Dividends  Capital Gains  Preemptive Rights  Securities Transaction Tax  Estate Taxation and Gift Tax  Dividends declared by us out of our retained earnings and distributed to you are subject to Republic  of China withholding tax, currently at the rate of 20%, on the amount of the distribution in the case of cash  dividends or on the par value of the common shares in the case of stock dividends. However, a 10% Republic of  China retained earnings tax paid by us on our undistributed after-tax earnings, if any, may provide a credit of up  to 10% of the gross amount of any dividends declared out of such earnings that would reduce the 20% Republic  of China withholding tax imposed on these distributions.  Share dividends paid by us out of our capital surplus which are derived from the issuance of shares at a  premium are not subject to Republic of China withholding tax.  Gains from the sale of property in the Republic of China are generally subject to Republic of China income  tax. Under the current Republic of China law, capital gains on securities transactions (including sale of common  stock) are exempt from income tax but subject to Income Basic Tax (alternatively known as the Alternative  Minimum Tax) assessment at the rate of:  Sales of ADSs by you are regarded as transactions relating to property located outside the Republic of  China and thus any gains derived therefrom are currently not subject to Republic of China income tax.  Distributions of statutory preemptive rights for common shares in compliance with Republic of China  law are not subject to any Republic of China tax. Proceeds derived from sales of statutory preemptive rights  evidenced by securities are exempted from income tax but are subject to securities transaction tax at the rate of  0.3% of the gross amount received. Proceeds derived from sales of statutory preemptive rights which are not  evidenced by securities are subject to capital gains tax at the rate of:  Subject to compliance with Republic of China law, we, at our sole discretion, can determine whether  statutory preemptive rights shall be evidenced by issuance of securities.  A securities transaction tax, at the rate of 0.3% of the gross amount received, payable by the seller will  be withheld upon a sale of common shares in Taiwan. Transfers of ADSs are not subject to Republic of China  securities transaction tax. According to a letter issued by the Ministry of Finance of the Republic of China in  1996, withdrawal of common shares from the deposit facility will not be subject to Republic of China securities  transaction tax.  Republic of China estate tax is payable on any property within Taiwan of a deceased person who is a  nonresident individual, and Republic of China gift tax is payable on any property within Taiwan donated by any  such person. Under Republic of China estate and gift tax laws, common shares issued by Taiwan companies  are deemed located in Taiwan regardless of the location of the owner. It is not clear whether the ADSs will  be regarded as property located in Taiwan under Republic of China estate and gift tax laws. Starting from  January 21, 2009, the estate tax and gift tax rates were reduced to 10%.  • 20% of the gains realized if you are a natural person; or  •  20% of the gains realized if you are an entity that is not a natural person.  •  20% of the gains realized if you are a natural person residing in the Republic of China; or  • 10% of the gains realized if you are an entity that is not a natural person and have a fixed place of  business or business agent in the Republic of China.  PART I 113