Cabinet passes draft amendment to extend tax incentives for SMEs

Taipei, April 18 (CNA) The Cabinet on Thursday approved a draft amendment proposed by the Ministry of Economic Affairs (MOEA) to extend and expand tax deduction incentives for small and medium enterprises (SMEs).

The deductions for corporate income tax, relating to research and development, increased employment and pay raises, are proposed to be extended to Dec. 31, 2033, whereas they would become ineffective from May 19 this year under the current act, according to a news statement released that day.

The criterion that corporate income tax deductions for increased employment and pay raises only apply when the unemployment rate reaches 3.78 percent for six consecutive months will be removed, the release by MOEA's Small and Medium Enterprise and Startup Administration (SMESA) said.

To incentivize enterprises to employ older workers, tax deductions of up to 150 percent of the annual gross salary will be applied to new employees aged 45 or older, in addition to new hires 24 years old or younger who are covered by the current policy, said the SMESA.

Maximum deduction rates for pay raises are set to be increased from 130 percent of the extra amount to 150 percent, according to the proposed amendment.

Limited partnerships will also be applicable for tax incentives involving research and development, to encourage more innovation, the SMESA said.

However, tax benefits of the same nature cannot be repeatedly granted under different laws.

The draft also includes a term stipulating that SMEs will be ineligible to apply for tax deductions if they have been identified by competent authorities as being guilty of serious offenses relating to environmental protection, labor welfare or food safety in the last three years.

The amendment is expected to lead to more than 4,000 job openings, said Wu Chia-ying (吳佳穎), a deputy director-general of the SMESA, in a press event after the Cabinet meeting.

The pay raises will benefit another 5,850 employees, she added.

Addressing concerns about tax losses for the government, Wu said that the net effect is expected to be positive, with NT$10 million (US$308,535) extra brought in from increased employment and NT$7 million from pay raises.

The draft will be sent to the Legislature for review before being officially signed into law.