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Capital Gains from Structured Products Offered by Offshore Banking Units Exempt from Income Tax
Capital gains from structured products are "other income" stipulated in Art. 8 and Art. 14 of the Income Tax Act. Beginning 1 January 2010, a 15% withholding tax is imposed on such income in accordance with Art. 3 of the Standards of Withholding Tax Rates for Various Incomes. Because capital gains derived from structured products are tax free in neighboring territories such as Hong Kong and Singapore, and in order to maintain international competitiveness and encourage local banks to develop structured products, Art. 16 of the Offshore Banking Act was amended to the effect that capital gains derived from structured products offered by an offshore banking unit are not "other income" and are exempted from withholding tax. The tax exemption is retrospectively effective from 1 January 2010.