Posted on 10 Jan 2023
The Legislative Yuan of Taiwan approved a draft amendment of Article 10-2 and Article 72 of the Industrial Innovation Act on 7 January, referred to as Taiwan's Chips Act. It aims to attract more enterprises to deeply invest in Taiwan, as well as consolidate and improve the position of Taiwan's key industries, including the semiconductor industry, in the global supply chain, Kallanish learns.
The implementation period is from 2023 to 2029. A 25% and 5% income tax deduction is available for each of research and development deduction and equipment deduction, respectively. If applying for both, the total income tax deduction will not exceed 50% of the total payables.
Taiwan's Ministry of Economic Affairs says: "This law takes both industrial development and bearing reasonable tax burden into account. Taiwan is a crucial part of the global supply chain and is also a reliable partner of large international factories. Taiwan ought to strengthen its international competitive advantages in key industries in the face of huge incentives launched by the US, Japan, South Korea, and the European Union ... For candidates, there is no limitation on industry type as long as the enterprise conducts technological innovations in Taiwan and holds an important position in the global supply chain. There are strict criteria for annual R&D expense, R&D frequency, and effective tax rate. The effective tax rate should reach 12% this year and 15% next year, but considering the minimum tax rate set by the Organization for Economic Cooperation and Development (OECD), it may be adjusted to 12% next year as a buffer."
Taiwan's Ministry of Economic Affairs and Ministry of Finance plan to formulate the sub-measures within six months, and a press conference will be held to familiarise the industry with the policy measures.
Source:Kallanish
