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Cabinet approves draft bill to give companies bigger tax breaks

11/17/2022 05:24 PM
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Image source: Unsplash
Image source: Unsplash

Taipei, Nov. 17 (CNA) The Cabinet on Thursday approved a draft amendment bill that seeks to give eligible companies bigger tax deductions on their equipment purchases and their research and development expenditure.

The draft amendment to the Statute for Industrial Innovation, which will now be sent to the Legislature for review, proposes a tax break on 25 percent of the companies' R&D costs -- up from the current 15 percent -- and on 5 percent of their equipment procurement spending, providing that the total deductions do not exceed 50 percent of their overall income taxes.

The proposed tax break will be applicable to companies across all sectors, once they meet the thresholds for effective tax rate and R&D expenditure and intensity, according to the draft bill approved by the Cabinet.

The effective tax rate threshold initially will be 12 percent, which will be raised to 15 percent by 2024, but companies could seek Cabinet approval for the increase to be deferred to 2025, according to the bill.

While it did not specify the minimum R&D expenditure, an official familiar with the matter told CNA on condition of anonymity that the figure will be determined later but is expected to be at least NT$5 billion per year.

Minister of Economic Affairs Wang Mei-hua (王美花) said that the proposed tax break will be applicable not just to semiconductor manufacturers, as reported in the media, but also to companies in the electric vehicle, 5G, and low-earth-orbit satellite sectors, among others, once they meet the eligibility criteria.

Foreign companies and their subsidiaries that engage in R&D in Taiwan will also be eligible for the bigger tax deductions, as they too contribute to Taiwan's industrial development, she said.

The proposed law amendment will result in a loss of taxes in Taiwan, but that will be outweighed by the benefits, Wang said.

(By Lai Yu-chen and Sean Lin)


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