Enforcement Rules of the Income Tax Act Article 70

When a company capitalizes its undistributed surplus earnings by issuing additional equity shares, the amount of dividend shares distributed by the said company to each of its individual shareholders residing within the territory of the Republic of China, exclusive of the dividend shares which are distributed in accordance with the provisions set out in Article 16 and Article 17 of the abolished Statute for Upgrading Industries before its amendment and promulgation on December 31, 1999, shall be included by each of such shareholders having received such dividend shares into the aggregate amount of his/her incomes to be declared in his/her annual consolidated income tax return to be filed in the taxable year in which such capitalization project of undistributed surplus earnings is effected, and the income tax levied on such income shall be paid by the shareholders receiving dividend from such shares under the law accordingly. However, for such shareholders as may receive dividend shares and who have no residence within the territory of the Republic of China, and for the profit-seeking enterprise whose head office is located outside the territory of the Republic of China, the assessment and withholding of the income tax levied on the dividend shares distributed to and received by the foregoing shareholders shall be effected by the issuing company in accordance with the provisions set out in Article 88 of the Act when making distribution of such dividend shares.