Public announcement of financial accounts listed as “Financial Accounts that Present a Low Risk of Being Used to Evade Tax”
The Ministry of Finance stated that, in order to enhance the efficiency of conducting due diligence, the list of financial accounts which are “accounts that present a low risk of being used to evade tax” was released on June 27, 2019 in accordance with Subparagraph 8 of Article 23 of the “Regulations Governing the Implementation of the Common Standard on Reporting and Due Diligence for Financial Institutions” (hereinafter referred to as the Regulations). The list includes “An Employee Savings Ownership Trust, Employee Stock Ownership Trust and other Stock Rewards Trust in conformity with certain requirements,” “An Overseas Foreign & Mainland China Employees Collective Investment Account in conformity with certain requirements,” and “Micro-whole-life Insurance.” These accounts and the accounts stipulated in Subparagraphs 1 to 7 of Article 23 of the Regulations are “Excluded Accounts,” which are not subject to the due diligence and reporting obligations conducted by Reporting Financial Institutions.
The Ministry explained that the accounts listed on the announcement have been reviewed by the Ministry and the other competent authorities of these accounts to assure conformity with the requirements stipulated in the Common Reporting Standard (CRS) released by the Organisation for Economic Co-operation and Development (OECD). The requirements are as follows:
1. The account presents a low risk of being used to evade tax in comprehensive consideration of high-risk and low-risk factors. For instance, whether the account is subject to AML/KYC procedures, promoted as a tax minimization vehicle, subject to regulation, required to report information to tax authorities, and the type of account providing appropriately defined and limited services to certain types of customers so as to increase access for financial inclusion purposes.
2. The account has substantially similar characteristics to any of the accounts described in Subparagraphs 1 to 6 of Article 23 of the Regulations.
3. The status of the account as an Excluded Account does not frustrate the purposes of the CRS.
The Ministry further elaborated that, the draft version of this announcement included the Employment Insurance Fund (EIF), the Arrear Wage Payment Fund (AWPF), the Occupation Incidents Protection Fund (OIPF), the Labor Insurance Fund (LIF), the Labor Retirement Fund (the Old Fund), the Labor Pension Fund (the New Fund), the Government Employee and School Staff Insurance (GESSI), the Public Service Pension Fund, the Private School Staff Retirement and Compensation Fund, and the Separation Fund for Government Organization or School Employee. After confirming with relevant competent authorities of these accounts, the account holders are the Bureau of Labor Fund of the Ministry of Labor, the Public Service Pension Fund Management Board, the ROC Private School Staff Retirement and Bereavement Compensation Fund Management Committee, government agencies, and public schools. Therefore, those accounts are not Foreign Accounts defined in Article 26 of the Regulations. Neither are other funds managed by government agencies (e.g., the National Pension Insurance Fund (NPIF)). In accordance with Paragraph 1 of Article 33 of the Regulations, Reporting Financial Institutions would not have much compliance burden when conducting due diligence and reporting obligations on the above-mentioned accounts. Thus, it is not necessary to treat those accounts as Excluded Accounts. The issuance of this announcement without including the above-mentioned accounts does not have substantial impact on the compliance and application of the Regulations by Reporting Financial Institutions.
The Ministry stressed that, the OECD set a peer review standard including “Ensuring that any Financial Account or category of Financial Accounts defined in the domestic legislative framework as an Excluded Account meets the requirements for its status as an Excluded Account consistently with the CRS.” In response to the international development of tax transparency, the Ministry established the system of the Common Standard on Reporting and Due Diligence for Financial Institutions. The announced list of financial accounts which are “accounts that present a low risk of being used to evade tax” was reviewed carefully in accordance with the requirements set out by OECD CRS. It may enhance the efficiency of due diligence procedures, improve tax transparency, and fulfill international obligations. The Ministry will continuously pay attention to the implementation of the CRS worldwide, follow the global consensus, and maintain our competitiveness.