The ruling has retrospective effect from 1 January 2024, because it is linked to the January 2024 decree imposing alternative minimum tax on the settlor and beneficiaries of offshore trusts when a CFC is involved. That decree stated that shares or capital held by the settlor through an offshore trust must be included in the calculation of an individual's direct shareholdings, for the purposes of taxing a CFC.
Affected trustees must now prepare accounts and detailed income and distribution statements for all the trust assets, both CFC and non-CFC. Offshore trustees who do not have a presence in Taiwan must appoint a local agent to handle registration, obtain a tax identification number and conduct the reporting and withholding procedures. The retrospective start date means there may be a risk of non-compliance even if an offshore trustee immediately terminates its current Taiwanese engagements as a result of the new ruling, says law firm Baker McKenzie.
The implementation of CFC taxation has induced the finance ministry to seek information on offshore trusts, as they may contain assets that generate Taiwan CFC income. Taiwan is not a full member of the Common Reporting Standard network for international information exchange and can achieve information exchange only through bilateral agreements. So far, this has been undertaken only with Australia, Japan and the UK.