The Committee expresses its appreciation to the government for its ongoing efforts to advance the development of Taiwan’s asset management industry. We acknowledge the government’s commitment to fostering an environment that encourages innovation and fair competition while safeguarding the interests of investors.

In light of the government’s increasing focus on developing Taiwan into a leading asset management center in Asia, the Committee emphasizes the importance of engaging industry stakeholders to shape policies that support a sustainable and competitive market framework. We further underscore the importance of pursuing this goal by placing equal emphasis on retaining existing wealth domestically and attracting additional investment.

In support of these efforts, we respectfully submit the recommendations below for the government’s consideration.

Suggestion 1: Enhance administrative efficiency to foster a more attractive and responsive investment environment for foreign asset managers.

To establish Taiwan as a leading asset management center in Asia, it is essential to cultivate an environment characterized by world-class expertise, diversified investment and product services, and advanced risk management capabilities. This juncture presents a strategic opportunity to enhance global investors’ access to Taiwan, contributing to financial market transformation as well as broader economic development.

To enhance the attractiveness and long-term sustainability of Taiwan’s investment environment, the Committee emphasizes the importance of improving administrative efficiency. Establishing a principles-based, efficient, and fair market framework will enable Taiwan to strengthen its competitiveness against other regional asset management markets, including Hong Kong and Singapore, while encouraging increased participation from foreign market participants.

1. Accelerate the review timelines for the introduction of overseas public offerings. The general perception among international asset managers is that Taiwan maintains some of the most stringent restrictions on foreign investment in the region, particularly regarding access to global platforms and product offerings. In addition, the Committee observes that Taiwan’s approval process for offshore fund registration is regarded as the lengthiest in the Asia-Pacific region.
   When Luxembourg- and Irish-domiciled funds, which account for approximately 90% of offshore funds registered in Taiwan, undergo registration with the Securities and Futures Commission in Hong Kong, the standard review process takes approximately two months, while fast-track approval is typically completed within three weeks. In Singapore, the Monetary Authority’s standard review period ranges from 7 to 21 days, with a maximum of 28 days. Both jurisdictions provide clear, transparent, and predictable review timelines.
   In comparison, the review process for offshore fund registration in Taiwan generally takes a minimum of five months, in many cases extending to a period of 7 to 12 months, with no clear or predictable review timetable. Besides the extended review period, offshore products face additional investment restrictions prior to their introduction to the Taiwan market. Long, unpredictable review periods and regulatory constraints discourage international asset managers from expanding in Taiwan. Consequently, a growing number of investors have instead chosen to allocate substantial assets to markets such as Singapore and Hong Kong.
   The Committee recommends that the Securities and Futures Bureau (SFB) in Taiwan expedite the product review timeline for offshore funds that comply with the European Union’s UCITS standards. These funds are subject to rigorous regulatory oversight and are widely recognized in markets outside the EU for their safety and reliability. We further suggest that Taiwan align its review procedures with those of Hong Kong and Singapore and adopt a product liberalization policy consistent with international practices in major financial markets across the Asia-Pacific region.
2. Establish a single window for the supervision of foreign asset managers. Foreign asset managers must navigate a complex landscape, balancing compliance with domestic regulations, adhering to the governance standards set by their parent companies, and fulfilling domestic asset management obligations.
   However, the SFB, possibly due to constraints in personnel allocation, does not differentiate between foreign and domestic asset managers in its supervisory approach. Instead, case assignments are evenly distributed among case officers without regard to the nature of the asset manager. This practice has resulted in an insufficient and inconsistent understanding of the operational models and common needs of foreign asset managers and their parent companies.
   The Committee recommends that the Financial Supervisory Commission (FSC) consider adopting an approach similar to that of its Banking Bureau, which has established separate divisions for domestic and foreign banks to facilitate more effective supervision. We suggest the establishment of a dedicated supervisory window for foreign asset managers, with designated officers responsible for the unified oversight and management of matters related to foreign asset managers. This structure would enable more direct, efficient, and transparent communication and information exchange between foreign asset managers and regulatory authorities. It would also allow the FSC to more effectively address the common needs and concerns of foreign asset managers operating in Taiwan.
   Such needs include areas such as environmental, social, and governance (ESG) practices, outsourcing arrangements, financial sanctions compliance, and matters that generally require alignment with the policies and operational frameworks of a foreign asset manager’s global group. By implementing a differentiated supervisory approach for foreign and domestic firms while maintaining the same overarching regulatory objectives, the FSC could help reduce communication gaps and avoid misaligned expectations. This approach would also improve administrative efficiency, alleviate the workload of individual case officers within the SFB, and strengthen foreign asset managers’ confidence in the Taiwan market. Such an approach would also encourage increased investment and support the development of Taiwan as a regional asset management center.

Suggestion 2: Exempt active bond exchange-traded funds from the securities transaction tax.

According to Article 2-1 of the Securities Transaction Tax Act, the securities transaction tax on corporate bonds and financial bonds has been suspended for the period from January 1, 2010, to December 31, 2026. This move aims to stimulate bond market activity, facilitate capital raising for enterprises, and promote the overall development of capital markets.

In addition, to further promote the development of listed or over-the-counter (OTC) exchange-traded funds (ETFs) primarily invested in bonds, commonly referred to as passive bond-type ETFs, the securities transaction tax on the beneficial certificates of such ETFs publicly offered and issued by securities investment trust enterprises has been suspended for the period from January 1, 2017, to December 31, 2026. This tax suspension, however, does not apply to ETFs that track, simulate, or replicate a multiple of the performance of an index or a multiple of the inverse performance of an index.

The FSC amended the Regulations Governing Securities Investment Trust Funds in late 2024 to allow securities investment trust enterprises to issue active ETFs listed on the stock exchange or OTC market. Given that active bond-type ETFs, similar to passive bond-type ETFs, are listed and primarily invest in bonds, the Committee believes that the two product types should be afforded equal treatment under the securities transaction tax regime, irrespective of structural or naming distinctions. Current regulations, however, do not appear to extend the same tax exemption to active bond-type ETFs.

Promoting the development of active ETFs is a key policy objective of the FSC. If active bond-type ETFs are subject to less favorable tax treatment than passive bond-type ETFs, their growth and market development may be adversely affected. Consequently, the Committee recommends that active bond-type ETFs be granted the same securities transaction tax exemption as their passive counterparts.

Suggestion 3: Remove the restrictions on investment in non-investment-grade bond funds through investment-linked policies.

Taiwan is the only jurisdiction that prohibits investment-linked insurance policies (ILPs) from linking to non-investment-grade bond funds (NGBFs). In all major markets, general retail investors are permitted to subscribe to NGBFs, as these funds are not classified as a special fund type. The Committee strongly recommends that the FSC consider removing this restriction, as it is inconsistent with international regulatory practices and does not serve the best interests of Taiwanese investors.

Further, relaxing the restriction would facilitate the FSC’s efforts to develop Taiwan as a regional asset management center, enhancing diversification and reducing concentration risks. NGBFs, formerly known as high-yield bond funds, are an important option for ILP policyholders’ long-term investment planning and play a key role in building diversified portfolios.

NGBFs possess several characteristics that make them suitable for inclusion in ILPs. The risk exposure of investing in an NGBF differs significantly from that of holding a single non-investment-grade bond. NGBFs generally have lower risk ratings and historical volatility compared to most equity and multi-asset funds, and the default risk of non-investment-grade bonds is effectively reduced through NGBFs’ diversified portfolios.

In periods of market volatility, the inclusion of NGBFs in policyholders’ portfolios can help balance risks and enhance returns. The current prohibition limits policyholders’ ability to allocate risk appropriately and restricts their investment choices. This regulatory constraint is inconducive to long-term investment planning or effective risk diversification, as it may lead policyholders to seek higher-risk investment alternatives.

Suggestion 4: Lift investment restrictions on Rule 144A securities for onshore securities investment trust enterprise funds and offshore funds.

The Committee recommends adjusting the maximum investment limit for domestic securities investment trust funds (onshore funds) and offshore funds investing in U.S. Rule 144A bonds, which would provide Taiwanese investors with improved investment flexibility and outcomes.

As global capital markets evolve, the Rule 144A bond market is growing rapidly, serving as an efficient platform for capital raising and investment. Currently, Rule 144A bond issuances dominate the U.S. non-investment grade market, with issuers including large U.S. and international corporations, many of which are publicly listed, ensuring transparency. As the market expands and more investors participate, the prominence of Rule 144A bonds has significantly increased.

Consequently, most of the current issuance in the High Yield Bond market is 144A, and more than 80% of the High Yield index is 144A. That number will be expected to continue to increase as more debt is issued under 144A. Additionally, from an investor’s perspective, there is no difference in the credit risk between Rule 144A and Regulation S debt instruments, as they are considered fungible.

For example, Rule 144A bonds, which are privately placed securities in the United States that can be sold to institutional investors without full SEC registration, now make up a large portion of major U.S. bond market indices. As of December 31, 2024, approximately 19.73% of the ICE BofA U.S. Corporate Index (published by Intercontinental Exchange and Bank of America), 82.99% of the ICE BofA U.S. High Yield Index (which tracks lower-rated corporate bonds), and 82.91% of the Bloomberg U.S. Corporate High Yield Bond Index consist of Rule 144A bonds.

This growing representation of Rule 144A bonds in major U.S. indices underscores their importance in global fixed-income markets. To ensure that Taiwanese investors are not constrained in accessing this key segment and to promote greater portfolio flexibility, the Committee respectfully recommends that the SFB raise the maximum investment limits for Rule 144A bonds. These revised thresholds should apply consistently to both onshore and offshore funds, as outlined below:

1. Fixed income funds. Raise the investment threshold in bonds adhering to U.S. Rule 144A from “not exceeding 10% of the net asset value of the fund” to “not exceeding 20% of the net asset value of the fund.”
2. NGBFs. Adjust the total investment in Rule 144A bonds from “not exceeding 30% percent of the net asset value of the fund” to “The percentage of the fund’s net asset value invested in Rule 144A bonds shall be alignment with weights in representative market indices of the respective investment regions and disclosed in the prospectus.”
3. Balanced funds and Multi-Asset Funds. As funds already maintain a specific asset allocation proportion for bond investments and adhere to limits on the proportion of investments in non-investment grade bonds, it may not be necessary to set separate limits specifically for Rule 144A bonds.

Suggestion 5: Proactively support and communicate progress on efforts to sign a double taxation agreement with the United States.

The Committee would like to reiterate our support, stated several times throughout our White Paper submissions in recent years, for the swift conclusion of a double taxation avoidance agreement between Taiwan and the United States. Under current regulations, domestic funds offered and issued by Securities Investment Trust Enterprises (SITEs) in Taiwan that invest in U.S. equities are subject to a 30% withholding tax on dividends received from U.S. corporations. This rate is significantly higher than the 10% rate applied in jurisdictions that maintain income tax treaties with the United States, such as Japan.

This tax disparity places Taiwan-based SITE funds at a structural disadvantage. It discourages local investors from using domestic funds to access U.S. capital markets and disincentivizes foreign asset managers from domiciling U.S.-focused funds in Taiwan. The lack of a tax agreement creates a competitive imbalance that weakens Taiwan’s position as an international asset management hub.

The Committee is encouraged by recent developments in the U.S. Congress to authorize the negotiation of a double taxation avoidance agreement with Taiwan. We also welcome the expected initiation of technical consultations between the U.S. Department of the Treasury and Taiwan’s Ministry of Finance later this year.

To ensure stakeholders remain informed and can prepare accordingly, the Committee recommends that the Ministry of Finance provide regular updates on the status of double taxation avoidance agreement consultations and outline Taiwan’s policy roadmap for securing treaty-equivalent benefits. Proactive engagement with the financial sector (through briefings or working groups) will be essential to align industry expectations and accelerate the positive impact of any future agreement.