Employee’s bonus or compensation – Article 235-1 Taiwan Company Act

In 2015, Taiwan MOEA amended the Article 235 Company Act and add a new Article 235-1, which provides that a company should share with its employee at least some certain amount or % of its net profit.

Debating on how to calculate the employee bonus has been ongoing since last year either. Therefore, in Jan 2015, Taiwan MOEA provided an Administrative Order, No 10402413890, suggesting that the employee bonus could be based on a % of “net profit before income tax”.

Because there is no penalty on failing to amend the article of incorporation according to the Article 235-1 of Taiwan Company Act; this Administrative Order becomes a suggestion.

To calculate the employee bonus according to the net profit before tax or net profit after tax, the result of P&L is the same, from the shareholders’ point of view. It is the Ministry of Finance suffers due to this suggestion, the administrative order, because less tax payable; therefore, Taiwan tax office does not follow up to revise any tax regulation or administration order to endorse the Article 235-1.

Because this new article, the Article 235-1, does not stipulate the penalty if a company failing to do so, since then debating on this issues, employee bonus, has been on going to now. Thus far, more than 80% of companies have not filed amendment of its article of incorporation or association.