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Under the three principles of “Fairness, Transparency and Acceptability” the 2010 Tax Reform was introduced. In general, there was a shift from deductions to the establishment of allowances. Among the 310 special tax codes which were adopted, 82 of them were either abolished or modified. With the establishment of a children’s allowance and the elimination of high school tuitions, special treatments on minor dependency allowances have been abolished. Other reforms at the individual level include the tax deduction changes for life insurance premiums and the abolishment of tax reliefs on employer provided housing loans. |
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The employment deduction for the officers of family owned companies was reinstated arising from claims from the owners of closed held corporations. However, a fundamental restructuring of the employment deduction is expected in the 2011 Tax Reform. This change may have a large impact on individuals who enjoy tax benefits arising from “double deduction.” |
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In conjunction with the Company Law changes which have been taking effect since 1997, the impact of such has been seen in an entity’s accounting principles as well as taxation for entities with a common shareholder. With the division of responsibilities between directors and officers, and the growing number of holding companies, there was a need to overhaul the system. Under the new tax law, any recording gains or losses from asset transfers within wholly-owned group companies will be disallowed. Also, special tax measures for small and medium-sized entities would not apply if the parent company is considered a large corporation. We can foresee an increased number of companies filing consolidated tax returns in the coming years. Other corporate tax changes include the abolishment of special taxation during liquidations and information infrastructure improvement tax credits and the reform on taxation for tax havens. |
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