The Committee appreciates the government’s attention to the recommendations outlined in the 2025 Taiwan White Paper and acknowledges the continued communication and support provided by the National Development Council. Encouraging progress is underway on several items, while others involve complex considerations and cross-agency coordination that may require additional time to advance. We welcome the government’s continued efforts and remain committed to supporting the development of Taiwan’s capital markets.

Recent advancements in artificial intelligence and virtual assets are rapidly reshaping the financial sector and broader economic landscape. The Committee welcomes the government’s proactive efforts to establish an appropriate legal and regulatory framework for these emerging technologies. Given the potential of such technologies to fundamentally transform financial services, the Committee encourages early and structured engagement with industry stakeholders to ensure that regulatory approaches are principles-based, practical, effective, and aligned with international standards.

The Committee continues to focus on improving the efficiency and competitiveness of Taiwan’s securities market, with particular attention on creating efficient pre-matching mechanisms for securities borrowing and lending, and optimization of the tax refund and preapproval process. In addition, building on the development of the regional asset management center in Kaohsiung, the Committee encourages further efforts to strengthen the role of the securities industry in asset management and in attracting international talent via relaxation of restrictions on holding concurrent positions and providing access to professional certifications in English. These efforts will be important to support the continued development and internationalization of Taiwan’s capital markets.

In support of the above objectives, the Committee respectfully offers the following specific suggestions:

Suggestion 1: Modernize outsourcing and data governance standards for virtual asset service providers to reflect cloud-based operating models.

The Committee appreciates the government’s continued efforts to establish a regulatory framework in Taiwan for virtual asset service providers (VASPs). As VASPs increasingly rely on cloud-based and distributed digital infrastructure to deliver secure and scalable services, it is vital that outsourcing and data governance standards continue to safeguard cybersecurity, service continuity, investor protection, and effective supervisory access.

At the same time, virtual asset services are inherently cross-border, technology-driven, and rapidly evolving. Taiwan’s existing outsourcing frameworks were developed for financial services operating through centralized systems and a fixed infrastructure. While the underlying regulatory objectives remain unchanged, the mechanisms used to achieve them should be updated to reflect current technological realities.

In particular, applying concepts derived from existing frameworks, such as the “Directions for Operations Outsourcing by Securities Firms,” does not fully align with the architecture of modern virtual asset services. Without appropriate adjustments, regulatory requirements may create unnecessary constraints without enhancing risk management outcomes. For example, expectations around localizing customer data, and more generally the systems supporting key operations, can make it more challenging for VASPs to leverage established global infrastructure and service models. This may add operational complexity and limit flexibility, without fully realizing the security and resilience capabilities that cloud-based approaches can offer.

The Committee therefore suggests that outsourcing and data governance standards applicable to VASPs be modernized to reflect cloud-native operating models while maintaining robust regulatory safeguards. In particular, we recommend:

1.1   Enabling the use of secure global cloud infrastructure. Regulatory standards should allow VASPs to leverage global cloud service providers, provided that appropriate controls are in place, including strong encryption, key management, access controls, and incident response mechanisms. Security and resilience in the VASP context should be assessed based on governance and technical controls rather than physical infrastructure location.

1.2   Clarify the definition and scope of “important data” in the Directions for Operations Outsourcing by Securities Firms regulations. Current terms such as “material” and “important data” are broad and open to interpretation. Clear definitions that distinguish between categories (such as personal data, transaction records, ownership information, and system logs) would enable proportionate regulation, targeted protection, and reduce unnecessary duplication and operational burden.

1.3 Allowing flexible approaches to data localization. Where data accessibility within Taiwan is required, this objective can be achieved through secure and controlled local replication of relevant datasets, without requiring full localization of primary systems. This approach would preserve supervisory access while maintaining system resilience and scalability.

1.4   Prioritizing governance and risk oversight over location-based requirements. Regulatory frameworks should emphasize governance, service provider due diligence, risk assessment, and ongoing monitoring. These elements provide more meaningful assurance of operational resilience than prescriptive requirements tied to infrastructure location.

Adopting a technology-neutral and risk-based approach would enable Taiwan to maintain high standards of investor protection and regulatory oversight while supporting innovation and competitiveness in the virtual asset sector.

Suggestion 2: Ensure that subordinate regulations under the Artificial Intelligence Basic Act are aligned with international standards and developed through timely structured industry consultation.

The Committee welcomes the promulgation of the Artificial Intelligence Basic Act on January 14, 2026. The Act establishes high-level principles for the development and application of artificial intelligence and introduces a risk classification framework to guide sector-specific regulation. It also provides a two-year transition period for authorities to review and align existing laws and administrative measures.

As implementation progresses, the formulation of subordinate regulations will be critical in determining how these principles are translated into practice. In the financial sector, the Financial Supervisory Commission (FSC) has already issued guidance on the use of artificial intelligence. These frameworks are expected to evolve in response to the Act and may be supplemented by more formal regulatory requirements.

At the same time, the increasing adoption of AI in financial services presents new regulatory challenges. Taiwan’s existing supervisory approach has traditionally been rule-based and prescriptive. In the context of rapidly evolving technologies, overly detailed or inflexible requirements may not adequately reflect how AI systems are developed, deployed, and governed, particularly within multinational financial institutions operating under group-level frameworks. Requirements of this nature result in practical implementation challenges, regulatory inconsistency, and increased compliance costs without corresponding improvements in risk management.

The Committee therefore recommends that, in developing subordinate regulations under the Artificial Intelligence Basic Act, relevant authorities adopt a principles-based and internationally aligned approach. In particular, regulatory development should reference widely adopted international frameworks and ensure compatibility with global governance structures, while avoiding overly prescriptive localized requirements that may limit innovation or create unintended barriers to implementation.

In addition, the Committee encourages the establishment of structured and ongoing consultation mechanisms with industry stakeholders throughout the regulatory development process. Early engagement will help ensure that regulatory measures are practical, proportionate, and responsive to rapidly evolving technological and operational realities.

A balanced and internationally aligned approach to AI regulation will support innovation, reduce regulatory fragmentation, and strengthen Taiwan’s position as a competitive and forward-looking financial market.

Suggestion 3: Establish a pre-matching mechanism for securities borrowing and lending transactions.

The Committee notes that securities transactions in Taiwan benefit from the Virtual Matching Utility (VMU) platform operated by the Taiwan Depository & Clearing Corporation (TDCC). This mechanism, enabling pre-matching of transactions between securities firms and custodians prior to settlement, has significantly improved operational efficiency and reduced the risk of settlement errors and failed transactions.

However, no equivalent pre-matching mechanism exists for securities borrowing and lending (SBL) transactions. Since the participation of foreign institutional investors (FINIs) in SBL transactions was introduced in 2003, transaction volumes have increased steadily. In the absence of a centralized pre-matching platform, market participants must rely on manual processes, including email and telephone confirmations, to reconcile transaction details prior to settlement.

This operational gap increases the risk of mismatches, errors, and settlement failures, while also imposing an additional administrative burden on securities firms and custodian banks. As a result, SBL transactions in Taiwan are less efficient and carry higher operational risk compared with standard securities transactions.

In addition, FINIs engaging in SBL transactions face relatively higher transaction costs, including both brokerage commissions and SBL fees charged by the Taiwan Stock Exchange. These factors, combined with operational inefficiencies, may affect the attractiveness of Taiwan’s SBL market relative to other jurisdictions.

The Committee therefore recommends that the Taiwan Stock Exchange and Taiwan Depository and Clearing Corporation establish a centralized pre-matching mechanism for SBL transactions, building on the existing VMU framework. Introducing such a platform would enable market participants to confirm transaction details prior to settlement, reduce operational risk, and improve overall market efficiency, as well as encourage greater participation by international investors, strengthen market competitiveness, and contribute to the continued development of Taiwan’s capital markets.

Suggestion 4: Relax restrictions on concurrent positions to enhance talent mobility and the internationalization of Taiwan’s securities industry.

The FSC has identified the development of Taiwan as an Asian asset management center as a key policy objective. Achieving this goal will require strengthening the internationalization of Taiwan’s securities industry and attracting financial professionals with cross-market experience. Such talent is critical to introducing global expertise, supporting product innovation, and enhancing the overall competitiveness of Taiwan’s capital markets.

The Committee notes that in the asset management sector, the FSC has already improved flexibility by allowing the personnel of securities investment trust and consulting enterprises to concurrently hold positions in overseas affiliated entities within the same group. This approach facilitates the deployment of global talent and supports cross-border business operations.

By contrast, Article 4 of the “Regulations Governing Responsible Persons and Associated Persons of Securities Firms” continues to prohibit securities firm personnel from holding concurrent positions with other domestic or foreign securities firms. Importantly, Article 4 already contains a limited, risk‑managed carve‑out, since legal compliance, internal audit, and risk-management personnel, as well as in‑charge accountants, may concurrently hold same‑nature positions at an overseas securities affiliate enterprise within the same group. However, the existing carve‑out is too narrow to reflect the operational structure of international financial institutions, where senior professionals are often responsible for multiple markets or regional functions.

As a result, the current framework discourages foreign professionals from taking positions in Taiwan and reduce incentives for Taiwanese professionals working overseas to return. In practice, professionals with regional or global responsibilities may be required to relinquish those roles in order to work in Taiwan, limiting talent mobility and constraining the transfer of international experience to the domestic market.

The Committee therefore recommends that the FSC expand Article 4 to allow securities firm personnel to concurrently hold positions with overseas securities affiliates within the same group, subject to appropriate safeguards, such as conflict-of-interest management mechanisms, inclusion within internal control systems, and prior filing or approval requirements.

Relaxing these restrictions would facilitate cross-border talent deployment, strengthen links between Taiwan and international markets, and support the development of more sophisticated financial products and services. It would also enhance Taiwan’s attractiveness as a destination for global financial professionals and contribute to the long-term development of the securities industry.

In addition, the Committee recommends that the relevant authorities expand access to professional certification and licensing processes in English within Taiwan. Providing greater flexibility for both local and foreign professionals to obtain and maintain required certifications domestically would further support talent development and reduce barriers to participation in Taiwan’s financial sector.

Suggestion 5: Optimize the tax refund and preapproval processes.

5.1   Create a standardized approval and deposit procedure for tax refunds to Foreign Institutional Investors (FINI).

        It has become increasingly common for FINIs, under applicable tax treaties, to apply for tax refunds on overwithheld dividend taxes, making it important to enhance the consistency and efficiency of refund operations in order to improve Taiwan’s investment environment. Currently, however, tax offices across different jurisdictions may use different methods to consolidate and release the approved refund amounts. For example, depending on the practices adopted by each tax office, these refunds may be processed by year, by tax withholder, or by any other classification. In addition, minor discrepancies sometimes occur between the originally requested amount and the approved refund.

        As a result, custodian banks are usually unable to immediately identify the source or attribution of the received refund payments, often leading to time-consuming reconciliation efforts or clarification from the tax authorities before the refund payments can be credited to FINIs’ accounts. Such inconsistent practice and insufficient remittance information has increased the administrative burden on custodian banks, tax agents, and tax authorities during the reconciliation process, resulting in FINIs’ inability to receive the refund payments in a timely manner.

        The Committee therefore recommends the following:

• • Instruction by the Ministry of Finance (MOF) to the National Taxation Bureaus for establishment of a standardized operational procedure for all tax offices to adopt when processing tax refund payments.
  • Provision by the MOF and the regional National Taxation Bureaus of detailed refund information when approving tax refunds. When tax offices issue tax refund approval letters, for example, they would attach a list of the amounts covered by the refund payment being released. Copies of such approval letters and refund details should also be sent to the FINI’s custodian bank in Taiwan.

        If system or administrative constraints make it difficult for the tax authorities to provide a complete and reconcilable consolidated refund breakdown, each tax office could process the refunds on a per-item basis, which would allow custodian banks to correctly allocate each refund amount based on the corresponding transaction details. This approach would not only avoid the reconciliation issues arising from aggregated refund amounts, but also reduce the need for repeated followup contacts between foreign investors and the tax authorities, thereby substantially enhancing the transparency and operational efficiency of the refund process.

5.2   Revise tax refund procedures for FINIs who use two or more custodian entities. FINIs in Taiwan are now allowed to use two or more custodian entities, with separate accounts opened and accounting books/records maintained by both the primary and secondary custodian banks. Only the respective custodian bank at which the account is opened may provide the accounting data required for tax reclaim applications, such as withholding certificates, account information, and income details.

        However, the FINI’s tax reclaim applications are currently submitted based on the aggregate dividends received through both the primary and secondary custodian banks. Under the current tax-refund process the approved refund payments can only be remitted into a single bank account — the account at the primary custodian bank

        The primary custodian bank who receives the tax-refunds payments then needs to manually notify each secondary custodian bank and transfer the respective refund amounts to their individual accounts. This process is lengthy, involves communication across multiple banks, creates information-timing gaps, and increases the risk of delays in the FINI’s receipt of the tax refund.

        The Committee recommends that when processing tax refunds for FINIs who are under a multi-custodian bank structure, the MOF and regional National Taxation Bureaus should allow them to include the account information for both the primary and secondary custodian banks in the application form and relevant appendixes, enabling the approved refund payments to be remitted to all such accounts.

        This change would allow tax refunds to be received by the bank accounts that originally received the dividends, thereby avoiding additional communications and administrative burdens and enhancing the convenience and transparency of Taiwan’s investment environment for foreign investors.

5.3   Facilitate online applications for pre-approval of FINIs’ reduced withholding-tax rate under tax treaties. In recent years, the government has promoted digitalization of tax administration and has established an online application system for FINIs to apply for the preapproval of reduced withholding tax rates under tax treaties. However, implementation of the system has not begun due to some restrictions under current administrative practices.

        The Committee recommends that the MOF and regional National Taxation Bureaus push for full implementation of the online application system as soon as possible and ensure that electronic applications are processed under the same review procedures as paper applications.

        We also suggest that the tax authorities review and optimize the current electronic application platform — including its functions, document formats, and data transmission processes — to prevent situations in which electronically submitted applications must still be manually processed by paper for review purposes.

        This step would align with the government’s digitalization policy and ensure that electronic submission can truly function as a sustainable and formal application channel, strengthening the convenience and reliability of FINIs’ tax compliance in Taiwan.