TAIWAN Law and Practice Contributed by: Daniel T H Tsai, Lee and Li
2.3 Taxation of Premium In principle, exemptions apply in the case of income tax on the compensation payment made for: • life insurance; • labour insurance; and • insurance for public servants, military personnel and teachers. Moreover, according to Article 17 of the Income Tax Act, the premiums paid by or for the taxpayer, their spouse or lineal dependants on life insurance, labour insurance, national pension insurance and insurance for military personnel, public servants or teachers have a deductible amount not exceeding TWD24,000 for each person per year. 3. Overseas Firms Doing Business in the Jurisdiction 3.1 Overseas-Based Insurers or Reinsurers Should a foreign insurance or reinsurance entity seek to establish a new insurance company or reinsurance company for the purpose of doing insurance business in Taiwan, the following steps must be taken: • apply to the Ministry of Economic Affairs (MOEA) for reservation of the new company’s Chinese name and business scope; • apply to the Investment Commission (IC) for a foreign investment approval (FIA) for foreign shareholders’ equity investment in the new com- pany (please note that this step is only required for investments funded by foreigners or foreign entities); • apply to the FSC for a special permit to establish a new insurance company or reinsurance company in the Republic of China (ROC) (“special permit”); • apply to the IC for verification of the new com- pany’s capital; • apply to the MOEA for incorporation registration; • apply to the FSC for the issuance of a business licence; • apply for business registration with the local tax authority; • apply for membership of the Life Insurance Asso- ciation of the Republic of China (the “Life Insurance
ests of the insured, the FSC has the authority to order the self-regulated Association of Insurers to: • amend its constitution, by-laws, rules and resolu- tions; or • provide reference materials, reports or contracts where necessary (based on Article 165-5 of the Insurance Act). For traditional personal life insurance products, an insurance company should provide the insured with the sample of the insurance terms and conditions for review via agents, fax, mail, the internet, or email, and the review period must be no less than three days prior to the policy being duly signed. (Please see Arti- cle 9 of the Regulations Governing Online Insurance Business and Online Insurance Services of Insurance Agent Companies and Insurance Broker Companies.) As regards the solvency risk of insurers, pursuant to Article 143-4 of the Insurance Act as well as Article 5 of Regulations Governing Capital Adequacy of Insur- ance Companies, the capital adequacy ratio of an insurance entity must not be lower than 200%, and the net worth ratio of an insurance company must not be lower than 3% in one of the most recent two periods. The capital adequacy ratio is categorised into four different levels – that is, adequate capital (200% or above), inadequate capital (150%–200%), signifi- cantly inadequate capital (50%–150%) and seriously inadequate capital (lower than 50%). Depending on the level of the capital adequacy, the FSC may take measures such as: • ordering the insurance entity or its responsible per- son to propose a plan for the capital increase; • ordering the insurance entity to cease selling insur- ance products or restrict its launch of new insur- ance products; • restricting the scope of the capital utilisation; • restricting the remuneration to its responsible person; • exercising receivership over the insurance entity; • ordering the entity to suspend and wind up the business; or • liquidating the entity.
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