Issues and Disputes on Taiwan’s Taxation on the Issuance of Warrants: An Introspective Review Starting with Judicial Yuan Interpretation No. 693
Date Issued
2016
Date
2016
Author(s)
Shao, Yu-Ting
Abstract
Due to the Ministry of Finance’s approval of domestic brokerage firms’ warrant offering to the public in 1997, it sought to clarify tax issue surrounding warrant offerings by the publication of two interpretive decrees: No. 861909311 and 861922464. Regarding the various stages involved in the life cycle of a warrant—initial sales, post-sale risk management, circulation on secondary markets, and buyers’ exercise of the warrant, the publications recognized the premium from initial sales as taxable income, but refused to recognize the corresponding risk management costs as deductible. This taxation scheme made earning a profit nearly unobtainable for the brokerage firms’ warrant offerings, and sparked law suits against the government to recover undue taxes collected by the government. Ultimately, this led to Judicial Yuan Interpretation No. 693, which found the publications as constitutional. Despite the addition of Article 24-2 to the Income Tax Act in 2007 after Judicial Yuan’s interpretation, which made the same risk management cost deductible under the new rule, the Act prevented its application retroactively. This means that the dispute involving billions of collected taxes remain active in the judicial processes. Besides an analysis based on Judicial Yuan Interpretation No. 693 to gain insight into the taxation dispute surrounding brokerage firms’ warrant offerings, this thesis explores the legality of the pre-Article 24-2’s taxation scheme on this topic, and the corresponding judiciary argument for post-Article 24-2’s recognition of risk management cost in favor of the brokerage firms. Ultimately, it is hoped that this thesis will aid the legal practitioners in the resolution of the aforementioned dispute.
Subjects
warrant
Judicial Yuan Interpretation No. 693
Income Tax Act
premium
SDGs
Type
thesis