Anybody know the background to that story?
I thought it may be cartel money that was moving through Taiwanese banks, HSBC got fined for that.
Or HK based tether or both i.e. tether being used to move the money around.
Or it could just be a scheme they had been running for very rich business people and gangsters in Taiwan. Who were these ‘very wealthy people’?
It was kept very hush hush, the government banks paid huge fines.
Yes! And that is why many of the branches we deal with as retail bankers (I am not talking about the rich folks on this board) often act with so much caution. Their managers don’t want their branches to get nailed again.
Guy
I think the tax haven blacklist is due to information sharing agreements. Taiwan didn’t start CRS until 2019 and was one of the last countries to agree to FATCA due to bank privacy laws.
On the EU site they list countries that are uncooperative and that determines whether they are on their black list: https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/
Will close the credit card with them and not going to use them anymore, first need to get another card for line pay.
Goes back to Megabank in 2016.
A very interesting read.
Back in 2016 it was the New York branch of Mega Bank that got caught in the regulatory cross-hairs involving cases revealed through the Panama Papers. This case led to stricter enforcement across the board.
More recently, in 2021 Taipei Fubon, DBS, and Citibank in Taiwan were fined for AML and other deficiencies.
The author of the article concludes: “I do believe that Taiwan is currently [this was written in September 2022] in a good position when it comes to its AML/CTF and sanctions regimes, but vigilance must be maintained as the criminals just get smarter all the time too. And, as it is so often said in the financial world, you are only as good as you were during your last inspection!”
Guy
They are all continuing to get fined because the whole AML gets a blind eye when big cash comes in.
So CTBC just called me back to say the following:
(1) It had taken them a while to get back to me because they’d had multiple complaints about this (@Mataiou I guess, but I got the impression it might be more) and they were dealing with them together.
(2) The 183-day and 10% vs. 20% withholding thing is probably just how it’s going to be, because they have no way to know how long we’ve been in Taiwan for a given year. Unless we want to go into a branch with proof of our time in Taiwan each year.
(3) She needed to ask her supervisor to check about the CRS rules for foreigners but agreed “GB” or other country codes probably shouldn’t be listed on the forms for foreigners wholly tax resident in Taiwan (not including U.S. citizens), and that I should expect an e-mail from her supervisor “in a few days”. I mentioned I’d complained to the FSC and MOF as well.
Slackers
it’s a self declaration for Christ’s sake, unless something stinks, they shouldn’t be checking.
We’ll see.
They should reply to us too.
Does anyone’s tax withholding certificate list their Tax ID in their country of citizenship? My HSBC one has some weird number on it that I don’t recognize. I can’t find all my other withholding certificates online because they changed my foreigner ARC number. I’ll have to go to the bank to ask.
Also when I report my taxes this year with my new number… I wonder if nothing will get migrated over.
What email did you use for CTBC?
I haven’t emailed them myself. All of our conversations have been on the phone so far.
I sent to this: whistleblowing@ctbcbank.com. they replied to me they received and are “processing”
Just to follow up on this - I got a call from Cathay United saying they told the branch office to allow me to declare that I’m only a tax resident of Taiwan on the CRS. I have to bring previous years tax filings as proof.
One bank fixed, 5 or so more to go.
I am having a hard time with this, but unfortunately there is a loophole here.
CRS and tax withholding have 2 separate standards here, so there is asymmetry.
Banks are required to withhold the tax on interest when the interest is paid, or incur in immediate fines.
This matter is not regulated by the FSC, but by the Tax Bureau and so refer first to the Income Tax Act and in particular to Standards of Withholding Rates for Various Incomes by the Ministry of Finance.
Art. 7 of the Income Tax Act is where tax residency is defined, and unfortunately the way how it is worded and with the other features of the legal system of TW, only Nationals with Household registration are assumed to “…ha(ve) domicile within the territory of the Republic of China and resides at all times within the territory of the Republic of China;” (I know that domicile (住所) does not equal household registration (戶籍), and there are even Supreme Court rulings on this, but banks here act with a principle of prudence and conservatively, and they actually legally can do this…)
All other persons, NWHOR, foreigners with ARC, foreigners with APRC, non-residents, are assumed not to be tax residents of TW unless they can prove otherwise. Unfortunately for this the burden of proof is on the client.
The proof for tax residency with the Tax bureau comes usually during the tax declaration each May, where we indeed declare how many days we stayed in TW, which then the Bureau checks with NIA thanks to the Entry and Exit certificates and logs and confirms it, applying thence the relevant resident tax rates according to the income declared. This tax rates is then retroactively applied to the interest paid and withheld by banks with “tax credits” towards to tax payable amount.
This is the conundrum: banks can’t afford to withhold the wrong amount, so they always assume foreigners not to be resident and withhold the max (20%), unless the foreigner proves to be tax resident somehow during the year (like with an entry and exit log), which then will withhold the resident rate (10%) for the remainder of the year. Hence they also need to modify the CRS declaration to be consistent, since CRS for them is the lesser pain to make “wrong”, they don’t get fines there immediately.
There is no solution until a legislative modification is made, since there are asymmetries in the declaratory periods and withholding periods, and also no easy way for various agencies and industry participants to communicate and share information.
This is also the reason why many employers, if they withhold taxes directly from the payslip, for foreigners just withhold for the first 6 months the non resident rate and then they “adjust”, or they get fines and just choose the lesser pain, i.e. inconvenience for the foreigner, understandably.
Below a excerpt from the National Tsinghua University brief upon recommendation of the Tax Bureau:
This is a battle we can’t win with the current rules, I am defeated, I concede. Rules have to be changed, but require a quite deep revamping of the system.
What is really goes back to is this.
I think not necessarily legislative but perhaps a supreme court decision on article 7 against the NTB? That might be the only way really
This makes sense but what about Taiwanese who work abroad and stay in Taiwan less than 90 days? They don’t have any tax withholding and the banks don’t get into trouble. They also don’t need to report tax if staying less than 90 days a year.
Just replace the word foreigner with Taiwanese in that excerpt and you’d see the same loophole except it’s already being exploited today by Taiwanese who work abroad and stay less than 90/183 days in TW each year and have no tax withholding. Seems they fixed this in a heavy handed way for foreigners that’s not in our favor, and locals have the tax exploit in place. I think we should fight for tax residency parity between taiwanese and foreigners first and look at the other issue separately since it already exists today for locals.
Or I’d be happy with a middle of the road solution - we’re tax residents if we have a long term residence card. This is how Singapore does it - you are considered a tax resident if your work visa is issued for 1+ years, and in the following year’s tax filings they’ll figure out your actual tax residency status.
“ Foreigners issued with a work pass that is valid for at least 1 year will also be treated as a tax resident.”
Less than 90 day no tax obligation at all
So basically be Taiwanese, stay in TW less than 90 days, no tax withholding on anything, seems like a tax exploit that’s allowed by the law