Extension of tax credits for SMEs under discussion: MOEA

Taipei, Dec. 25 (CNA) The Ministry of Economic Affairs (MOEA) and the Ministry of Finance (MOF) have in principle reached agreement to extend several tax incentives for the country's small and medium enterprises which are currently slated to end next year, but whether the terms will be relaxed is subject to further discussion, said the MOEA on Monday.

Currently three main tax incentives provided to small and medium enterprises (SMEs) are scheduled to end in 2024.

These include tax credits granted for research and development investment, and the deduction of payments to additional domestic hires and pay rises from an SME's current year taxable income, which are according to the Act for Development of Small and Medium Enterprises are due to end on May 19, 2024.

The third incentive comes from Article 10-1 of the Statute for Industrial Innovation, which states that capital investment in brand-new smart machines, 5th-generation mobile networks, or cyber security products or services can receive tax credits, which cease at the end of next year.

The two ministries have reached consensus on the extension of the clauses concerning SME research and development and new hires and pay raises.

However, there has been criticism that the regulations on tax credits for pay raises are too high as they are only initiated when Composite Leading Indicators are above certain levels, such as the unemployment rate reaching 3.78 percent for six consecutive years, according to Deputy Economics Minister Chen Chern-chyi (陳正祺) at a legislative hearing in October.

In response, a source in the MOEA's Small and Medium Enterprise and Startup Administration said the extension and the relaxation of applications for pay-raise tax credits have been discussed, but the details need to be further negotiated with the MOF.

The source said a proposal will be tabled in the new legislative session early next year.

The tax credits for research and development will also be discussed with an extension likely, the source said.

After Taiwan's Chinese National Federation of Industries called for the extension of tax credits for purchases of new smart, 5G, and cybersecurity-related equipment and services to 2029, following as with another article in the statute on credits for technological innovation (called Taiwan's Chip Act), the ministry source reiterated that the issue will be discussed with the MOF.

A ministry source said the extension of the effective period will be discussed but emphasized that insofar as Article 10-1 of the Statute seeks to "ignite" actions, further extension could weaken efforts to encourage companies to upgrade as soon as possible.

The source added that Article 10-1 tax credits were already extended in response to the pandemic, from the end of 2021 (smart machines) and the end of 2022 (5G) to the current end-of-2023 deadline.