FSC Supports 10-Year Extension of Bond ETF Transaction Tax Exemption, Including Actively Managed Funds

(CNA Taipei, June 30) Legislators have proposed continuing the exemption of transaction tax on bond ETFs for another 10 years, and suggested including actively managed bond ETFs within the scope of this exemption. The Financial Supervisory Commission (FSC) reported that during the period of exemption for bond ETF transaction tax, overall net tax revenue increased by approximately NT$54.972 billion, indicating that the tax exemption is beneficial to the development of Taiwan's bond ETF market and overall tax revenue growth. Considering the similar nature of the products, it is recommended that actively managed bond ETFs be included in the scope of the temporary suspension of transaction tax.

The Legislative Yuan's Finance Committee will review two proposals tomorrow: one by Democratic Progressive Party legislator Wu Ping-jung and 21 others, and another by Kuomintang legislator Li Yen-hsiu and 18 others, titled "Amendment to Article 2-1 of the Securities Transaction Tax Act" and others. FSC Chairman Peng Chin-lung will attend.

According to the legislators' proposals, the government, in order to invigorate the bond market, assist businesses in fundraising, and promote the development of the capital market, has exempted transaction tax on corporate bonds and financial bonds since 2010. Subsequently, to align with new investment products and market development, the exemption was further extended to exchange-traded bond index funds in 2017. As the preferential measure of transaction tax exemption is set to expire at the end of 2026, in order to continue promoting market development, the law is being amended to extend the exemption period by another 10 years, and it is also proposed to include actively managed bond ETFs within the scope of the exemption.

Legislators suggest extending the transaction tax exemption for corporate bonds, financial bonds, and passively managed bond ETFs for another 10 years, from the expiration at the end of 2026 to the end of 2036, and also propose including actively managed bond ETFs within the scope of the exemption.

The FSC's written report released today stated that for corporate bonds and financial bonds, from 2017 to 2025, during the period of continued transaction tax exemption, the total outstanding issuance of corporate bonds and financial bonds grew from NT$2.7 trillion to NT$4.7 trillion, an average annual growth of 7.29%. The transaction value of corporate bonds and financial bonds grew from NT$17.23 trillion to NT$19.73 trillion.

The FSC pointed out that corporate bonds and financial bonds are important pillars supporting long-term capital expenditures for businesses. The current system of exempting securities transaction tax is beneficial to the allocation of capital market resources and long-term stable development, not only enhancing the liquidity and fundraising efficiency of the bond market but also encouraging capital to remain in Taiwan.

Regarding passively managed bond ETFs, the FSC stated that as of the end of last year, there were a total of 100 passively managed bond ETFs issued, with a scale of approximately NT$3 trillion and an annual transaction value of about NT$2 trillion. Furthermore, during the period from 2017 to 2024 when the transaction tax on bond ETFs was temporarily suspended, the overall net tax revenue increased by approximately NT$54.972 billion, indicating that the tax exemption is beneficial to the development of Taiwan's bond ETF market and overall tax revenue growth.

In addition, the FSC pointed out that considering that actively managed exchange-traded bond funds (actively managed bond ETFs) and passively managed bond ETFs are both exchange-traded fund products and both primarily invest in bonds, their product natures are similar. To ensure policy fairness and consistency, it is recommended that actively managed bond ETFs be included in the scope of the temporary suspension of securities transaction tax. (Editor: Lin Ke-lun) 20270630

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