In the next seven years, 25% of Taiwan's semiconductor research and development expenses can be tax deducted

In response to the layout competition of the semiconductor industry in the future, the government encourages enterprises to carry out advanced research and development and adopt advanced equipment in Taiwan with substantive policies to ensure that advanced manufacturing processes remain in the local area. Taiwan's "Legislative Yuan" passed Article 10 of the Industrial Innovation Regulations for the third reading yesterday. Bis and Amendment 72, for companies that innovate in technologies such as semiconductors, 5G, and electric vehicles in the future and occupy a key position in the international supply chain, 25% of R&D expenses and 5% of expenditures for purchasing new machines with advanced manufacturing processes are all allowed. The deduction of the current year's business income tax will be implemented from New Year's Day of this year to December 31, 2029. Taiwan's "Ministry of Economic Affairs" stated that it will work with the "Ministry of Finance" to complete the sub-law within six months.

The layout of the semiconductor industry is a topic that important countries attach great importance to, including the introduction of the chip bill by the United States, and Japan and South Korea have proposed policy preferences to attract the semiconductor industry to settle in. Taiwan is currently leading the world in semiconductor manufacturing technology. In order to stabilize this niche and continue to leverage its advantages, the Executive Yuan recently passed the draft amendment to Article 10-2 of the Industrial Innovation Regulations, commonly known as the "Taiwan version of the Chip Act."

Taiwan's "Legislative Yuan" economic and financial committees jointly reviewed the case a few days ago. They generally support the revised version of the law proposed by the Government Yuan, but there are still details to be resolved. The proposal; the Legislative Yuan passed the third reading yesterday.

The key points of this revision include that the tax incentives for advanced semiconductor research and development in the future can be increased from 15% to 25%; manufacturers can also enjoy a 5% deduction for the use of advanced equipment, and the upper limit of expenditures will be abolished. However, the upper limit of the two deductions shall not exceed 30% of the current year's income tax, and the sum of the two shall not exceed 50% of the current year's income tax.

Taiwan's "Ministry of Economic Affairs" stated that the applicable objects are not limited to industries, as long as companies that carry out technological innovation locally and occupy a key position in the international supply chain, those who meet the applicable requirements can apply for the application.

But at the same time, in response to the Organization for Economic Co-operation and Development (OECD) promoting the global corporate minimum tax system, the effective tax rate of the applicable objects must meet a certain standard. Taiwan's "Ministry of Economic Affairs" stated that it will start from 20% and cooperate with other countries to promote the minimum tax burden. The progress of domestic legalization has been adjusted and gradually reached 15% of the OECD standard. The current plan is that the effective tax rate should reach 12% in 2023 and 15% from 2024. However, in 2024, the international implementation of the OECD global corporate minimum tax will be considered. In the case of a negative rate, report to the Executive Yuan to adjust it to 12% to give Taiwan's industry a buffer period.

Regarding the drafting direction of the sub-measures that the outside world is concerned about, Taiwan's "Ministry of Economic Affairs" stated that it will complete the formulation of the sub-measures with the Ministry of Finance within six months. Regarding the scale of applicable requirements and the definition of terms, it will be determined by referring to the development of industries at home and abroad, the R&D expenditures of major listed counter companies, and the density of industrial R&D, as well as collecting opinions from the industry and listening to the opinions of experts from industry, government, academia, and research. At the same time, it will be determined in response to industry development The trend will be revised in a timely manner. In addition, the application process, application period, review mechanism, and documents will also be specified in the sub-measures. Future applications will be reviewed through the review mechanism, inviting relevant ministries and external experts to jointly review. In addition, the Ministry of Economic Affairs will continue to provide measures such as product development, digital transformation, and financial assistance for issues such as small and medium-sized enterprises and innovative development that members are concerned about, and assist their development with multiple policy tools.

Legislator Zeng Mingzong of the Kuomintang expressed that he suggested tax concessions for key industries, and hoped that the government should provide specific plans other than tax concessions to provide more assistance to small and medium-sized enterprises to ensure the integrity of Taiwan's semiconductor production capacity and supply chain industry.