> Legislation of e-Industry
Back
Previous Introduction of the Revision of Article 22 and the Addition of Article 67-3 of the Statute for Industrial Innovation Next A Brief Introduction to Taiwan’s Legislations to Promote Industrial Innovations of the Digital Economy

An Introduction to Taiwan’s Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy Industries

An Introduction to Taiwan’s Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy Industries

2023/11/29

I. Preface

The Personal Data Protection Act (below, the “Act”), Article 27, paragraph 3 authorizes all central government authorities in charge of specific industries to formulate regulations regarding security standards and maintenance plans for their concerned industries.

Beginning August 27, 2022, Taiwan transferred authority over information services, software publishers, businesses that do retail sales of goods purely via the Internet, third-party payment providers, and other businesses in digital economy industries from the Ministry of Economic Affairs to the newly-established Ministry of Digital Affairs (MODA). Businesses in the digital economy industries collect, process, and use large amounts of important personal data, and therefore bear a relatively heavy responsibility for maintaining the security of personal data. In light of this, and in accordance with the Act, Article 27, paragraph 3, the MODA therefore promulgated the Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy Industries (below, the “Regulations”) on October 12, 2023. These Regulations specify the standards for digital economy industries’ personal data file security maintenance plans and rules governing the handling of personal data following a business termination (below, “security and maintenance plans”, or “SMPs”).

These regulations apply to all businesses in the digital economy industries. In order to reinforce responsibility for personal data security maintenance in the digital economy industries, tiered management is applied to businesses at different scales. The key points of these Regulations are introduced below.

II. Where the Regulations apply

As stipulated in the Regulations, Article 2, the “digital economy industries” that these Regulations apply to refer to any natural person, private juridical person, or other group, that engages in any of the following business operations: 4871 Retail Sale via Internet (industries that engage in retail sales to others via the Internet, but not including television, radio, phone, or other electronic means, nor postal sales); 582 Software Publishing; 620 Computer Programming, Consultancy and Related Activities; 6312 Data Processing, Hosting and Related Activities (industries that engage in processing customers’ data, server & website hosting, and other related services, but not including online audio/video streaming services); 639 Other Information Service Activities; or 6699 Other Activities Auxiliary to Financial Service Activities Not Elsewhere Classified (third-party payment industries, but not including other fund management activities). For the specific industries covered, see Attachment 1 of the Regulations.

III. Security maintenance and management measures

The relevant measures are stipulated in Articles 3 to 17 of the Regulations. In consideration that the businesses so regulated may collect, process, or use large amounts of personal data as part of their business activities, they bear a larger responsibility for maintaining the security of personal data than does the average enterprise. In compliance with the Regulations, every such enterprise is required to formulate an SMP, the content of which shall comply with the specifications in Articles 5 to 17. This includes putting in place management personnel and relevant resources; defining and inventorying the scope of personal data; risk assessment; putting internal management procedures in place; and other such matters.

These Regulations also adopt tiered management for businesses based on their capital levels, in order to reinforcement the frequency at which security maintenance measures are performed. The specific regulations for security maintenance measures are introduced below.

1. Formulating an SMP

In accordance with the Regulations, Article 3, and in order to maintain the security of personal data, each enterprise shall, within three months of the date the Regulations take effect, plan and formulate their SMP. Every enterprise shall also cause all staff members to understand and fully implement the SMP. In order to monitor implementation, the MODA may require that each enterprise submit its implementation of SMP; the enterprise shall then submit their implementation status information in written form within the specified time limit.

2. Making the protection policy known internally

In accordance with the Regulations, Article 4, and to make sure that everyone in the enterprise comprehends and implements personal data protection, each enterprise shall make its personal data protection policies known to all personnel within the enterprise. Matters that must be explained include Taiwan’s legal regulations and orders on personal data protection; how personal data may only be collected, processed, and used for specific purposes and in a reasonable, secure way; that protective technology must be at a level of security that could be reasonably expected; points of contact for rights relating to personal data; personal data contingency plans; and proper monitoring of outsourced service providers to whom personal data is outsourced. All of this must be done to make sure that every enterprise carries out their duty for comprehensive, continuous SMP implementation.

3. SMP content

(1) Putting in place management personnel with relevant resources

In accordance with the Regulations, Article 5; in accordance with both the Regulations as a whole and other laws and orders regarding the protection of personal data; and in order to implement personal data protection, each enterprise shall do the following things: Weigh the size and characteristics of their business to reasonably allocate operating resources; take responsibility for the personal data protection and management policy; and formulate, revise, and implement their SMP. Also, the enterprise’s representative or the representative’s authorized personnel shall carry out formulation and revision, in order to make sure that the SMP’s content is fully carried out.

(2) Establishing the scope of personal data

In accordance with the Regulations, Article 6, in order to define the scope of personal data to be included in the SMP, each enterprise shall periodically check the status of personal data that is collected, processed, or used.

(3) Risk assessment and management mechanisms for personal data

In accordance with the Regulations, Article 7, in a timely manner, and in accordance with their already-established personal data scopes and the processes in which their business involves the collection, processing, or use of personal data, each enterprise shall evaluate risks that may arise within their scope and processes. Based on the risk evaluation results, each enterprise shall then adopt appropriate security management and response measures.

(4) Incident prevention, reporting, and response mechanisms

In accordance with the Regulations, Article 8, and in order to reduce/control damages to data subjects resulting from personal data theft, tampering, damage, destruction, leakage, or other such security incidents, each enterprise shall formulate response, reporting, and prevention mechanisms:

1. Response mechanism: Methods to be followed after a security incident has occurred, to reduce/control damages to data subjects, and appropriate ways to notify data subjects after an incident investigation, as well as what such notifications shall contain.

2. Notification mechanism: Post-incident notifications to data subjects, in a form (such as email, text message, phone call, etc.) that makes it convenient for such subjects to learn what has occurred and what the incident handling status is; also, providing data subjects with a hotline or other way of seeking information later on.

3. Prevention mechanism: A post-incident mechanism for discussing and adjusting the prevention measures.

Within 72 hours after an enterprise learns that a personal data security incident has occurred, the enterprise shall use Attachment 2, the Enterprise Personal Data Leak Reporting Form, to notify the MODA of matters such as: A description of what caused the incident; an incident summary; the damage status; possible results from the personal data leakage; proposed response measures; proposed method and time for notifying data subjects; etc. Alternately, the enterprise may notify the special municipality or county/city government to then notify the MODA. If the enterprise is unable to report the incident within the time limit or is unable to supply complete reporting information all at once, the enterprise shall attach explanation of the reasons for the delay, or provide the information in stages. After the MODA or the special municipality or county/city government receives a report, they may implement reasonable handling in accordance with Articles 22 to 25 of the Act.

(5) Internal management procedures for personal data collection, processing, and usage

In accordance with the Regulations, Article 9, in order to ensure that their collection, processing, and use of personal data complies with the laws and orders regarding the protection of personal data, each enterprise shall do the following: Formulate internal management procedures; assess whether the use, processing, or collection of special categories of personal data are involved; assess data subjects’ consent has been obtained; assess whether the legal circumstances create an exemption from the obligation to inform; etc. The internal management measures shall also include providing data subjects with information on their rights in accordance with the Act, Article 3; putting in place mechanisms for ensuring the accuracy of and inquiring regarding personal data; and periodically reviewing whether the specific purposes for collecting personal data still exist or have expired.

(6) Limits, notifications, and monitoring for international transfers

In accordance with Article 10 of the Regulations and Article 21 of the Act, when an enterprise’s transfer of personal data across a national border affects data subjects to the extent that there is a major national interests concern, the enterprise shall assess whether MODA restrictions apply to the transfer. The enterprise shall also notify the data subjects of the region(s) that the data is transferred to; perform appropriate monitoring of the data recipient; and provide the data subjects with information on their rights in accordance with the Act, Article 3.

(7) Data, personnel, and equipment security management measures

1. Data security management measures: In accordance with the Regulations, Article 11, and when personal data is backup, kept confidential, or transferred by various means based on the risk assessment results, each enterprise shall put in place protective measures against abnormal access behaviors. When an enterprise provides information/communication technology services, the enterprise shall also put in place and regularly monitor intrusion countermeasures, abnormal access monitoring and contingencies, anti-malware mechanisms, account password verification, system testing, and other such data security management measures.

2. Personnel security management measures: In accordance with the Regulations, Article 12, each enterprise shall contractually specify the obligation to maintain confidentiality with all staff members; identify personnel who job duties involve collecting, processing, or using personal data; and periodically assess the appropriateness and necessity of personnel’s permissions to access personal data.

3. Equipment security management measures: In accordance with the Regulations, Article 14, and to prevent personal data being stolen, tampered with, damaged, destroyed, or leaked, each enterprise shall put in place appropriate media protection for personal data storage devices. The protection requirements include management measures such as technology, equipment and secured environments that meet a specific level of security.

(8) Education and training

In accordance with the Regulations, Article 13, each enterprise shall periodically use education and training to ensure that all staff members understand the following things: The laws and regulations pertaining to personal data protection; their personal duties and roles within their scopes of responsibility; and the requirements for all SMP management procedures, mechanisms, and measures. For any enterprise that engages in retail sales via the Internet, their SMP shall include user training and education regarding personal data protection and management; and the enterprise shall also formulate personal data protection rules for compliance.

(9) Continuous audit, recording, and improvement mechanisms

1. Data security auditing mechanisms: In accordance with the Regulations, Article 15, each enterprise shall periodically do internal audits of personal data, then put the audit results into an evaluation report that reviews improvements to the enterprise’s protection policy, SMP, etc. If there are any deficiencies, the enterprise shall make corrections.

2. Use of records, tracking data, and retention of evidence: In accordance with the Regulations, Article 16, and as part of carrying out its SMP, each enterprise shall retain a minimum of five years of records on the collection, processing, and use of personal data; tracking data for automated machinery; and evidence of having implemented the SMP. After an enterprise’s operations cease, it shall retain records of the destruction, transfer, or other deletion of personal data for a minimum of five years.

3. Comprehensive, continuous improvement for personal data security maintenance: In accordance with the Regulations, Article 17, any time an enterprise’s SMP is not implemented, the enterprise shall adopt corrective and preventive measures. Also, based on the SMP’s implementation status, its handling methods/implementation status, developments in data technology, adjustments to the enterprise’s business, and changes in the law and regulations, each enterprise shall periodically review and amend its SMP.

4. Tiered management

In accordance with the Regulations, Article 18, and to prevent relatively small businesses having to take on excessive personal data management costs, tiered management is applied. For an enterprise with a specific business scale (having capital of NT$10 million or more, or holding 5,000 or more personal data records), stronger security measure implementation is required, namely, the personal data security measures shall be implemented, reviewed, and improved at least once every twelve months. If an enterprise reaches NT$10 million or more in capital after the Regulations take effect, or if an enterprise’s number of personal data records held reaches 5,000 or more as a result of direct or indirect data collection, then within six months of meeting those conditions, the enterprise shall implement and review the improvement measures at least once every twelve months.

5. Outsourced personal data

Commercial outsourcing in the digital economy comes in many forms. In light of this, and in order to make clear each enterprise’s security management obligations with regard to the collection, processing, and use of personal data, Article 19 of the Regulations clearly spells out what duties shall be carried out with regard to any outsourcing that touches on personal data. When an enterprise outsources the collection, processing, or use of personal data, it is considered equivalent to the enterprise’s own activity. Thus, the enterprise shall understand and follow the legal orders and regulations on personal data set by the central government authorities in charge of the outsourcing party’s industries. Any oversight responsibilities arising from outsourcing the collection, processing, or use of others’ personal data shall be clearly stipulated in the outsourcing contract or other such documents.

IV. Conclusion

The Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy Industries are designed to balance development for Taiwan’s digital economy industries with comprehensive, continuous improvement of personal data security maintenance. In pursuit of those goals, the Regulations clarify what each enterprise must do: Plan, formulate, and carry out security maintenance plans for personal data that falls within the bounds of the enterprise’s business; ensure that all staff members receive training on personal data protection; provide personal data subjects with channels to file complaints and seek consultation on their rights; and inform the government authorities in charge of the digital economy about the enterprise’s SMP, including the status of any personal data security incidents. All this is done in hopes that the security measures will continuously improve the security of personal data in Taiwan’s digital economy industries.

※An Introduction to Taiwan’s Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy Industries,STLI, https://stli.iii.org.tw/en/article-detail.aspx?d=9095&i=170&no=55&tp=2 (Date:2025/07/02)
Quote this paper

Wen, Chih Chiang
 Associate Legal Researcher

Release： 2023/12
Tag
Read with phone
Back
Previous Introduction of the Revision of Article 22 and the Addition of Article 67-3 of the Statute for Industrial Innovation Next A Brief Introduction to Taiwan’s Legislations to Promote Industrial Innovations of the Digital Economy
You may be interested
Product Liability of Living Lab Products

I. Forward Only about 18% of the products or services continue to create good sales and have long product life cycles after entering the stream of commerce. This might denote that mass investing in the R&D does not necessary guarantee to develop popular goods and services. In order to overcome this obstacle, many experts and scholars from different research areas propose different R&D mechanisms to solve this problem. The so called “open innovation” is one of the most dynamic R&D mechanisms in recent years, which is created to compensate the weakness of “closed innovation”. By introducing the concept of “open innovation”, Living Lab invites real users join the projects of un-launched products and services for every possible R&D process to obtain the real interaction wherefrom, to fulfill the goal of “user centric” innovation. However, if users or any third party is injured or damaged from the trial products or services, to what extent Living Labs is liable for is one important question to further future innovation environment. This article will first gives a brief introduction and the development of living labs in Taiwan, follow by applying national laws and analysising obstacles to the liability issue caused by defective Living Lab products. Then, the article will continue to refer to foreign legislation and Living Lab practice, and conclude by suggestions and recommendations to the Living Labs practice in Taiwan. II. Brief Introduction of Living Labs A. Composition of Living Labs The concept of Living Labs was developed by Professor William J. Mitchell from the MIT Media Lab and School of Architecture. Professor Mitchell proposed applying the user-centric research method by using Living Lab as a R&D platform and bring together stockholders (co-creators), including public sectors, companies, universities and research fellows, and the most important, the end-users communities, both professional or non-professionals from various backgrounds, to join the R&D process. B. Operation Mode of Living Labs Living Lab invites end users to join the real world testing either in a digital, physical or virtual environment. Un-launched products or services are provided for testing and users are required to give feedbacks either experience, opinions, suggestions or even ideas to the products or services in return. Living Lab then collets and utilizes the feedbacks and observe the behavior patterns for product or service modification and improvement, future R&D plans and market analysis. C. Benefits of Living Labs Lirving Lab could effectively converse different backgrounds and levels of empirical environment, enhance the efficiency in R&D and bring about different benefits to the stakeholders. By participating in the R&D process, users could give feedbacks to Living Labs to further up the un-launched products and services (on the marketplace) to fit consumers’ needs. For industry, Living Lab provides platforms to get together stakeholders, speed up the integration of stakeholders of different size or from different fields and promote the R&D efficiency. For universities and research institutes, the public-private-people (user)-partnership (PPPP), could further more flexible services or R&D ecosystem and not only to have user-centric innovation, but also user-driven innovation.1 D. Development of Living Labs Living Labs has been energetically developed in Europe. Through the integration of project resources, individual Living Lab forms into Living Labs networks and actively engaging in cross-border or cross-project co-operation. 2 The concept of Living Labs has been introduced into Taiwan, there are several Living Labs in Taiwan so far, for example, Living Labs Taiwan from Institute for Information Industry (III), 3Touch Center (Center for Technology of Ubiquitous Computing and Humanity) from National Cheng Kung University, 4 Insight (Center of Innovation and Synergy for Intelligent Home and Living Technology) from National Taiwan University, 5 and Eco City from National Chiao Tung University. 6 The Living Labs aim to bring about the user-centric and user-driven model and bring new elements to R&D innovation. III. Liability of Losses, Damages, or Injuries Caused by Living Lab Products In order to encourage more end users join the Living Labs experiment, Living Labs usually provide the un-launched products or services as gifts or lend it for free. However, if products or services caused injury, economic loss or property damages to the users or third party during the experiment, to what extent should the Living Lab be liable for. A. Legal Status Upon on discussing of legal liability of Living Labs, the first prong to review is the legal status of Living Labs under the legal system in Taiwan. Although it is called “Lab”, but it is not necessarily to be a lab with “physical facility”, it could also be “virtual Labs”, for example, HP and Firebox are both launch for virtual Living Labs online to invite users join their open innovation projects. The concept of open innovation within the Living Labs environment, where Living Labs play as a role of a cook pot which gather personnel, equipment, and technology from parties from different working fields, integrate resources and creativeness to catalyze innovative ideas for new products and services. Normally, each Living Lab can be viewed as an independent "legal entity". In other words, it can exercise rights ad bear responsibility/liabilities under the law, and therefore, to response to needs for R&D, increase efficiency and contribute matters of legal compliance. B. User’s Legal Claims Against Living Labs 1. Contractual Liability Living Labs often use “user agreements” as legal documents to regulate the legal relationship between Living Labs and users. If there is any injury, damages or losses occurred during the experiment, users can sue Living Labs for breach of contract and sue for liability, warranty or violation of justice of contract. If the product is defective, such as manufacture defect, design defect or lack of proper warning, the injured user can sue Living Labs based on warranty. However under the provisions of Article 411 of the Civil Code, 7 if the product is offered for trial free for charge, if the gift is defective and caused injury, damages or losses to the users, Living Lab is not liable for breach of warranty. Unless the Living Lab intentionally conceal the defects and not information the user, or represent to the user that the product is guaranteed flawlessness and free from defects. Under this situation, Living Lab will be liable for damages caused by the defect. In the situation that when Living Lab only lend the products for trial, with the provisions of Article 466 of the Civil Code, 8 only when Living Lab intentionally conceal the defect, then is liable for the injuries and damages resulting there from. However, the purpose of the Living Labs experiment is to implement the open innovation, through the operation of the mechanism, by inviting potential users to join the experiment and require them to give feedbacks, ideas and recommendations for future product improvement. In addition to that, in most of the situations, it is difficult for Living Labs to foresee the existence of potential risks of their products or intentionally conceal the defects or guarantee the products are without defects; therefore it will be even harder for the injured users to bear the burden to proof the above situations. It is worth to address that, Living Labs and users shall enjoy contract autonomy as long as the provisions and terms of contract are not violating laws, public order and good morals, but not without any restriction. When parties have right of freedom of contract, at the mean time, their contract shall not exceed the boundaries of contractual justice. Especially, the burden and allocation of risks needs to be measured and assessed by the status and interests of the parties on rational bases. Because one of the special characteristics of Living Lab is open to general users to participate the experiment voluntarily, Living Lab usually adapts fill-in standard form contracts for convenience. But for the protection of the users, Living Lab shall pay more attention to the provisions and terms of contract which must not violate Article 247-1 of the Civil Code, 9 for example, provisions of contract shall not waive, decrease or increase liabilities of the parties, waive or limit any party to exercise his/her rights, or significant detriment one another’s’ interests, otherwise that part of the provision shall be void. 2. Tortious Liability When damages are caused by defective Living Lab products, users may be able to sue Living Labs and based his/her causes of action on Consumer Protection Law Article 7 business operator’s liability, 10 The Civil Code Article 191-1 manufacturer’s liability 11 and as well as The Civil Code Article 184 (1) tortious liability. 12 Yet, in order to provide motivations and incentives for users to join the open innovation, Living Labs usually gratuitous lending or gifting products or services to the users, at least in this stage, Living Labs are not conform with the definition of “business operators” 13 in the Consumer Protection Law, in designing, producing, manufacturing, importing or distributing goods, or providing services design, manufacturing, inputs, distribution of goods or the provision of services for business enterprise operators. Nor the Living Labs users are under the same definition of “consumer” 14 protected under the definition of the Consumer Protection Law, as those who enter into transactions, use goods or accept services for the purpose of consumption. Therefore, the relationship between Living Labs and the users are not “consumer relationship” 15 for sale of goods or provision of services, for which the Consumer Protection Law might not be applicable to offer protection to the users. Reviewing from the legislative history, Article 191-1 of the Civil Code was amended after the Consumer Protection Law. The reason for amendment was to maintain the completeness of the torts liability in the Civil Code and in supplement to the inadequacy of the Consumer Protection Law. 16 In referred from the above, the definition of “goods” is synonymous with the definition in the Consumer Protection Law. In order to apply the provisions, parties must be in the “consumer relationship” as regulated in Article 2 (3) of the Consumer Protection Law. As mentioned above, usually, Living Labs provide the products free of use or as gifts, it is really difficult to say there is “consumer relationship” between the parties. The first clause of Article 184 of the Civil Code states, “A person who, intentionally or negligently, has wrongfully damaged the rights of another is bound to compensate him for any injury arising there from. The same rule shall be applied when the injury is done intentionally in a manner against the rules of morals.” Hence, in this situation the burden of proof will lay on the users to prove that Living Labs is either with negligent or intent to damage the users by the defective products. Living Labs adapt open innovation to encourage users to participate into the every possible R&D process and obtain feedbacks or recommendations in return. Therefore, most of the time, Living Labs do not have “intent” to cause damages to the users, but whether Living Labs are with “negligence” will often be difficult to prove by the users. C. Third Party’s Legal Claim Against Living Labs 1. Contractual Liability In the case when a third party, who is not associated with the Living Labs experiment, sustains injury or damage from the defective Living Labs products, he or she might not be able to sue under the terms of contract because there is no contractual relationship exists between the parties. The possible cause of action for the third party might be able to sue Living Labs based on torts liability for damages. 2. Tortious Liability Although Article 7 of the Consumer Protection Law does provide cause of action for the third party to sue against the business operator for defective products, the third party must base his or her claim on the “consumer relationship” between the Living Labs or users. However, as mention as above, the relationship between Living Labs and the users are not under the “consumer relationship” as prescribed in the Consumer Protection Law, thus third party cannot sue Living Labs for damages in accordance with the Consumer Protection Law. As to the application process of provisions prescribed in Article 191-1 and 184 (1) of the Civil Code, the result is as the same as above. IV. Foreign Legislation and Practice A. American Jurisprudence 2d In the Comment of the 63A Am. Jur. 2d Products Liability §1142 states, “[s]trict liability covers not only products which have been sold, but also products that have been designed to be sold, have been produced to be sold, or are offered to be sold or marketed”. Furthermore, introduction into the stream of commerce does not require a transfer of possession; strict liability rests on “foreseeability”, and not on esoteric concepts relating to transfer or delivery of possession. Furthermore, the Comment extends the scope of application of strict liability to the “Transaction Other than Sales”. Strict liability also applies to the distribution products in a commercial transaction other than a sale, one provides the product to another either for use or consumption or as a preliminary step leading to ultimate use or consumption. For products made available for demonstration, testing or trial regulated in 63A Am. Jur. 2d Products Liability §1147, where a product-caused injury has taken place while the product is being tested or used for trial purposes by the prospective buyer, prior to the completion of a sales transaction, the person or entity who placed the product into the stream of commerce by providing it to the prospective buyer may be strictly liable. Strict liability also applies to those who manufacture and supply products to consumers on an investigational basis, even though the "supplying" does not technically amount to a sale. In the Observation of §1147 states that “[a] manufacturer who enters the marketing cycle by way of a demonstration, lease, free sample, or sale is in the best position to know and correct defects in its product, and as between the manufacturer and its prospective consumers, should bear the risk of injury to those prospective consumers when any such defects enter the market uncorrected. In sum, if one sustained injury, damages or economic losses by Living Labs products, he or she may sue Living Labs for product strict liability prescribes in §1142 & §1147. B. Living Labs Practice in Foreign Countries Referring to provisions of “Standard Contract” used between Living Labs and the users in other countries, most of the time, Living Labs might disclaim damages to property, but cannot disclaim legal protection or injury compensation. At the mean time, most of the Living Labs also adapt public safety insurance and product liability insurance to protect themselves and the users. V. Conclusion and Recommendation In conclude, the legal norms in Taiwan seems not be able to offer proper protection to Living Labs and the users. This article suggests that in order to form the ecosystem for the open innovation model of Living Labs, Living Labs shall provide proper protection to the users in order to balance the interests between Living Labs and users and catalyze the motive for the users to join the experiment. In referring to the “Guidelines for Good Clinical Practice for Trials on Pharmaceutical Products” 17 from the Department of Health, besides the proper duty, the main purpose of the guideline is to ensure the safety of the human participants. In the provisions prescribe in Article 22 of the “Good Clinical Guidelines”, the clinical trial agreement or related document shall provide participants with proper compensation or treatment when damage occurs. The “Model Clinical Trail Agreement” also provides provisions of damage compensation and insurance in the template which state the application to the assumption of risks and consumer protection. However, because the pharmaceutical clinical trial is with higher risk, the competent authorities, Department of Health, particularly get involved within the regulations and mechanisms of clinical trials to protect the human participants. In sum, whether the similar mechanism can be applied directly between the Living Labs and users needs for further consideration. Finally, for the continuous operating environment, it is necessary for Living Labs to adapt related laws and measures for the open innovation operating model. It is suggested that Living Labs shall enter contracts in the terms with proper risk allocation in accordance to contract justice and possibly with public safety or product insurance to share their liabilities. 1.EUROPEAN COMMISSION INFORMATION SOCIETY AND MEDIA, Living Labs for User-Driven Open Innovation:An Overview of the Living Labs Methodology, Activities and Achievements, European Commission(2009),at7,availableat http://ec.europa.eu/information_society/activities/livinglabs/docs/brochure_jan09_en.pdf (last accessed on Dec. 31, 2012). 2. Id., at 11-12 & 14. 3.Living Lab Taiwan, http://www.livinglabs.com.tw/index.html (Last accessed Dec. 26, 2012). 4. Touch Center from National Cheng Kung University, http://touch.ncku.edu.tw/touch/?q=node/52 (Last accessed Dec. 26, 2012). 5.Insight from National Taiwan University, http://insight.ntu.edu.tw/zh-tw/node/662 (Last accessed Dec. 26, 2012). 6.Eco City from National Chiao Tung University, http://www.ecocity.org.tw (Last accessed Dec. 26, 2012). 7.Civil Code Article 411, “The donor is not liable for a defect in the thing or right given. But, if he has intentionally concealed the defect or expressly guaranteed that the thing was free from such defect, he is bound to compensate the donee for any injury arising therefrom.” 8.Civil Code Article 466, “If the lender intentionally conceals a defect in the thing lent, he is responsible to the borrower for any injury resulting therefrom.” 9.Civil Code Article 247-1, “If a contract has been constituted according to the provisions which were prepared by one of the parties for contracts of the same kind, the agreements which include the following agreements and are obviously unfair under that circumstance are void. (1) To release or to reduce the responsibility of the party who prepared the entries of the contract. (2) To increase the responsibility of the other party. (3) To make the other party waive his right or to restrict the exercise of his right. (4) Other matters gravely disadvantageous to the other party. 10.Consumer Protection Law Article 7, “ business operators engaging in the design, production or manufacture of goods or in the provisions of services shall ensure that goods and services provided by them meet and comply with the contemporary technical and professional standards of the reasonably expected safety prior to the sold goods launched into the market, or at the time of rendering services. Where goods or services may endanger the lives, bodies, health or properties of consumers, a warning and the methods for emergency handling of such danger shall be labeled at a conspicuous place. Business operators violating the two foregoing two paragraphs and thus causing injury to consumers or third parties shall be jointly and severally liable therefore, provided that if business operators can prove that they are not guilty of negligence, the court may reduce their liability for damages.” 11.Civil Code Article 191-1, “The manufacturer is liable for the injury to another arising from the common use or consumption of his merchandise, unless there is no defectiveness in the production, manufacture, process, or design of the merchandise, or the injury is not caused by the defectiveness, or the manufacturer has exercised reasonable care to prevent the injury. The manufacturer mentioned in the preceding paragraph is the person who produces, manufactures, or processes the merchandise. Those, who attach the merchandise with the service mark, or other characters, signs to the extent enough to show it was produced, manufactured, or processed by them, shall be deemed to be the manufacturer. If the production, manufacture, process, or design of the merchandise is inconsistent with the contents of its manual or advertisement, it is deemed to be defective. The importer shall be as liable for the injury as the manufacturer.” 12.Civil Code Article 184 (1), “A person who, intentionally or negligently, has wrongfully damaged the rights of another is bound to compensate him for any injury arising there from. The same rule shall be applied when the injury is done intentionally in a manner against the rules of morals.” Consumer Protection Law Article 2 (2), “business operators" means those who are engaged in the business of designing, producing, manufacturing, importing or distributing goods, or providing services. Consumer Protection Law Article 2 (1), “consumers" means those who enter into transactions, use goods or accept services for the purpose of consumption. Consumer Protection Law Article 2 (3), “consumer relationship” means the legal relationship arising between consumers and business operators for sale of goods or provision of services. 16.王澤鑑，侵權行為法第二冊：特殊侵權行為，第313-314頁 (出版日期2006年7月) 17.DEPARTMENT OF HEALTH, Guidelines for Good Clinical Practice for Trials on Pharmaceutical Products, http://www.6law.idv.tw/6law/law3/%E8%97%A5%E5%93%81%E5%84%AA%E8%89%AF%E8%87%A8%E5%BA%8A%E8%A9%A6%E9%A9%97%E6%BA%96%E5%89%87.htm (last visited Dec. 31, 2012)

Legal Considerations of E-commerce of Taiwan: Development and the Status Quo

I. Preamble 1. Current Situation of E-Commerce Along with rapid developments of the information and the Internet, what follows in suit is inevitably the electronicalization in general industries. Nowadays, countries around the world accelerate exploitation of information technologies and management methods to enhance their capability of competition. Developments in digitalization have brought traditional business concerns to face rigorous challenge as regards both the nature of the business and the context of same, as well, in more recent years incidents such as Internet data exposition and on-line fraud have happened over and over again. Contentions of on-line transaction have also increased a great deal while some illegal websites proclaimed themselves to be legal ones. All these situations point to the importance of building up legislation on e-commerce and cyber environment. No less important is the buildup of more reliable environments friendly to electronic trades as to which the government should take into account the needs voiced from both suppliers and buyers in an effort to put into effects relevant implementations conducive to benignant developments of e-commerce. In the meantime, the entire B2C e-commerce market is going through unprecedented fusion, ongoing merging and cross application is seen in varied on-line transactions including TV shopping, Internet shopping, mobile shopping, e-mail shopping and so on, growing more tense than ever are integration in the context of http://bilingualdb.rdec.gov.tw/BilingWeb/bl_showworddetails.asplogistics,cash flow, exchange of information, and transactions, in addition, interchange of platforms and horizontal consolidation of varied equipments are indication enough that looking into the future, what looms ahead is a service-oriented, attention-intensive era of economy; by taking into good account consumers' actual needs, convenience and economies, these supplemented with customized service delivery, the intending party can realize phenomenal profits well beyond estimation; considering that the B2C business world is continually renovating its latest technology or application (the Skype, for example) better yet management model is required to strike profits (such as diggings of killer APs, Killer access Devices, Killer channels, Killer business models and their applications), and therein lies the orientation for efforts to be spent in so far as the future of the B2C e-commerce is concerned. By the outcome of the B2C Business Strategy Conference closing as of both 2004 and 2005,the current B2C e-commerce of Taiwan is fighting hard to cross the gap of lag in family Internet shopping rates (13% in 2003, grown up to 19.6% by 2005), if relevant technology matures and breaks various obstacles against B2C e-commerce, it is safe to say that by 2007 will come the mainstream epoch for Internet shopping vogue, and that is good enough for what one could envision for the B2C e-commerce. Reliable survey conducted for relevant projects indicates that the on-line shopping market over the year 2005 is estimated at approx. NT$51,073,000,000, reflecting a growth of 47% over the correspondent field of NT$34,720,000,000 realized in 2004, hopefully the growth may hit around 43% by the year 2006, estimation: NT$73,146,000,000; in the year 2005 the overall retail market realized a revenue of approx. NT$3,090,297,000,000 of which roughly 1.65% was due to contribution from on-line retail sales, estimation shows that by the year 2009 the on-line shopping market will expand to around NT$154,475,000,000. All of the survey digits clearly show that there is still much to expect of our domestic electronically subordinated markets, for which a growth potential always exists. 2. Implementation strategies and policy directions Over the nearly twenty years in the past the US has been strategically employed varied technologies associated with e-commerce at large, for the promotion of e-commerce and that has fetched a hit over Japanese business industry that was long-timed noted for their high quality struck at relatively low-profile cost image, and at the same time switched the fading stage of the US economy up to the rosy side. What makes e-commerce so much a marvel? Well, the secret is in fact simple enough, for in the wake of contemporary atmosphere for competition centering on internationalization and globalization, the only recipe for success and survival for any business is simply the triplicate: “Speed”, “Flexibility” and “Creativity”; e-commerce not only timely satisfied these needs, it plays a key role in this respect all at once, such that any responsive and responsible business executive would but have to admit that “Without getting electronic, you can expect no more orders”. In awe of this wake trend going for entrepreneurial electronic synonymous with e-commerce, our government has been keeping a keen eye on the position of modern e-commerce around the world. In addition, it has charged relevant departmental agencies to attend to the development and planning of domestic e-commerce to begin with the Ministry of Economic Affairs firstly accomplished Electronic Commerce Model System recommended for Business-to-Business (B2B) in the Informative Segment, the indicial system for electronic industry for our country is thereby established, and this by and by has extended to other kinds of industry; in the meantime, efforts have been shed to expel lots of bottlenecks facing the electronic of all and sundry industries as regards the environmental nods and the institutional node. Years of governmental efforts in this concern have seen results in the context of our domestic industries vying one another in the startup of getting involved in electronic operation. It is safe and fair to say that up to this date the e-commerce development in this country, already soundly founded, and is still growing avidly and rapidly. Because of the application of information has already become a sharp tool for advanced countries in upgrading their competitive margin in global markets, the premise being as such, countries have one by one promulgated their national information expertise development projects with a view to get going infrastructures information and communication constructions on a national scale. Here in this country relevant constructions have begun as early as back in the year 1994, the Executive Yuan has ratified the “National Information/Communication Infrastructure Implementation Plan” in the year 1997; in June 1999 the “Industrial Automation Plan” ratified previously was upgraded to a combined “Industrial Automation and Electronicalization Plan” for the purpose of promoting industrial competition margin. By the year 2001 our government, in view of societal need for general information as well as technical renovation that comes as a result of advances in information/communication technology, and through collective consultation and resource consolidation, founded a National Information and Communication Initiative Team (NICI Team) whose mission is to implement NICI Projects, while the priory founded Industrial Automation and Electronicalization Plan continued to function in the name of the “Industrial Electronic” Work Group under said NICI Project, in addition, a consensus has been reached that the implementation of information/communication know-how be regarded as playing a key role in the promotion of overall national competitive competency. II. Legislative Demands for the Development of e-Commerce in Taiwan 1. Trend of international legislation Under the ongoing trend of globalization and internationalization, transnational communication and transaction blooms fervently, a universal expectation shared by nations around the world is that concrete and clear-cut legislations be adopted to rule out obstacles to developments of electronic transactions due to inadequacy of statutory provisions or proscriptions. Whatever the contents of legislation from one state to another, the primary object is unexceptionally to promote developments of electronic transactions by the institutional introduction and intervention in all respects concerned. Phrased otherwise, the key role played by laws governing electronic transactions lies in presentation as enabling or supplemental laws to serve as legal basis with respect to issues where conventional institution fails to see or proves inept; whereas issues or legal interactions facing common transactions equivalent to traditional trades will still abide by conventional statutes, still, the ongoing trend respecting the same electronic trades on international communities calls not for the creation of new laws, but in installing legislation on issues not being covered in currently enforced statutes. Other countries facing issues relating to electronic transactions will not reason with reference exclusively to traditional civil or commercial codes by ignoring electronic trade codes or vice versa, instead they will rely upon both traditional codes and relatively regulations related to electronicalization, at the same time. 2. Legislation of e-commerce: Necessity and Orientation for Deliberation Speaking of legal concerns possibly facing application of electronic trades, with legal effects to the extent acknowledged according to laws governing transactions executed by “Electronic Signatures ACT” with respect to electronic documents being excepted, party autonomy and the principle of freedom to contract will prevail, still, contractual contentions otherwise occurring in the course of transaction will be subjected to relevant civil or commercial codes all the same, and that having nothing to do with pertinent electronicalization legislations. Considering the practical aspects, competency of legal intervention in the course of concluding of contracts involving electronic transactions deserves deliberation in the context of practical needs. Apart from relevant issues seen in a contract, matters such as competency of law respecting trades of digitalized merchandises, respecting protection of consumers in respect of which the law is already there, and respecting privacy protection, are all of vital interest to parties in executing any electronic transactions. Other issues which warrant close inspections considering a piece of electronic trade include; legislation with respect to cash flow, to material flow and practices, to whatever affects the proper rights of parties to a trade, to attempts to use the Internet as a criminal means, to situations where violation of safety of trade or order of trade arises; to issues relevant to competency of proof considering electronic documents, electronic signatures in the event of dispute out of a piece of electronic trade; and eventually, responsibilities on the part of ISP who forms a part of a piece of electronic trade, as well as electronic jump mail (spam), because all of them could undermine the development of electronic transactions. III. Taiwan Legislation on Electronic Commerce: the Status Quo and the Outlook in the Future The arrival of digital era has broken down the fence by which the world for ages has been defended, the e-commerce is taking up the place of traditional marketing scheme and outlets in giant strides, and has virtually become the focus of economy in the current era, Still, new fangled trade modes emerging from day to day in step with electronic modern business operators are impinging upon existent legal systems here in this country and that without any letup, such that the traditional philosophy of legislation is compelled to reorient itself to meet the impending challenge of our times. The most important of interest to a wholesome development of e-commerce lies in the creation of a benignant legislation structure. However, it is a pity that the creation of electronic commercial codes is a very complicated institutionalized project, considering that apart from electronic documents and electronic signature, the electronic transaction by and large will involve legislation specific to civil, criminal and otherwise legal fields, encompassing key issues including: contractual relationship, electronic taxation, electronic cash flow, network jurisdiction and protection extended to consumers. Given the foregoing disclosure, it is rightly with a view to attend to smooth developments of electronic trades, to secure a wholesome transaction environment, and to safeguard the proper interests of network users, that the importance of a wholesome legislation structure is set off all the more obviously. Seeing that the crucial key to nationwide practicing of so-called electronic transaction or trade and to the meaningful functioning of an electronic government lies indispensably in the creation of a safe and reliable network environment, so that information in the process of internet transmission is ensured against falsification, fabrication or theft, will allow for identifying of the identity of both parties to the transaction, and henceforth, preclusion of denying by either party of the transaction afterwards, that therein lies the key to the universality of an electronic government and of the implementation of electronic transaction, as a matter of fact here in Taiwan the “Electronic Signature Act” was ratified in 2001, and the same put into practice in April, the year next to 2001, This code accords electronic documents and e-signatures which fulfill prescribed requirements the same legal effects as would be granted to traditional paper documents or signatures, and specifies certifying agents based on low-profile control means. Next in both 2003 and 2004 respectively, the competent authorities have put into effect subordinating statutes including: “The Enforcement Rules of Electronic Signature Act”, “Regulations on Required Information for Certification Practice Statements” and “Regulations Governing Permission of Foreign Certification Service Providers”, with a view to comprehensive coverage of codes specifying control of electronic signatures, to the safeguarding of environments for credible electronic signatures, and all these meant for access with international counterparts. The Electronic Signature Act specifies essentially “electronic documents” which carry information specified as electronic transactions (the specification includes what is known as electronic government), and “electronic signatures” produced by parties thereto and as appearing thereon. Electronic transaction is based on computerized network and electronic technology bear advantages over traditional commences in terms of convenience, effectiveness, scope of coverage, low-profile trade costs, among other considerations, for all these reasons will better meet the information age that is ours today and the challenge for globalization of trade and economy everywhere, that is why they develop so fast and find wider and wider application from day to day. Legislation of electronic transaction is not meant to establish a rule of regulations that will totally replace correspondent laws erected earlier in years bygone, it starts out in the beginning to address unique legal complications that arose because of substantial change having taken place as regards means and manner of transaction. The newly arisen legal problems originated from the unique feature of electronic transaction itself, what comes in suit is the global, universal, international, technical and inter-territorial nature of codifications governing electronic commences, Currently legislation of e-commerce around the world is classifiable into those which relates to promotion or macroscopically policy of electronic transactions, synoptic codification of electronic transactions, codification of electronic signatures, codification of environments friendly to electronic commences. (Comprising: protection of consumers, protection of privacy) After reviewing different specifications of electronic transactions from international sources, one is convinced that differentiation in legislation of electronic trades from one state to another is much more a result of policy election than that of pure legislates. Notwithstanding that over the last decade legislation of electronic commerce that is seen globally ran fast, every state tries hard to bring up a full set of codes on electronic commerce/transaction in the shortest possible period so as to effect timely control of electronic transactions which themselves are renovating with no less fast a speed, however, it is a pity that electronic commerce goes deep into a number of specific fields, crossing legal, scientific and technical realms, and its application extends deep into varied day-to-day layer, such that the scope of legislation of electronic commerce/transaction has run afar to limits beyond imagination, forcing international organizations and economic entities to issue model codes and directives for their member states to adopt as norms for comparable legislations. Nevertheless, after being cut into effect for several years, problems emerged one after another with electronic commerce/transaction codes, including electronic signatures act; the situation is the same in countries all over the world, in Hong Kong, where Electronic Transactions Ordinance as amended have been promulgated in 2004, in Singapore, where triplicate-phased public inquiry in written form have been proffered successively in 2003 and 2005, whereby public suggestions are solicited as references to subsequent revisions; whereas on the other hand, the United Nations have erected protocols addressed to issues arising in the course of concluding of international electronic contracts to complement the “UNCITRAL Model Law on Electronic Commerce of 1996” and the “UNCITRAL Model Law on Electronic Signatures of 2000”. A common guideline for legislation at Legislature Agency is: “Adequate Regulation, Leaving Leverage, Conducing to Development”, in order to provide suitable legislation frame as soon as possible, a Legislature Agency would but offer sketchy outline to allow for space appropriate for future development of the newly emerging e-commerce world. So there is little wonder that Taiwan's electronic signature relevant rules have been cited as the most succinctly structured electronic signature code anywhere on the globe, as such, its contents are restricted but to controls of electronic signatures, failing largely to deal with the highly mutable electronically transacted business activities and trades. Four years have elapsed since the implementation of the electronic signature code, in view of the ever-changing environments of e-commerce, statutes currently in force have proved inadequate or behind time, if only present status and future demands of e-commerce are to be taken into account in step with emerging trends in global legislation as well as newly arisen commercial modes, it is truly time to review and amend current codes. To build a wholesome environment for the e-commerce industry, local competent authorities have already effected general review of current electronic signature rules by taking into account: how the current regulations have been working, international developmental trends, the latest development of relevant technology, and put forth recommendations on amendments of current codes after reviewing ongoing trends of legislation seen in Singapore, Hong Kong and the United Nations. Their amendments to their existent codes included, underway are our amending of scope of application of current codes so that a good match is possible with practical reality, such that the code is renamed to read as “Electronic Signature and Transaction Act”, the keynote being to enlarge scope of application of both electronic documents and electronic signatures, inclusion of regulations relevant to electronic trades and strengthening of currently existent authentication agencies in terms of their management capabilities, Also, to lay firm practice of electronic signature and transaction norms, amendments where necessary of relevant by-laws are being prosecuted at the same time, in this connection drafts in progress includes: “Amendments of The Enforcement Rules of Electronic Signature Act (Draft)”, “The Regulations for the Examination of Eligibility of Executive Agencies Exempt from the Application of Electronic Signature Act (Draft)”, “The Regulations on Certification Authority Agency (Draft)”, and “The Regulations of Guidance to Electronic Signatures and Transactions (Draft)”. So in short competent governmental agencies by now have begun to earnestly review current laws, drafting amendments thereto or considering legislation of new laws, whilst comprehensive planning addressed to future trends of our electronic transaction codes is also on the agenda. Without touching the prime framework of the Electronic Signatures Act that is currently in force, we are working on amendments of that code, for the reason that such is a way that incurs the least possible costs, so to say, all issues which electronic trades will or might face are titleogether included in the codification process, this serving to rule out overlapping of statutory provisions, what is made possible all at once is elucidation as to any amendment or draft incurred on the basis of current codes, backed with policy directive or de facto needs, and that effort conducive to collateral correlation with international reality. Issues as to which and what topics should be included in the scope of protocol for amendment of the Electronic Signature Act, including, for example, exemption eligibility and periodical review, as to those that would warrant enactment of dependent codes by competent authority authorized pursuant to said protocol, those which should be left to competent authorities in charge of other object enterprises to exercise their options as to erection of new laws or more preferably, amendment of current laws, ISP relevant provisions, for example, would have to be jointly deliberated and coordinated by and among experts representing respectively the government, the industry concerned, the academic circle, and the researching elites, that being a necessary requisite procedure to the setup of a milestone marking the structuring of an irreproachable electronic transaction mechanism here in this country. Up to the present day, trailing tight behind the development of electronic trade industry this country is equipped with substantially adequate codes, in the foreseeable future, current laws will still be reviewed with reference to the many unique features of the electronic trade industry to make amendments where justifiable, so as to make our codes more perfect. The orientation for future efforts can roughly be summed up in 7 points outlined below: 1. Guideline of Legal Mechanism to Resolve Electronic Transaction/Commerce Issues The legislation theme considering the electronicalized dominant reality today in our country is set on the keynote of the electronic signature codes,in so far as a legal action is committed by reason of electronic operation, to the extent that what is provided in currently enforced law is thus involved, then any jurisprudent discussion in that context will honor as principal the freedom to contract as provided in civil codes, and regard as exceptional legally required act, this being the premise, in the process of law enactments, principles that must be met include: Firstly, the market oriented principle, it seems that the leading position ought to be taken by private enterprises where the matter relates to development of e-commerce, that business need not be a constrained industry; Secondly, refraining from imposing any restraint on the e-commerce transaction, what a government must do is to participate an seldom as possible, and to refrain from meddling to the extent appropriate, it follows then that it should avoid imposing additional or unnecessary restriction upon commercial activities prosecuted via world wide web or electronic trades, considered as such are; troublesome procedures or formalities, tax duties additionally levied or additional fees; Thirdly, the sole reason for governmental intervention would be; to reinforce and back up a predictable, a most simple, easy, and contextually consistent environment in which to legally bind electronic commercial activities; Fourthly, understanding the unique features that characterize electronic commerce, effect earnest review and amendment where justified, of that part of current laws or ordinances susceptible of obstructing development of electronic trades, or titleernatively effect new order or scheme, regulation to adapt to possible development of electronic trades; Lastly, implementation of electronic trade activities are globally motivated, the establishment of a globally unified unique code to govern electronic trade activities to put aside traditional legal systems varying from one country to the next, will boost up confidence on the part of those engaged in electronic trade activities. 2. Legislation be concerned with International Paralleling As having been stated hereinabove, a guideline for legislation is: adequate regulation, leaving leverage, conducing to development. Since after having been put into practice for years, multiple problems emerged one by one, is almost a rule for many nations where legislation of electronic commerce/transaction or electronic signature codes was introduced, and that evidenced by the publication of the amended Electronic Transactions Ordinance, 2004, Hong Kong; open invitation to the public for suggestions, 2003 and 2005, Singapore, for reference for amendments; the UN Protocol drafted to deal with interrelated problems arising out of the processes of concluding of international electronically related contracts. A common keynote in the institutionalizing of electronic transaction codes among international communities is that in addition to the legal status invested upon electronic documents, electronic signatures, provisions are made to protect fair trade principle, fair competition, consumer’s proper interests, intellectual proprieties and privacy, paralleled with means and measures to encourage supervision, effective mediation and discourage criminal undertakings, while the governmental policy tends to assume a non-restrictive, market-oriented tune, to keep to the minimum any governmental intervention, and unwarranted constraints, the same is, just as it should be the guideline for the instituting of electronic transaction codes here in this country so as to keep abreast with international realities, and that conducive to making out the utmost of advantages possible out of electronic transaction activities on the worldwide stage. 3. Deliberation of the Electronicalized Dominance Legalization be in Parallel with Newly Emerged Applications and Development of Transaction Modes Due to the technology involved in striking a deal executed electronically, one piece of electronic trade on the point of conclusion is not as simple as traditional modes of transaction by virtue of the preclusion of both time and space restrictions, so to speak, application of electronic mode of transaction may very well result in situations beyond restriction through traditional legal constraints or theoretic reasoning. Such trade modes, by reason of its unique transaction feature, gave way to contention as to incompatibility with traditional statutory constraints, this is briefly a common dilemma facing all the nations around the world, and they all betake themselves in the working for whatever is possible to regulate and control electronic transactions through legislative means and innovations. Not to mention the complexity of legal intervention in case of transnational transactions prosecuted electronically, again, by reason of the unique feature characterizing electronic transaction, so a basic tune for the working toward the formulation of electronic trade legislation is the buildup of consensus so as to being domestic effort in alignment with international reality. 4. Studies on the Topics of Digitalized Merchandise Any trade of digitalized goods, without regard to whether such is taken as a commodity pursuant to civil codes, would hardly quality for being categorized as sort of authorization or anonymous contract, they would more appropriately be ascribed as like purchase vs. sale and be detitle with accordingly. Given that on-line delivery or downloading, albeit differing from the transfer delivery that is specified in civil codes, still, want of material delivery would not necessarily mean want of legally deemed transfer or delivery. That intangible network transmission would grant the purchaser de facto control of the object in question, then ascertaining of the point of time of transfer of risk, may very well be prosecuted in accordance with provisions in the civil code. As regards assumption of responsibility for flaw, trade of commercial software against on-line payment may reasonably be regarded as categorized debt against which buyer is entitled to delivery of flawless commodity; as to reinstatement of obligations upon dissolution of contract, the point lies not with returning of the object as received, but with returning of the right to use the software concerned, In the event of virus being entrained with the purchase which is an object in question, damage incurred to the buyer is usually in the form of damaged hardware or falsification, deletion of files, that of loss of inherent interests, as to such forms of damage or loss buyer may exercise multiple means of indemnifications, still, the legal status of filed date and principle to quantify such loss in view of indemnification will have to be defined commensurate with evolution of both theory and practice. Overall, as far as transactions of software against on-line payment are concerned, civil law as is still adequate without much ado. As to the question whether digitalized commodities qualify for postal trades where Consumer Protection Law applies, to balance the proper interests claimable to both consumers and the entrepreneur, and to rule out consumer's abuse of rights where ethics is at risk, it is fit and proper to restrict or rule out the transaction of certain commodities under specified categories, For one thing, considering the risks of digital date or digitalized commodities containing digitalized information, in respect of which copying or reproduction is as easy an pie, as to which it is not easy to ascertain whether the consumer has indeed returned the utility right, there is reason to doubt the suitability of granting unilaterally the consumer the right of rejection. Still, in so far as the digitalized commodity remains unopened, or that it is supplied with copying or reproduction procedures, product initiation means, then the risk of copying or reproduction is ruled out and in this instance Consumer Protection Law should apply notwithstanding. 5. Topics Relating to Consumer Protection and Privacy Protection The latest amendment to Consumer Protection Law with respect to electronic trades by including postal purchase on the Internet under Article 2 Section 10, and by the addition of Article 19-1 to allow for the application of the Hesitation Period respecting postal purchase trades, means more comprehensive protection for on-line consumers all right, still, due to the riddling complexity of the operation of electronic commerce at least a portion of the contents of transaction hardly fit the latest provisions in Consumer Protection Law, such that conflict seems to have emerged between protection for the consumers and reasonable risks borne by the entrepreneur. It is therefore suggested that the competent authorities consult the “Distance Marketing of Consumer Financial Services Directive (Directive 97/7/EC)” issued by the European Union with regard to the exclusion of contractual obligations, and conduct a comprehensive review of contents possible for inclusion in a piece of electronic transaction so as to delete commodities or services inappropriate for stipulation under Article 19 and article 19-1 by amendments to existent legislation, both administration and legislature ought to reinforce efforts in relevant protection mechanism to meet the challenging the Internet Age of our times paralleled with efforts to go in line with ongoing trends for consumer's protection on the international scenario. Next, responding to the point of key interest to consumers regarding protection of personal date entangled in B2C electronic transactions, the Ministry of Justice has publicized the protocol of amendments to Personal Date Act, whereby the scope of coverage extend to overall latitudes without discrimination, incorporating the obligation to serve notice respecting the collection and use of data, restriction on the collection of children's data and of sensitive data, group litigation, and increase of indemnity amounts. Upon legislative ratification of amendments to Personal Data Protection Act in the future, operators of electronic trades will have to face certain restrictions collecting data on websites in addition to being charged with duty of notice, so that without securing consent from the person whose data is being solicited for collection, the operator may not engage in inappropriate use, let alone selling of personal data in question, it is anticipated that our existent on-line marketing mode would hence go through substantial change. To prevent operators of electronic transactions in this country from frustrations adapting to the forthcoming statutory amendments, it is suggested that the competent authorities upon legislation of said amendments prepare models of policy for protection of personal privacy confronting operation of electronic transactions. 6. Topics Relating to Cash Flow titlehough respecting electronic transactions, safe payment scheme has already been established for the market; further to that, the Banking Bureau of the Financial Supervisory Commission, Executive Yuan, has published aimed at web banking operations “Pattern Contracts for Personal Computerized Banking Services and Web Banking Service” and stipulated “Criterion for Banking Institution's Operation and Safety Control of Electronic Banking Services”, to ascertain safeguarding of web payments; as regards petty payments amendment has been made to Banking Law by the introduction of Article 42-1, whereby cash buildup cards derive their legality basis, along with Procedures governing Bank's issue of cash buildup cards implemented such that such cards are available for on-line transactions, these are much in the promotion phase, yet distant to universal application. In practice, it is common and popular for credit cards to be used in on-line transactions, still, such form of payment could strike a potential risk for the card owners, to effectively protect card owners' safety at consumption and proper interests, it is suggested that the competent authorities promptly institute “Pattern Contract Terms Respecting Web Transactions Using Credit Cards” to meet inadequacies of stipulation on credit card operation over on-line transactions. Concurrent with the increased frequency of cash flow via the internet, there may develop more of payment tools in the foreseeable future, and more funds may come and go via the Net, however, the existent legislation respecting electronic transfer of funds currently is far from adequate, it is appealed that the competent authorities institute relevant legislation in time to help build a sound and wholesome environment for out net financial industry as well. 7. Tax Related Topics Internationally there has not reached, to this day, unified consensus respecting complicated net taxing policy, since that taxation with respect to on-line transactions is not as simplistic as would suffice the notion that “as long as there is income, there is duty”, it involves by and large concerns such as development of the Internet industry, fairness of taxation and even national competition, so in so far as net taxation is concerned, the concern should extend to deliberation of complementally measures apart from just reviewing if existent taxation laws are adequate for exploitation and in the negative case, if ad hoc stipulation is required

Introduction of the Revision of Article 22 and the Addition of Article 67-3 of the Statute for Industrial Innovation

Introduction of the Revision of Article 22 and the Addition of Article 67-3 of the Statute for Industrial Innovation 2025/06/04 I. Foreword Taiwan is enhancing overseas investment screening and technology security through modifications to the Statute for Industrial Innovation (hereinafter the Statute). The current updated Statute has demonstrated the international trend in tightening control over technology sector through means of investment. In a globalized arena of technology competition, Taiwan is spearheading the development of such a control mechanism. At the outset, the Statute was enacted in 2010 for elevating industrial innovation, improvement of the industrial environment and enhancement of industrial competitiveness. It’s broadly inclusive in the sectors within the purview of its governance in agricultural, industrial and service businesses. On April 18, 2025, the Legislative Yuan passed a bill modifying several provisions, including Article 22 and the newly added Article 67-3. Subsequently, on May 7, 2025, the President of the Republic of China (Taiwan) promulgated the modified provisions, including Article 22 and the newly added Article 67-3. The effective dates for Articles 22 and 67-3 will be determined by the Executive Yuan. The Statute has now been revised to reflect the growing geopolitical and economic pressures Taiwan faces as a global leader in semiconductors and high-tech manufacturing in response to increasing concerns over technology security and capital outflows. The critical essence here to safeguard key know-how lies in Article 22 and 67-3. Article 22 governs the approval process for overseas investments, while Article 67-3 stipulates penalties for non-compliance. The revised Article 22 now is explicitly allowing the Ministry of Economic Affairs (hereinafter MOEA) to reject or conditionally approve outbound investments if they are deemed to fit into certain conditions. Together with the newly-added Article 67-3, those who are violating Article 22 will be subject to penalties. These amendments reflect a broader regulatory shift toward strengthening screening of outbound investments, particularly in sectors involving sensitive technologies. This article discusses the current legislative trend and the implication of latest statutory revision on Article 22 and 67-3. II. Article 22: Expanding the Scope of Investment Screening Under its original form, Article 22 required company incorporated in accordance with the provisions of the Company Act of Republic of China (Taiwan) to obtain prior approval from relevant authorit(ies) for overseas investments exceeding NTD one and a half billion (approximately USD forty-eight million). This threshold-based approach was primarily designed to monitor large-scale capital outflows and ensure such investments aligned with national industrial policy. However, the latest amendment significantly redefines the scope of the authority’s review. Firstly, the subject matter of the Statute has been expanded to include juridical person organized and registered pursuant to the Limited Partnership Act of Republic of China (Taiwan). Therefore, persons subject to the application of the Statute are now limited partnerships and companies registered according to the applicable law. Secondly, Article 22 now provides foundation to the MOEA to require prior approval for outbound investments based not only on the investment amount but also on the nature, destination and strategic importance of the investment. Specifically, the amendment allows the MOEA to review and disapprove when it is determined the investment is of: 1. Impact on national security, such as defense and military 2. Impact on national economic development with significant adverse effects, such as undermining the supply chain resilience and security of Taiwan’s internationally leading position in or key industries of. 3. Influence on the Government to comply with international treaty, agreement or pact, such as the overseas investment or operation of the company influencing the Government to sign or voluntarily comply with international treaties agreement or pact, or is a breach of implementation of relevant treaties, agreement or pact. 4. Violation of the Labor Standards Act entailing major labor-capital issues that have yet to be resolved, such as malicious closure of factory closure and relocation of capital that affects labors' rights. In fact, similar provision regulating investment for the concern of national security is not new. A comparable regulatory mechanism may be traced back to Article 3 of the MOEA Guidelines for Reviewing and Supervising Investments in Semiconductor and LCD Panel Industries in Mainland China (在大陸地區投資晶圓鑄造廠積體電路設計積體電路封裝積體電路測試與液晶顯示器面板廠關鍵技術審查及監督作業要點, hereinafter the Guidelines). The Guidelines require that investments, such as establishing or acquiring 12-inch wafer foundries, IC design, packaging and testing operations exceeding USD fifty million, or LCD panel plants in Mainland China be subject to investment review by a Key Technology Task Force convened by the MOEA. Notably, this task force may include representatives from national security agencies, underscoring the long-standing policy to integrate security considerations into industrial and investment regulation. The alignment of the amended Statute with these existing security-based review frameworks reflects a broader institutionalization of national security as a key factor in Taiwan's outbound investment governance. In considering the above factor and in evaluating the conditions on the approval process, the amended Article 22 has added that the MOEA is authorized to consult with relevant authorities on providing the rules implementing the review of the specific investment destination country or regions, the specific industry or know-how, the threshold investment amount, the application procedures and other compliance matters. Importantly, the MOEA may fully or conditionally reject application of approvals if the investment is deemed to be contrary to national interests. This expanded regulatory framework is aimed at preventing the leakage of critical technology and intellectual capital to particular countries or regions that may pose strategic or economic risks to Taiwan. It aligns with global trends where countries are re-evaluating their foreign investment regimes to address national security concerns. III. Article 67-3: Aligning with the Purpose of Revision of Article 22 Through Stronger Penalties The newly added Article 67-3 introduces a robust penalty regime to enforce compliance with the amended Article 22. Previously, the Statute did not provide penalties for parties’ failure to seek required investment approvals. However, such a provision lacked sufficient enforcement mechanisms. Therefore, to prevent leakage of key know-how leading to erosion of industry competiveness and forming foundation to the threat of the country, for purpose of legal compliance, Article 67-3 has explicitly laid out the consequences to violation of Article 22. Under the revised provisions, companies that fail to comply with investment approval rules now face: 1. Fine(s) not less than NTD fifty thousand and not more than NTD one million and; 2. Mandatory withdrawal from the overseas venture, order of correction, cease the investment, where applicable. 3. In the event that the violator fails to comply with imposed conditions or fails to rectify the violation within the required time limit, the authority may impose fines not less than NTD five hundred thousand and not more than NTD ten million upon the violator for each and every violation in order to enforce regulatory control. In addition, to ensure effective enforcement of regulatory conditions and instructions issued by the MOEA, Article 67-3 further provides penalties targeting non-compliance with terms attached to overseas investment approvals or corrective orders issued under Article 22. Specifically, with regard to the conditions, restrictions, or other requirements MOEA imposed under Article 22 Paragraph 3 when granting approval for overseas investments, failure to fulfill the foregoing may lead to fine(s) not less than NTD five hundred thousand and not more than NTD ten million per violation. This enforcement mechanism serves to deter regulatory breaches in sensitive outbound investment activities. In light of rising global concerns over economic security and the protection of key technologies, Article 67-3 has been added to strengthen the regulatory framework for outbound investment. In sum, the introduction of Article 67-3 serves to reinforce the legal force of Article 22 by establishing a clear and enforceable penalty framework. This provision fills a critical gap in the Statute by providing the relevant authorit(ies) with the necessary tools to ensure compliance and deter unauthorized outbound investments. IV. Conclusion The amended Article 22 and newly added Article 67-3 are not merely administrative changes but represent a strategic recalibration of Taiwan’s industrial and security policy. Taiwan’s economic model has long emphasized innovation, global integration and export-driven growth. But with growing external pressure to align with allied democratic nations on technology controls, the policy is now steering toward balance with caution. It is also strengthening its national security through reducing vulnerability to economic coercion. Such a move not only gestures to preserve Taiwan’s competitive edge in strategic industries, but also ensures that public subsidies and domestic R&D efforts are not inadvertently diverted to foreign rivals. This shift also reflects the evolution in Taiwan’s approach to outbound investment regulation. The amended legislation introducing a more comprehensive review criteria under Article 22, along with the enforcement mechanism in Article 67-3, enhances the ability to respond proactively to emerging risks, whether they stem from the nature of the technology, the destination of the investment, or potential violations of domestic legal and labor standards. Looking ahead, these legislative changes could prompt companies to re-evaluate their international strategies. At the same time, it is expected that a strengthened policy in domestic innovation ecosystem through targeted incentives should be introduced to balance the current trend of investment screening. In sum, the latest changes underscore a broader shift toward reinforcing economic security and industrial self-reliance while navigating the complexities of a rapidly shifting global technological landscape. Disclaimer: This article was prepared as part of the work at the Institute for Information Industry. While it is published under the author's name, its title and content do not necessarily represent the personal views of the author. This article is intended for informational purposes only and does not constitute legal advice.

How Does Taiwan Respond to Tax Challenges Arising from Digitalization

How Does Taiwan Respond to Tax Challenges Arising from Digitalization Yuan-Qing, Liao Attorney and Legal Researcher 2022/3/24 I. The Tax Challenges arising from Digitalization 　　According to the Ability-to-pay principle, companies need to pay income tax for their income or profit. Nevertheless, in order to avoid their tax obligations, Multinational Corporations (MNCs) have been continuously developing sophisticated and refined tax planning practices to disconnect or mismatch between “where value is created” and “where taxes are paid”, and such practices erode the tax base.[1] 　　A well-known example of trade model under digitalization of MNCs is that “MNCs do not necessarily have to open domestic physical stores or set up servers, those domestic consumers can purchase goods and services from MNCs directly through the Internet”. This trade model not only breaks the international tax rules “With Permanent Establishment (PE), With taxing power”, but also disconnects or mismatches between “where value is created” and “where taxes are paid” more perfectly. As a result, the taxing power of “where value is created” is eroded. This is a classical type of challenges faced by tax regulators in the age of digitalization of the economy. 　　In response, The European Commission (EC) and The Organization for Economic Cooperation and Development (OECD) had respectively proposed new plans to ensure that digital business activities are taxed in a fair and friendly way. (I) The Digital Service Tax proposed by EC[2] 　　In 2018, EC proposed a temporary tax - Digital Services Tax (DST), which a basic rate of 3% to be imposed on revenues of a digital platform when such platform meets all of the following criteria, including (1) online placement or advertising services, (2) sales of collected user data, (3) facilitate interactions between users, (4) annual worldwide revenues exceeding 750 million euros and (5) taxable revenues within the European Union (EU) exceeding 50 million euros.[3] 　　Concerning that the DST apparently targeting US MNCs - Google, Amazon, Facebook and Apple (GAFA), the US government once threatened to impose retaliatory tariffs. Insofar, it seems that only a part of MNCs will be immediately affected by DST, but the entire trading systems in the rest of the world will be impacted if the retaliatory tariffs conducted by the US take effect. (II) The Two-Pillar plan released by OECD[4] 　　In October 2020, OECD had released Reports on the Pillar One and Pillar Two Blueprints (The Two-Pillar plan), which aimed to terminate the international dispute resulting from DST of EC and provide solutions for tax challenges arising from the digitalization of the economy in the long term.[5] 　　Pillar One is “Unified Approach”, to ensure the exercise of taxing powers of governments and a fairer distribution of profits among countries where largest MNCs, including digital companies are located at. It would “re-allocate” the taxing powers over MNCs among governments of different jurisdictions. The governments located at the place where MNCs have business activities and earn profits will have the tax powers over those MNCs, even MNCs do not have a physical presence there. Pillar Two is “Global Anti-Base Erosion rules (GloBE)”, tried to protect tax bases of countries through the introduction of “Global Minimum Tax (GMT)” which sets up a minimum corporate income tax rate on MNCs to prevent tax competitions among countries. 　　Compared with DST proposed by EC, which focuses on the taxing powers of the government that is located at the place where value is created. The Two-Pillar plan focuses more on both re-allocation of international taxing powers and protects the tax base of each country. (II) The Consensus on The Two-Pillar plan[6] 　　The Group of Seven (G7[7]), G20[8] and 137 countries and jurisdictions OECD stated not only agreed to remove the DST or the similar measures, but also had a consensus on Two-Pillar plan to reform international taxation rules[9]. In order to ensure that MNCs pay a fair share of tax wherever they operate, as well as to set a GMT rate to protect tax base of each country. Moreover, the new international tax system that the GMT rate is 15%[10] is expected to take effect in 2023 and an estimated 154 domestic MNCs will be thus affected accordingly. II. The Response of Taiwan to Tax Challenges 　　A foreign enterprise has to pay Taiwan taxing regulators enterprise income tax for income generated in Taiwan in the premise that this foreign enterprise has a PE in Taiwan. In other words, a PE in Taiwan, which is recognized as the fixed place of business through which the business of an enterprise is wholly or partly carried on[11], is the determinant that affects the power of Taiwan to tax the profits of a foreign enterprise. In brief, “No PE, No taxing power”. 　　In the era of digitalization, the foreign enterprises can create value through the digital means without establishing a PE in Taiwan. The situation of disconnection or mismatch between where value is created and where taxes are paid not only erodes the taxing power of Taiwan, but also breaks the principle of equality in substantive taxation[12] as mentioned above. As a result, the Ministry of Finance (MOF) adjusted and implemented several new taxation policies or measures, including, inter alia, “Income Taxation on Cross Border Electronic Services[13]” and “Income Basic Tax Act”. These two measures were once considered similarly to DST or GMT individually. (I) Income Taxation on Cross Border Electronic Services 　　Responding to tax challenges posed by foreign enterprises under digitalization, the MOF promulgated a new income tax regulation “Income Taxation on Cross Border Electronic Services[14]”, and asked those foreign enterprises who provide cross-border electronic services to purchasers in Taiwan, shall register for business value-added tax (VAT), including register a tax identification number and file taxes. The causation between the electronic services and national economy shall be the determinant to identify income generated in Taiwan: The payment made by a purchaser located in Taiwan to a foreign enterprise in order to procure following products or services provided by such foreign enterprise shall be deemed as income generated in Taiwan. (1) The product that is produced, manufactured, transmitted, downloaded and saved in a digital device and can only be provided with assistance by individuals or enterprises in Taiwan. (2) The real-time, interactive, handy, and continuing electronic services that are provided through digital means A foreign enterprise provides a digital platform to conduct transactions, once one of the transaction parties is in Taiwan, the sales amounts shall be recognized as income generated in Taiwan (II) Income Basic Tax Act (IBT) 　　To promote domestic economic development and industrial innovation, Taiwan has enacted many laws on tax incentives, mainly tax deductions and credits. However, these laws have been overdeveloped, the implement period has also been excessively extended, which contributes to severely unreasonable tax burden inequality. 　　Therefore, Taiwan officially introduced Alternative Minimum Tax System (AMT) and promulgated Income Basic Tax Act (IBT)[15] since 2006. As a separate taxation system, AMT is imposed by government that places a floor on the percentage of taxes a certain filer must pay, regardless of how many tax incentives the filer may claim[16]. Hence, in accordance with Article 1 of IBT “[T]he purposes of this Act are to uphold tax equity, to ensure tax revenue for the country, and to establish the basic requirements of profit-seeking enterprises and individuals in regard to their obligation to fulfill their income tax burden as a contribution to public finance.” 　　AMT uses a different set of rules to determining taxable income compared with the normal tax calculations. Once the regular income-tax amount is higher than the AMT, the taxpayer pays the regular income tax. Thus, if AMT is higher, then the taxpayer pays the AMT. And according to Article 8 (1) of IBT, the enterprise IBT rate is prescribed of 12% since 2013.[17] 　　However, according to Article 3 (1) (5) of IBT[18], a foreign enterprise without domestic fixed place of business or domestic business agent is not regulated by IBT. (III) Conclusion “Income Taxation on Cross Border Electronic Services (Hereinafter referred to as “the measure”)” asked the foreign enterprises to file income tax. But the elements of “the measure” are different from DST. The reasons may be (1) “This measure” has been designed and promulgated earlier than DST and (2) The DST is essentially more like alternative minimum tax. IBT may effect by the concept of “with PE, with taxing power”. Therefore, a foreign enterprise without PE in Taiwan is not regulated by IBT, this means “No PE, No obligation of IBT”. Also, the IBT rate of profit-seeking enterprise is 12%. III. The Remaining Problems of Tax System in Taiwan 　　It is foreseeable that with the international consensus on launching the Two-Pillar Plan in 2023, those countries and jurisdictions will start to adjust their tax policies, inclusive of increasing the income tax rate as well as basic tax rate. As long as the issue of "Taiwan companies abusing tax planning to hide wealth aboard and avoid domestic tax obligations" is not solved, this issue will lead to the continuous erosion of Taiwan taxing power. 　　Concretely, in order to reduce domestic tax burden, several Taiwan companies abusing tax planning to detain profits in foreign affiliated companies or disguise as foreign companies. Though Income Taxation on Cross Border Electronic Services has taking effect, those companies pay income tax only on income generated in Taiwan instead of global income. Therefore, the Controlled Foreign Company Rules and the Place of Effective Management Rules have been proposed. (I) The Controlled Foreign Company Rules 　　A controlled foreign corporation (CFC) is a corporate entity that is registered and conducts business in foreign countries or jurisdictions, and is either directly or indirectly controlled by a resident taxpayer. 　　According to Article 43-3 of the Income Tax Act, if a parent company holds 50% or more of the shares of a foreign subsidiary, or has significant influence on such foreign subsidiary, the subsidiary may be seen as a conduit of the parent company and subject to domestic enterprise income, whether there is dividend distribution to the parent company or not, unless the subsidiary can pass the substantial activity test or its revenue is below a certain threshold.[19] 　　Yet, the “Paragraph 3”, compared with “Paragraph 4”, is not ruled the “a CFC can deduct the domestic income tax from foreign income tax it paid[20]”, which may result in double taxation. 　　The Taiwan CFC rules have not come into effect yet. However, according to the ancillary resolution passed by Legislative Yuan[21], our CFC Rules will come into effect within one year after the tax amnesty legislation, "The Management, Utilization, and Taxation of Repatriated Offshore Funds Act", expires. Namely, the Taiwan CFC Rules will finally come into effect in 2022 at the latest. (II) The Place of Effective Management Rules 　　The place of effective management (PEM) is defined as a place where key managements and commercial decisions a business entity substantially made.[22] This means, once a foreign company sets and operates a branch in Taiwan, and this branch substantially made key managements and commercial decisions for the foreign company, then it will be deemed as a PEM, the foreign company will also be deemed as a domestic company, and will be subject to tax assessment in accordance with the Taiwan Income Tax Act and other tax regulations.[23] 　　Following the PEM rules, which is incorporated into Article 43-4 of the Income Tax Act, the elements of PEM including (1) decision making location, (2) record keeping and maintenance location, and (3) actual operating location are all in Taiwan. 　　However, take foreign experience for example, German practice believes that the PEM rules only need to list "decision making location" as a necessary condition. The rest elements "record keeping and maintenance location" and "actual operating location" are more like reference factors than necessary conditions[24]. 　　The Taiwan PEM rules list all three elements as necessary conditions, which may probably cause excessive restrictions on future applications. And the PEM Rules were announced by the MOF in July 2016, which have yet to take effect neither. (III) Attachment: The Sophisticated and Conflicting Tax System 　　The enterprise income tax rate in Taiwan is 20% to 24% in accordance with Article 5 (5) and Article 66-9 (1) of Income Tax Act. Still, to achieve specific policy goals by promoting or suppressing certain behaviors, a policy that oriented tax deductions and credits is called tax incentives, and the disadvantage of which is apparently turn the tax burden into inequality. In the end, to solve the inequality of tax burden resulting from tax incentives and to ensure tax revenue, the minimum tax will be levied by AMT. The AMT rate in Taiwan is 12% as aforementioned. 　　The implementation of tax incentives and AMT has made the domestic tax system over-complicated. Since the overused tax incentives have abnormally increase the amount of uncompetitive enterprises, who heavily rely on them. While the AMT may strangle the enterprises, who are compliance with economic policies. Then, the interaction and conflicts between tax incentives and AMT not just complicate the domestic tax system, also substantively result in unpredictability and inconsistency of domestic tax environment, which may cause a double-loss situation between tax revenue for the country and economic development policies. IV. Conclusions and Prospects (I) Conclusion Amend the Income Basic Tax Act and Increase Enterprise Rate to at Least 15% 　　First, those foreign enterprises without PE but create value in Taiwan are not ruled by IBT. Second, the enterprise IBT rate in Taiwan is now 12%, apparently lower than GMT of 15%. If IBT rate maintains 12% through 2023, the difference between GMT and IBT may be deemed as a harmful tax-based competition. Hence, it is imperative to amend the IBT to rule the foreign enterprises without PE but create value in Taiwan and increase the enterprise IBT rate to at least 15%. 　　Once consider that GMT is aimed at large MNCs, the IBT may adopt a categorized approach and set different rates based on the size of the enterprise. For instance, increase the IBT rate of MNCs that meet all GMT criteria to 15%, and the rest maintains 12%. Amend and Take CFC rules and PEM rules into effects 　　A domestic company pays income tax on global income, while a foreign company with PE in Taiwan pays income tax on income generated in Taiwan. Responding to digitalization, the implement of Income Taxation on Cross Border Electronic Services regulates foreign companies without PE in Taiwan to pay income tax generated in Taiwan fairly. 　　It is necessary to implement both CFC rules and PEM rules, to prevent domestic companies from abusing tax planning to detain the profit in foreign affiliated companies or to disguise as foreign companies for reducing domestic tax burden, which may continuously eroding taxing power of Taiwan. However, CFC rules and PEM rules still leave some problems to be improved and solved as aforementioned, which is undoubtedly the obligation of Taiwan government. (II) Prospects Substantive Review the Tax Incentives and Reconstruction of Taiwan Tax System 　　The Reasoning of Interpretation No.565 mentioned that “[W]hile taxpayers should, under the principle of equality in taxation, pay taxes which they are supposed to pay according to their actual taxpaying ability, it is not forbidden by Article 7 of the Constitution to specify, with reasonable cause, differential treatments by way of exceptions or special provisions within the scope of discretion authorized by law to grant taxpayers of a particular class tax benefits in the form of tax reduction or exemption in order to promote the public interest.”. 　　The principle of ability-to-pay means that those who have greater ability to pay taxes, usually measured by income, wealth and financial capability, should pay more in taxes compared with those who have minor capability. Since taxation is the pecuniary obligation with non-counter performance under public law, the only foundation of legitimacy is the principle of ability-to-pay. Therefore, this is the core principle of the tax law. 　　To achieve specific policy goals, a policy that oriented tax deductions and credits to promote or suppress certain behaviors is called tax incentives, which can be permitted only in case of justifiable reasons presented. Nevertheless, the weak connection between the policy goals and the tax incentives made the acts, especially the tax incentives, unreasonable. 　　Additionally, the tax-form expenditure is generally a formal review of fiscal balance, no substantive review of the impact on principle of ability-to-pay taxation and the compensation for it. Under these premises, the excessively extended implementation period of tax incentives has resulting in severely unreasonable tax burden inequality and excessive reliance of uncompetitive enterprises on tax incentives. 　　To sum up, instead of implement the tax incentives to limit the principle of ability-to-pay, then solve it with AMT. The enactment, amendment and implement of tax laws must strictly abide by above principle. The restriction of above principle must be strictly review and limited as a whole. Namely, it is better to comply with the principle of ability-to-pay strictly. Therefore, it is important to substantively review the domestic tax incentives and reconstruct the domestic tax system. Ministry of Digital Development and The Tax Reform 　　Taiwan government is intending to form Ministry of Digital Development (MODD),[25] which is considered as a step toward the right direction to coordinate and expedite the development of Taiwan’s digital economy. 　　According to Article 1 of the Organizational Act of MODD, "[T]o promote the development of digital industries such as national communications, information, cyber security, network and communication, to undertake digital governance and digital infrastructure, and to assist the digital transformation of public and private sectors, the Executive Yuan has specially established the Ministry of Digital Development."[26] 　　However, in name of the above-mentioned policies and ideals, which may possibly related to tax policies. Thus, this article considered that, once the MODD is staffed with public servants and experts both proficient in tax law as well as forward-thinking, and given a clear mandate, the MODD may not only contribute significantly to both domestic digital transformation and the tax reform, but also improve the efficiency of tax administration and maximize the overall economic and social benefits. [1] OECD, 〈BEPS – Base Erosion and Profit Shifting〉, https://cleartax.in/s/beps-oecd (last visited Aug 20, 2021). [2] 拙著，〈柳暗花明的數位服務稅〉，工商時報名家評論，2021年5月17日，網址：https://view.ctee.com.tw/tax/29375.html，最後瀏覽日：2021年11月24日。 [3] 陳衍任，〈歐洲數位服務稅發展簡析〉，台灣經濟論衡，2020年3月，第18卷第1期，頁58，網址：https://www.ndc.gov.tw/Content_List.aspx?n=1BD4A3B93EF55A5F，最後瀏覽日：2021年4月21日。 [4] 拙著，〈勢在必行的全球企業最低稅負制〉，工商時報名家評論，2021年4月20日，網址：https://view.ctee.com.tw/tax/28814.html，最後瀏覽日：2021年11月24日。 [5] 拙著，〈勢在必行的全球企業最低稅負制〉，工商時報名家評論，2021年4月20日，網址：https://view.ctee.com.tw/tax/28814.html，最後瀏覽日：2021年11月24日。 [6] 拙著，〈取消數位服務稅已為國際趨勢〉，工商時報名家評論，2021年11月23日，網址：https://view.ctee.com.tw/economic/34152.html，最後瀏覽日：2021年11月24日。 [7] Mayer Brown LLP, 〈The G7 Agrees on a Broad Framework for Pillar One and Two〉, June 23, 2021, https://www.mayerbrown.com/en/perspectives-events/publications/2021/06/one-small-step-but-perhaps-one-giant-leap-for-global-tax-reform-the-g7-agrees-on-a-broad-framework-for-pillar-one-and-two (last visited Nov 11, 2021). [8] G20, 〈G20 ROME LEADERS’ DECLARATION〉, at 11 of 20, https://www.g20.org/wp-content/uploads/2021/10/G20-ROME-LEADERS-DECLARATION.pdf (last visited Nov 11, 2021). [9] OECD, 〈Mauritania joins the Inclusive Framework on BEPS and participates in the agreement to address the tax challenges arising from the digitalization of the economy〉, https://www.oecd.org/tax/mauritania-joins-the-inclusive-framework-on-beps-and-participates-in-the-agreement-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy.htm (last visited Nov 11, 2021). [10] Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalization of the Economy, at 4 (Aug 2021), available at https://www.oecd.org/tax/beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy-july-2021.pdf (last visited Aug 20, 2021). [11] Model Tax Convention on Income and on Capital 2010 (Full Version), at c(5)-1 (2010), available at https://read.oecd-ilibrary.org/taxation/model-tax-convention-on-income-and-on-capital-2010_9789264175181-en#page208 (last visited Aug 20, 2021) [12] 稅捐稽徵法第12條之1第1項：「涉及租稅事項之法律，其解釋應本於租稅法律主義之精神，依各該法律之立法目的，衡酌經濟上之意義及實質課稅之公平原則為之。」亦有釋字第420、460、496、519、597、625及第700號供參。 [13] 資誠，〈法國徵數位服務稅，我不跟進〉，2019年7月24日報導，網址：https://www.pwc.tw/zh/news/media/media-20190724-1.html，最後瀏覽日：2021年4月15日。 [14] 財政部賦稅署，〈外國營利事業跨境銷售電子勞務課徵所得稅制度簡介〉，2018年4月27日，頁1以下，網址：https://www.dot.gov.tw/download/dot_201804270002_1_doc_476，最後瀏覽日：2021年4月21日。 [15] 中華民國94年12月28日總統華總一義字第09400212601號令制定公布全文18條；本條例施行日期除另有規定外，自95年1月1日施行。 [16] 所得基本稅額條例第1條：為維護租稅公平，確保國家稅收，建立營利事業及個人所得稅負擔對國家財政之基本貢獻，特制定本條例。 [17] 財政部台財稅字第10100670710號函：自102年度起營利事業基本稅額之徵收率為12％。 [18] 所得基本稅額條例第3條第1項第5款：營利事業或個人除符合下列各款規定之一者外，應依本條例規定繳納所得稅：五、所得稅法第七十三條第一項規定之非中華民國境內居住之個人或在中華民國境內無固定營業場所及營業代理人之營利事業。 [19] 所得稅法第43條之3第1項：營利事業及其關係人直接或間接持有在中華民國境外低稅負國家或地區之關係企業股份或資本額合計達百分之五十以上或對該關係企業具有重大影響力者，除符合下列各款規定之一者外，營利事業應將該關係企業當年度之盈餘，按其持有該關係企業股份或資本額之比率及持有期間計算，認列投資收益，計入當年度所得額課稅：一、關係企業於所在國家或地區有實質營運活動。二、關係企業當年度盈餘在一定基準以下。但各關係企業當年度盈餘合計數逾一定基準者，仍應計入當年度所得額課稅。 [20] 參考「所得稅法增訂第43條之3建立我國受控外國公司(CFC)課稅依據，係以受控外國公司當年度盈餘，依控制公司對其持有之資本比率按「權益法」認列之國外投資收益。惟查此依權益法認列之投資收益，似漏未規定該關係企業在國外已納所得稅額可予扣抵，恐形成公司階段稅負重複課稅；對照本條第4項規範營利事業於實際獲配股利或盈餘時，國外已納所得稅額得予扣抵之規定，其疏漏自明。」立法院，〈受控外國公司課稅新制相關問題評析〉，110年8月，網址：https://www.ly.gov.tw/Pages/Detail.aspx?nodeid=6590&pid=210513，最後瀏覽日：2021年10月25日。 [21] 境外資金匯回管理運用及課稅條例自2019年8月15日起施行，施行期間2年，已於今（2021）年8月14日失效，故我國CFC制度至遲於明（2022）年8月14日前報請行政院核定施行日期。參考「另附帶決議針對105年增訂之「所得稅法」第43條之3條文（營利事業CFC制度），與106年增訂之「所得基本稅額條例」第12條之1條文（個人CFC制度），要求財政部於本案施行期滿後1年內報請行政院核定施行日期，有助落實反避稅條款。」立法院，〈制定境外資金匯回管理運用及課稅條例〉， 網址：https://www.ly.gov.tw/Pages/Detail.aspx?nodeid=33324&pid=184215，最後瀏覽日：2021年8月20日。 [22] OECD, 〈THE IMPACT OF THE COMMUNICATIONS REVOLUTION ON THE APPLICATION OF “PLACE OF EFFECTIVE MANAGEMENT”AS A TIE BREAKER RULE〉, at 4 (Feb 2001), https://www.oecd.org/ctp/treaties/1923328.pdf (last visited Aug 20, 2021). [23] 所得稅法第43條之4第1項：依外國法律設立，實際管理處所在中華民國境內之營利事業，應視為總機構在中華民國境內之營利事業，依本法及其他相關法律規定課徵營利事業所得稅；有違反時，並適用本法及其他相關法律規定。 [24] 參考「從德國的經驗回頭看台灣可以發現：台灣雖然立意良善地將「決策者或決策地」、「帳簿及會議紀錄的製作或儲存地」，以及「實際執行主要經營活動地」，「同時」列為PEM的認定標準。然而，其中只有「決策者或決策地」確實屬於PEM認定上的必要條件；至於將「財務報表、會計帳簿紀錄、董事會議事錄或股東會議事錄的製作或儲存處所」及「實際執行主要經營活動地」也列為PEM的認定標準，恐怕就值得商榷。因為上述兩項標準，固然可以作為認定企業的PEM是否在台灣境內的「參考因素」，但卻不適合作為認定企業的PEM在台灣境內的『必要條件』」。陳衍任，〈實際管理處所在適用上的爭議問題〉，月旦會計實務研究，2018年3月，頁29以下。 [25] 2021 Taiwan White Paper Overview, 〈Facing New and Existing Challenges Head On〉, at WP7 (2021), https://amcham.com.tw/wp-content/uploads/2021/06/June-2021-Taiwan-Business-TOPICS.pdf (last visited Aug 20, 2021). [26] 作者自譯。

Most read
[　X Close　]
Copyright © 2016 STLI,III. All Rights Reserved.
TOP