The Legislative Yuan yesterday passed amendments that would offer tax breaks to “innovative” firms whose research and development (R&D) expenditure and intensity reach a certain level.
The amendments to the Act for Industrial Innovation (產業創新條例) stipulate that companies that work to innovate technologies domestically and have a critical role in international supply chains would be granted tax deductions equivalent to the sum of 25 percent of their expenditure on R&D and 5 percent of their spending on new equipment acquired for “advanced processes” over a fiscal year.
The total amount of tax deductions would not exceed 50 percent of their income tax for that fiscal year, the amendments state.
Photo: Wang Yi-sung, Taipei Times
While the provisions do not limit the types of industries that can receive the tax breaks, they are widely seen as incentives for semiconductor, 5G and electric vehicle companies to step up their R&D efforts.
The threshold to meet the R&D expenditure and intensity requirements, and what would be deemed a “critical role” in international supply chains would be defined later in supporting legislation, the amendments stipulate.
Minister of Economic Affairs Wang Mei-hua (王美花) said during cross-caucus negotiations on the amendments on Thursday that while they were proposed with the aim of consolidating the competitive edge of industries that stand out in the global arena, they would not be biased toward certain industries.
Photo: CNA
The amendments would hopefully drive economic growth and spur the expansion of companies in the same industry chains as those benefiting from the tax breaks, thereby ensuring national security through economic stability, Wang said.
The stipulations include an effective tax threshold for eligible companies set at 12 percent for this year and tentatively at 15 percent for next year.
Although the 15 percent effective tax rate was set to match the increased minimum corporate tax on multinational enterprises introduced by the Organisation for Economic Co-operation and Development (OECD), which was implemented on Sunday last week, the Ministry of Economic Affairs could ask the Cabinet to retain the 12 percent rate next year after observing how many countries have implemented the OECD’s minimum corporate tax rate hike by then, the amendments say.
The stipulations include a sunset clause saying that the tax benefits would end on Dec. 31, 2029.
The ministry said in a statement that it would consult with the Ministry of Finance to define the criteria for vetting companies eligible for the tax breaks, adding that it would introduce the criteria in six months.
The thresholds would be set after considering the R&D capital and intensity of listed and over-the-counter companies and after consulting with experts from the public, private and academic sectors, and would be reviewed and adjusted if necessary, the ministry said.
A review committee comprising agency officials and outside experts would be created to review applications, it added.
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