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11.1. Direct and Indirect Tax Consequences of Re-Organizations

Business Transformation and Reorganization

Taiwan's reorganization environment is quite open for both domestic and foreign companies and investors. There is little restriction aside from those imposed by the Negative List for Investment by Overseas Chinese and Foreign Nationals.

Merger & Division

Under Taiwan law, for two or more companies to consolidate through a merger, the original participant companies are dissolved and a single new company is incorporated. The rights and obligations of the dissolved companies are passed to the newly formed company.

In a division, a company can transfer all or part of its independently operated business to an existing or newly incorporated company in exchange for shares of the existing or new company for itself or its shareholder.

If a participating company is a company limited by shares in a merger or a division, the surviving company must also be in the form of a company limited by shares.


Under Taiwan law, a company can acquire the shares, business, or assets of another company in exchange for shares, cash, or other assets.

Tax Considerations

Value-Added Tax (VAT)

Share acquisitions are not subject to VAT, while asset acquisitions are; excluding marketable securities and land. The rate is 5%. However, under the incentives provided in Taiwan's Business Merger and Acquisition Act, if the total consideration for the assets is at least 65% voting shares, the transaction is exempt from VAT.

Stamp Duty

Acquisitions of shares are not subject to stamp duty, but would be subject to securities transactions tax of 0.3%.

Acquisitions of assets are subject to stamp duty of TWD 12 on each deed for the sale of movable property and a 0.1% ad valorem duty on deeds for the sale of immovable property. As with VAT, stamp duty may be exempt under the Business Merger and Acquisition Act, if the total consideration for the assets is at least 65% voting shares.

Transfer Tax / Deed Tax

Share acquisitions are not subject to deed tax, while real estate asset acquisitions are; excluding land. The rate is 6% of the price of the property as determined by the local government where the property is located. As with VAT and stamp duty, deed tax may be exempt under the Business Merger and Acquisition Act, if the total consideration for the assets is at least 65% voting shares.

Land Value Increment Tax

Share acquisitions are not subject to land value increment tax, while land asset acquisitions are. The tax rate ranges from 20% to 40% and is based on the prescribed market value of the land less the declared value or price paid by the original owner. The tax can be deferred until further transferred if the same terms for exemption covered above are met.

For land, and other immovable property, acquired on or after 1 January 2016, a new capital gains tax regime applies. (See ‘Capital Gains’ under Section 8.1. for details)

Securities Transaction Tax

Acquisitions of marketable securities are subject to securities transaction tax, while asset acquisitions are not. The tax rate is 0.3% based on transaction price for the shares. The same exemption terms covered above apply to securities transaction tax.

Depreciation & Amortization

In the case of mergers or when shares are used to acquire a company, fixed assets of the participating companies can continue to be depreciated at the same rate.

In an acquisition of assets, unutilized depreciation cannot be carried forward. However, the basis of the assets can be stepped up. Differences between the transaction price and the fair market value, or book value, of the assets will be considered business rights (in the case of tangible assets), and goodwill (in the case of intangible assets). The resulting business rights should be amortized for no less than 10 years, while resulting goodwill should be amortized between 5 and 15 years.


In the case of a share acquisition, the net operating losses of the participating companies can be carried forward and deducted from the net operating income of the newly formed company.

In the case of an asset acquisition, no losses carried forward can be transferred to the new/surviving company. However, any capital gains tax* resulting from the acquisition of assets can be offset by losses carried forward of the original company.

*Note - Taiwan does not have a separate capital gains tax. Capital gains are treated as ordinary income subject to corporate income tax (Covered in Sec. 8.1.).

Transaction Cost Deductibility

Transaction costs incurred for an acquisition of shares are not tax deductible in Taiwan.

Transaction costs incurred for an acquisition of assets are generally deductible as they are typically capitalized as part of the cost of the acquired assets. If eligible, those costs can be depreciated or amortized along with the assets and therefore deductible. However transaction costs related to land or securities are not deductible.