Foreign Institutional Investors may have the opportunity to reclaim withheld taxes following a merger involving Taiwan.
The merger of Shin Kong Financial Holding Co., Ltd. (SKFH) and Taishin Financial Holding Co., Ltd. (Taishin FHC), set to take effect on 24 July 2025, has presented a tax reclaim opportunity for foreign institutional investors (FINIs) who hold common stock shares in SKFH.
According to a report published by the Tax Technical Knowledge Services group, FINIs may apply for a tax reclaim of overpaid withholding tax due to the merger, if the actual acquisition cost of SKFH shares, calculated using the First-In, First-Out (FIFO) method, exceeds NT$10.259 per share and supporting documents for the cost are available for audit by the Taiwan tax authority.
The application for a tax reclaim must be submitted through a Taiwan tax agent within the 10-year statute of limitations, as per Article 28 of the Tax Collection Act. FINIs may appoint a resident individual or a profit-seeking enterprise with a fixed place of business in Taiwan to act as their tax agent for this purpose.
It is important to note that as a result of the merger, there is a deemed dividend income of NT$3.8074 per share for the common shareholders of SKFH that must be recognized and taxed. However, for tax purposes, common stock shareholders are entitled to apply the higher cost to their deemed dividend income if proof of the actual acquisition cost is available.
FINIs should verify with local custodians and qualified tax agents that the supporting documents for acquisition costs are available and adequate for tax reclaim purposes. It is advisable for FINIs to consult with local custodians regarding this potential withholding tax reclaim opportunity.
Ernest & Young (Taiwan), Taipei, and Ernst & Young LLP (United States) have tax professionals who can assist with the tax reclaim process.
It is crucial to mention that SKFH will be delisted and dissolved as a result of the merger. Common stock shareholders of SKFH will receive common and preferred shares of Taishin FHC as consideration. The value of new shares issued by Taishin FHC as merger consideration is set at NT$14.0664 per share.
A 21% withholding tax will be imposed on FINIs who do not qualify for tax treaty benefits. For those whose actual purchase price of SKFH shares exceeds NT$10.259 per share and who have supporting documents for the purchase price available for audit by the tax authorities, they have the ability to reduce their taxes on alleged dividend income by filing a tax refund application.
This information was legal-edited by Carolyn Wright.
