Taiwan’s economy is expected to be adversely affected by COVID-19 pandemic in 2020. The growth of real gross domestic product (GDP) of Taiwan is expected to shrink, unemployment level to increase and current account balance to reduce due to COVID-19 this year. As of 28^th July 2020, Taiwan had 467 confirmed COVID-19 cases out of which 440 people have recovered from the disease while 7 have lost their lives.

In this blog post we will be focusing on economic impact of COVID-19 pandemic and fiscal, monetary and employment policy measures by Taiwan government under following sections –

1. Impact of COVID-19 on Taiwan Economy in 2020

2. COVID-19 Containment Measures of Taiwan

3. COVID-19 Related Fiscal Policy Measures by Taiwan

4. COVID-19 Related Monetary Policy Measures by Taiwan

5. COVID-19 Related Employment Policy Measures by Taiwan

 

 

1. Impact of COVID-19 on Taiwan Economy in 2020

Taiwan’s real gross domestic product (GDP) was TWD 17287.244 billion in 2019 and due to COVID-19 outbreak it is estimated to decrease by 4.031% to be around TWD 16590.395 billion in 2020.

Taiwan’s unemployment rate was 3.8% of total labor force in 2019. Due to slowdown in global economic activity due to COVID-19 pandemic the unemployment is expected to increase by 13.64% and reach 4.4% in 2020. Unemployment is further estimated to decrease in 2021 by 10% and reach 4% of total labor force in Taiwan.

Taiwan’s current account balance in 2020 is expected to be at 8.235% of GDP compared to 10.531% of GDP in 2019. This means Taiwan will remain net lender to rest of the world in 2020.

As of 11^th May 2020, the Taiwan government has taken following fiscal, monetary and employment related policy measures to contain coronavirus (COVID-19) pandemic.

2. Coronavirus (COVID-19) Containment Measures of Taiwan

In 2004, Taiwan government established the National Health Command Center (NHCC) to manage any other epidemic like SARS. The NHCC is part of a disaster management center that focuses on large-outbreak response and acts as the operational command point for direct communications among central, regional, and local authorities. The NHCC unified a central command system that includes the Central Epidemic Command Center (CECC), the Biological Pathogen Disaster Command Center, the Counter-Bioterrorism Command Center, and the Central Medical Emergency Operations Center.

On 31^st December 2019, when the World Health Organization was notified of pneumonia of unknown cause in Wuhan, China, Taiwanese officials began to board planes and assess passengers on direct flights from Wuhan for fever and pneumonia symptoms before passengers could deplane.

On 05^th January 2020, notification was expanded to include any individual who had traveled to Wuhan in the past 14 days and had a fever or symptoms of upper respiratory tract infection at the point of entry; suspected cases were screened for 26 viruses including SARS and Middle East respiratory syndrome (MERS). Passengers displaying symptoms of fever and coughing were quarantined at home and assessed whether medical attention at a hospital was necessary.

On 20^th January 2020, while sporadic cases were reported from China, the Taiwan Centers for Disease Control (CDC) officially activated the CECC for severe special infectious pneumonia under NHCC, with the minister of health and welfare as the designated commander. The CECC coordinated efforts by various ministries, including the ministries of transportation, economics, labor, and education and the Environmental Protection Administration, among others, in a comprehensive effort to counteract the emerging public health crisis. Taiwan quickly mobilized and instituted specific approaches for case identification, containment, and resource allocation to protect the public health.

Taiwan leveraged its national health insurance database and integrated it with its immigration and customs database to begin the creation of big data for analytics.  It generated real-time alerts during a clinical visit based on travel history and clinical symptoms to aid case identification. It also used new technology, including QR code scanning and online reporting of travel history and health symptoms to classify travelers’ infectious risks based on flight origin and travel history in the past 14 days.

Persons with low risk (no travel to level 3 alert areas) were sent a health declaration border pass via SMS (short message service) messaging to their phones for faster immigration clearance; those with higher risk (recent travel to level 3 alert areas) were quarantined at home and tracked through their mobile phone to ensure that they remained at home during the incubation period. Taiwan government worked to increase public awareness about COVID-19 and provided food, frequent health checks, and encouragement for people under quarantine.

Ban on export of masks

Till 30^th April 2020, export of masks products were banned in Taiwan to improve availability for local population. However, woven or knitted masks without filter of textile materials, gas masks for epidemic prevention and replaceable filters, sponge masks and paper masks were not subject to the export prohibition.

Export control on fever thermometers

From 04^th  March 4 to 31^st March 2020, the fever thermometers (including infrared non-contact forehead temperature gun, contact forehead temperature gun, ear temperature gun, electronic thermometer, infrared temperature thermograph, etc.) could not be exported from Taiwan without the approval issued by the Taiwan Bureau of Foreign Trade of the Ministry of Economic Affairs.

Temporary adjustment rate on the importation of mask and undenatured alcohol concentration above 90%

From 27^th February 2020 to 26^th May 2020, importation of mask and undenatured alcohol concentration above 90% could be subject to the temporary adjustment rates.

For the raw material of medicinal alcohol (Other undenatured ethyl alcohol of an alcoholic strength by volume exceeding 90% vol), the temporary adjustment rate 10% could be applied if the goods is used for the production of medicinal alcohol, and the approvals issued by the Ministry of Economy Affairs and Ministry of Health and Welfare are obtained. However, if the goods would be used for other purposes (e.g. for production of wine or industrial alcohol), the original duty rate of 20% should still be applied.

The import duty rate of “textile materials production mask” mainly includes the N95 mask and general medical and surgical masks are temporarily adjusted from 7.5% to 0%.

3. Coronavirus (COVID-19) Related Fiscal Policy Measures by Taiwan

Taiwan government announced measures providing a broad range of tax relief in response to the coronavirus (COVID-19) pandemic. Among the tax relief measures are:

Deferral of tax payments or by installments

On 25^th March 2020, Taiwan Ministry of Finance (MoF) announced a special guideline allowing taxpayers having difficulties to make tax payments to apply for deferral of tax payments or by monthly installments. This special guideline is applicable to tax payments due date fall between 15^th January 2020 to 30^th June 2021. This special guideline will be applicable to taxpayers having difficulties to make tax payments by the statutory deadline due to COVID-19 may apply for deferral of tax payments for a maximum of 12 months or by monthly installments of up to 36 months, without late payment interest, if meeting any of the following conditions:

For Business entities

• Entitle to supportive measures under the relevant COVID-19 special relief and restoration regulations as announced by the relevant central competent authorities; or
• Having significant decline in business revenue – for instance, monthly turnover dropping by 15% or more for two consecutive periods since January 2020, comparing to the average in past 6 months or 12 months.

For Individuals

• Entitle to supportive measures under the relevant COVID-19 special relief and restoration regulations as announced by the relevant central competent authorities;
• Under no paid or part paid leave scheme implemented by employer affected by COVID-19 situation with prior notification to the local labor affair authorities in-charge; or
• Suffering from other situations due to COVID-19 (e.g. wage cut, lay off or having monthly working days dropped by 50% from original schedule for two or more months).

This special guideline will cover individual income tax, individual house and land transactions income tax, corporate income tax, VAT, commodity tax, liquor & tobacco tax, specifically selected goods and services tax, house tax, land value tax, vehicle license tax, and relevant interest and penalty of these taxes.

On 13^th April 2020, Taiwan Ministry of Finance (MoF) announced that tax return filing and tax payment deadlines for corporate and individual income tax purposes are postponed to 30^th June 2020 in response to the coronavirus (COVID-19) pandemic. Corporate income tax returns and payments were originally due 1^st May 2020 through 1^st June 2020. Individual income tax returns and payments were originally due 1^st June 2020. These returns and tax payments now are extended to 30 June 2020 and will not be subject to interest or penalties for late filing or late payment. The extension is applicable for all taxpayers, and no prior application is required. Taxpayers still encountering difficulties to make tax payments by the 30^th June 2020 deadline may still apply for a deferral of tax or apply to make payments in installments pursuant to special guidelines issued by the Ministry of Finance in March 2020. Tax payment deferrals may be granted for up to one year, and installment payments of tax may be allowed for up to three years without late-payment interest or penalties. For this relief, an application must be filed (along with supporting documents) before the deadline for filing the tax return.

Extension of tax filing and payment deadlines under quarantine or self-isolation

On 05^th March 2020, Taiwan Ministry of Finance (MoF) announced a tax ruling which grant affected taxpayers an extension to file and pay their taxes.  This ruling is applicable to tax filings or payments originally due between March to May 2020. This ruling will be applicable for individual taxpayers or company taxpayers whereas the representative person, in-charge accountant, or the CPA, booker engaged for filing the returns is under isolation or quarantine due to COVID19 during the original prescribed time limit of tax filing and payments.

Apart from the above, the Taiwan government also released other relief policies covering VAT and customs supportive measures on certain medical supplies (e.g. protective masks, medicinal alcohol and its raw materials); temporary relief on house tax and vehicle license tax during its idle period in light of the current COVID-19 situation; and pro-rata exemption on VAT and amusement tax for taxpayers levied under special assessment basis during its business suspension period.

Corporate income tax 200% deduction on certain salary expenses

As part of the Special Act on COVID-19 Prevention, Relief and Restoration announced on 25^th February 2020 to alleviate the social and economic impact, Taiwan MOF also announced a tax ruling on March 10, 2020 to provide guidance on how companies can deduct additional salaries expenses for employees who are affected by COVID-19. This special act is applicable from 15^th January 2020 to 30^th June 2021. The applicable expenditures covered under this special act are salaries, wages, service pay and other regular compensations paid to employees during their statutory leave period falling under any one of the following reasons:

• Under quarantine or isolation order from the various level of health department and authorities.
• Taking care of dependent family members who is under quarantine and isolation order; or
• Upon receiving special instructions from the epidemic command center of the central government.

4. Coronavirus (COVID-19) Related Monetary Policy Measures by Taiwan

Taiwan government has used three ways to get help from public banks

• Policy Lending Package: Support SMEs funding to operate business.
• Loan Extension: Companies or individuals can apply to defer principal repayment or extend loan.
• Credit card payment deferral: Individuals can apply to defer card payment without penalty and interest.

Taiwan government has taken following measures for reducing interest rate from public banks

• For all residential loans: 01^st April 2020 to 30^th September 2020, 0.5% lower within TWD 10 million
• For all consuming loans: 6 months since 01^st April 2020, 0.75% lower within TWD 10 million (including credit card, unsecured loan, car loan)

Rental concession/adjustment

• Rent payment deferral for National property: The users of national property who are affected by epidemic can defer rent payment until the end of 2020.
• Rent/royalty payment deferral and extension of construction and operation in PPPIP: The private institutions for promotion of private participation in infrastructure projects (PPPIP), which are impacted by epidemic can apply to defer rent/royalty payment or install payment, and extend the period of construction and operation.

Taiwan government has announced two funding packages from commercial banks.

1. TWD 100 billion package (For all affected business) -

• TWD 10 billion project
• Bank lending TWD 100 billion
• LTV ratio 80%~100%

2. Interest subsidy package (For affected SMEs only)

• Extended loan
• Business loan
• Stimulus loan

The measures taken under commercial banks funding packages by Taiwan government are:

	NTD$100 billion	Interest subsidy
	(Guarantee fee free)	Interest rate	Maturity
Extended Loan	Original Guarantee Percentage	0.81%	1 year
		Up to TWD 220,000 (per application)
Business loan (Salary & rent only) (NOT layoff)	Guarantee Percentage 100%	1.845%	6 months
		Up to TWD 55,000 (per application)
Stimulus loan	Guarantee Percentage 80%~90%	0.845%	1 year
		Up to TWD 55,000 (per application)

5. Coronavirus (COVID-19) Related Employment Policy Measures by Taiwan

Labor Market Support

Taiwan Ministry of Labor has reviewed and expanded existing measures, and added more new labor market measures as follows:

1. Less working hours

• Training program: Subsidy training program up to TWD 18,960
• Employment plan: Subsidy salary up to TWD 11,000
• Immediate work plan: Subsidy salary up to TWD 12,640

2. Jobless

• Unemployment benefits: 60% of average monthly insurance salary
• Tuition subsidy for unemployed children: Subsidy tuition high school up to TWD 6,000/ university or college up to TWD 24,000

3. Corporate

• Subsidy for working environment improvement: Subsidy process safety and health equipment improvement up to TWD 2 million
• Worker life balance: Subsidy caregivers hourly wages up to TWD 200,000
• Defer labor insurance premium and pension payment: payment deferral without penalty
• Training program: Subsidy training program up to TWD 3 million

Source – With inputs from Organisation for Economic Co-operation and Development (OECD), International Monetary Fund, World Bank, International Labour Organization (ILO) and Government of Taiwan