Taiwan Income Tax
| Eligibility | Laws & Regulations of Tax Reduction and Exemption or Tax Incentives | Related Explanation | ||||||||||||||
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Where a profit-seeking enterprise subscribes for or underwrites the registered stock issued by a private institution participating in a major infrastructure project upon its incorporation or expansion, and has held such registered stock for a period of 4 years or more, such profit-seeking enterprise, starting from the fifth year of the date on which such profit-seeking enterprise has held such registered stock, may credit up to 20% of the price paid for acquisition of such stock against the profit-seeking enterprise income tax payable in the then current year. In case the amount of the profit-seeking enterprise income tax payable is less than the creditable amount, the balance thereof may be credited against the profit-seeking enterprise income tax payable in the 4 following years.
The amount of the tax credit against the profit-seeking enterprise income tax payable in each year shall not exceed 50% of the amount of the profit-seeking enterprise income tax payable in the then current year for the profit-seeking enterprise except in the last year of the said 4-year period.
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It is stipulated in Article 40 of the Act for Promotion of Private Participation in Infrastructure Projects. | ||||||||||||||
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A biotech and new pharmaceuticals company may credit up to 35% of the funds invested in research, development, and personnel training against the profit-seeking enterprise income tax payable for a period of 5 years, starting from the year in which the company begins to pay the payable profit-seeking enterprise income tax. In the case that the research and development (“R&D”) expenditure of the then current year is greater than the average R&D expenditure of the previous two years, or the personnel training expenditure of the then current year is greater than the average personnel training expenditure of the previous two years, 50% of the excess amount may be credited against the profit-seeking enterprise income tax payable.
The amount of the tax credit against the profit-seeking income tax payable in each year shall not exceed 50% of the amount of the profit-seeking enterprise income tax payable in the then current year for the biotech and new pharmaceuticals company except in the last year of the said 5-year period.
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Where a profit-seeking enterprise subscribes for or underwrites the stock issued by a biotech and new pharmaceuticals company and has been a registered shareholder of such biotech and new pharmaceuticals company for a period of 3 years or more, the said profit-seeking enterprise may credit up to 20% of the price paid for acquisition of such stock against the profit-seeking enterprise income tax payable for a period of 5 years from the year in which the company begins to have the payable profit-seeking enterprise income tax; provided that the such biotech and new pharmaceuticals company has not applied for exemption from profit-seeking enterprise income tax or investment credit for shareholders based on the subscription or underwriting price under other applicable laws and regulations.
However, in the case that the said profit-seeking enterprise is a venture capital company (“VC”), the tax credit shall be enjoyed by such VC’s profit-seeking enterprise shareholders. Such VC’s profit-seeking enterprise shareholders may claim a tax credit against their profit-seeking enterprise income tax payable based on the aforementioned amount originally creditable by the VC hereof and in proportion to their respective shareholdings in the VC, for a period of 5 years from the fourth year of the date on which the VC has become a registered shareholder of such biotech and new pharmaceuticals.
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New stock issued by a biotech and new pharmaceuticals company to top executives and technology investors in return for their knowledge and technology shall be excluded from the amount of their individual or profit-seeking income tax of the then current year. However, in the case that such stock is transferred, bestowed, or distributed as estate, the total transferring price or the market value of the stock at the time of bestowal or distribution as estate shall be deemed as revenue generated in that tax year. Such revenue less the acquisition cost shall be reported in the relevant income tax return. | It is stipulated in Article 7 of the Act for the Development of Biotech and New Pharmaceuticals Industry. | ||||||||||||||
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Companies limited by shares may credit up to 20% of the total investment amount of construction of new towns against the profit-seeking enterprise income tax payable in the then current year. In the case the amount of profit-seeking enterprise income tax payable is less than the creditable amount, the balance thereof may be credited against the profit-seeking enterprise income tax payable in the 4 following years. |
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Where a company limited by shares operates in a designated tax-reduction area in new towns and engages in an industry which is recognized to be beneficial to the development of such town, such company, after the commencement of the operation, may credit up to 20% of the total investment amount against the profit-seeking enterprise income tax payable in the then current year. In case the amount of the profit-seeking enterprise income tax payable in the then current year is less than the creditable amount, the balance thereof may be credited against the profit-seeking enterprise income tax payable in the 4 following years. |
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An urban renewal business institution organized as a company limited by shares invests in the urban renewal business of an implemented urban renewal area designated by the competent authority, such institution may credit up to 20% of the total investment amount against the profit-seeking enterprise income tax payable for the year which the urban renewal business plan has completed. In the case the amount of the profit-seeking enterprise income tax payable is less than the creditable amount, the balance thereof may be credited against the profit-seeking enterprise income tax payable in the 4 following years.
The amount of the tax credit against the profit-seeking enterprise income tax payable in each year shall not exceed 50% of the amount of the profit-seeking enterprise income tax payable in the then current year for a company except in the last year of the said 4-year period.
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Corporate tourism enterprises may credit 10% to 20% of the amount of the expenses under the related categories for international tourism and international promotion campaigns against the profit-seeking enterprise income tax payable in the then current year. In case the amount of the profit-seeking enterprise income tax payable in the then current year is less than the creditable amount, the balance thereof may be credited against the profit-seeking enterprise income tax payable in the 4 following years.
The amount of the tax credit against the profit-seeking enterprise income tax payable in each year shall not exceed 50% of the amount of the profit-seeking enterprise income tax payable in the then current year for such profit-seeking enterprise, with the exception that this limitation shall not apply to the creditable amount in the last year of the said 4-year period.
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In the case of a profit-seeking enterprise that purchases products or services which are originally created by the cultural and creative industry and donates those products or services by way of schools, institutions, or organizations to students or disadvantaged minorities, or donates products or services for cultural and creative activities held in remote districts, or funds incubation centers established by a cultural and creative enterprise, or other qualified affairs that are approved by the central competent authority, and where the aforesaid total donation amount is less than NT$10,000,000 or under 10% of the profit-seeking enterprise’s annual taxable income, such amount may be allowed to be listed as current expenses or losses, and is not restricted by Item 2, Article 36 of the Income Tax Act. | It is stipulated in Article 26 of the Act for the Development of Cultural and Creative Industries. | ||||||||||||||
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Donations by business enterprises that accord with the following conditions can be, pursuant to Item 1 of Article 36 of the Income Tax Act, listed as expenditure with no cap on the amount:
1. Sports associations registered with the government.
2. Nurturing and supporting sports teams or athletes.
3. Promoting sporting activities of enterprise employees.
4. Donating to government agencies and all levels of educational institutions to establish sports stadiums or facilities or equipment.
5. Purchasing tickets to domestic sporting events and donating to students or disadvantaged groups through schools or non-profit organizations.
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It is stipulated in Article 26 of the Sports Industry Development Regulation. | ||||||||||||||
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If an individual makes a donation for an athlete approved by the central competent authority through the dedicated bank account, when that individual files their income tax return, they may list that donation as a tax deductible item in accordance with the following provisions:
1. A donation made without specifying a designated athlete is regarded as a donation to the government, and the full amount of that donation is listed as a tax deductible item;
2. A donation made for a specific designated athlete is regarded as a donation towards education, culture, public welfare, or to a charity institution or organization, in accordance with the provisions of Article 11 Paragraph 4 of the Income Tax Act, and the amount will be listed as a tax deductible item, in accordance with the provisions of Article 17, Paragraph 1, Subparagraph 2, Item 2-1 of the same law.
If an individual has an amount that satisfies the Income Tax Act requirements for listing as a deduction referred to in the previous paragraph, that amount is not included when calculating the total gift amount of the Estate and Gift Tax Act.
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It is stipulated in Act 26-1 of the Sports Industry Development Act. | ||||||||||||||
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Where a profit-seeking enterprise which invests in the establishment or expansion of a motion picture production on a certain scale subscribes for or underwrites the registered stock issued by such motional picture production industry and has held such registered stock for a period of 3 years or more, such profit-seeking enterprise, starting from the fourth year of the date on which such profit-seeking enterprise has held such registered stock, may credit up to 20% of the price paid for acquisition of such stock against the profit-seeking enterprise income tax payable in the then current year.
The amount of the tax credit against the profit-seeking enterprise income tax payable in each year shall not exceed 50% of the amount of the profit-seeking enterprise income taxable payable in the then current year for profit-seeking enterprise except in the last year of the said 4-year period.
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It is stipulated in Article 7 of the Motion Picture Act. | ||||||||||||||
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A company has the option of choosing one of two choices in the number of years and the related tax credit rates for the claiming of the tax credit. That is to say, if an enterprise’s R&D activities are qualified, it can choose to claim the tax credit within 3 years using a 10% tax credit rate or within the current year using a 15% tax credit rate; provided that the amount of the tax credit against the profit-seeking income tax payable shall not exceed 30% of the amount of the profit-seeking enterprise income tax payable in the then current year.
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It is stipulated in Article 10 of the Act for Industrial Innovation. | ||||||||||||||
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Where an R.O.C. individual or company receives revenue from assignment or licensing of his/her/its intellectual property rights in his/her/its own R&D results, up to 200% of his/her/its R&D expenses in the then current year may be deducted from the amount of his/her/its taxable income up to the amount of the above revenue in that year, and in the case of a company, the company may select the tax credit against its R&D expenses under either this Paragraph or Article 10. | It is stipulated in Paragraph 1, Article 12-1 of the Act for Industrial Innovation. | ||||||||||||||
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Where an R.O.C. individual, company or limited partnership assigns, or grants a license to use, his/her/its intellectual property rights in his/her/its own R&D results to a company, the individual, company or limited partnership may opt to exclude the new shares acquired as the consideration from his/her/its income taxable in the year such shares are acquired. Once an option is made, it cannot be reversed. However, after the individual, company or limited partnership has opted to exclude such new shares from his/her/its income taxable in the year such shares are acquired, if the shares are transferred or are delivered by book-entry transfer to an account with a securities depository enterprise, the entire transfer price, the market price of the shares at the time of giving away or distribution as estate, or the market price of the shares on the date of book-entry transfer less the expenses or costs incurred for acquisition of the shares but not yet recognized, shall be included in the revenue for the year of transfer or book-entry transfer and be declared for assessment of income tax.
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Where a domestic academic or research institution assigns the intellectual property rights resulting from its R&D achievements and conferred on it to a company or licenses the company to use such rights in accordance with Paragraph 1, Article 6 of the Fundamental Science and Technology Act, and acquires shares in the company, and distributes such shares to the R.O.C. creators of such intellectual property rights in accordance with Paragraph 3, Article 6 of the Fundamental Science and Technology Act, such an R.O.C. creator may opt to exclude the new shares so acquired from his/her income taxable in the year such shares are acquired. Once such option is made, it cannot be reversed. However, after the creator has opted to exclude such new shares from his/her income taxable in the year such shares are acquired, if the shares are transferred or are delivered by book-entry transfer to an account with a securities depository enterprise, the entire transfer price, the market price of the shares at the time of giving away or distribution as estate, or the market price of the shares on the date of book-entry transfer shall be included in the creator’s salary for the year of transfer or book-entry transfer and be declared for assessment of income tax in accordance with the Income Tax Act. |
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Where a company employee acquires stock-based employee compensation, the employee may opt to exclude up to an annual total of NT$5 million worth of the acquired shares from his/her annual taxable income as calculated at the market price prevailing in the year such shares are acquired or the year of the day the acquired shares become disposable. Once an option is made, it cannot be reversed. However, employee who has opted to exclude the acquired shares from the annual taxable income in the year such shares are acquired, when the shares are transferred or book-entry transferred to an account of a securities depository enterprise, the entire transfer price, the market price of the shares at the time of giving away or distribution as estate, or the market price of the shares on the date of book-entry transfer is deemed the employee’s revenue for the year of transfer or book-entry transfer and must be declared for assessment of income tax in accordance with the Income Tax Act. Where a company employee has opted to apply the regulations in the preceding paragraph, and has held the shares and continued to work at the company for two years or more from the day the shares are acquired, when the shares are transferred or book-entry transferred to an account of a securities depository enterprise, and the entire transfer price, the market price of the shares at the time of giving away or distribution as estate, or the market price of the shares on the date of book-entry transfer is higher than the market price on the day the shares are transferred or become disposable, the market price on the day the shares are transferred or become disposable shall be included in the revenue for the year of transfer or book-entry transfer, and be declared for assessment of income tax in accordance with the Income Tax Act. However, where a company employee has not declared for assessment of income tax, or has been declared for assessment of income tax but cannot provide documentation proof of the market price on the day the shares are transferred or become disposable, and the market price on the day the shares become disposable cannot be obtained by the taxation authority, the above provisions shall not apply. |
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Venture capital enterprises in the form of limited partnerships (hereafter “venture capital limited partnerships”) meeting the criteria are exempt from profit-seeking enterprise income tax during the applicable period, which is principally ten years, and, if required, the extension period shall not exceed five years. In the applicable period, the income of venture capital limited partnerships is divided into two categories: income from gains derived from the securities transactions regulated in Article 4-1 of the Income Tax Act (hereafter “gains derived from securities transactions”) and income other than income from the securities transactions. Partners are attributed income from venture capital limited partnerships according to the earning distribution proportion; this income is subject to the Income Tax Act. In other words, for the partners who are individuals or profit-seeking enterprises whose head office is not within the territory of the R.O.C., the attributed income sourced from gains derived from the securities transactions is exempt from income tax. Such tax incentive is effective from January 1, 2017 and is valid until December 31, 2019. | It is stipulated in Article 23-1 of the Act for Industrial Innovation. | ||||||||||||||
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Where an individual invests at least NT$1 million in cash in one year in domestic innovative startups which have been incorporated for less than two years and identified by the central authority in charge of relevant enterprises as high-risk innovative startups, and acquires and holds the new shares issued by the company for two years, up to 50 percent of the investment may be excluded from the individual’s consolidated income for the year in which the second anniversary of such shareholding falls. The aggregate amount excludable from an individual’s consolidated income each year in accordance with this paragraph shall not exceed NT$3 million. | It is stipulated in Article 23-2 of the Act for Industrial Innovation. | ||||||||||||||
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A small-and-medium enterprise has the option of choosing one of two choices in the number of years and the related tax credit rates for the claiming of the tax credit. That is to say, if an enterprise’s R&D activities are qualified, it can choose to claim the tax credit within three years using a 10% tax credit rate or within the current year using a 15% tax credit rate; provided that the amount of the tax credit against the profit-seeking income tax payable shall not exceed 30% of the amount of the profit-seeking enterprise income tax payable in the then current year. | It is stipulated in Article 35 of the Act for Development of Small and Medium Enterprises. | ||||||||||||||
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New shares of stock issued to a small and medium enterprise or an individual in exchange of its/her/his intellectual property rights, by an enterprise that is not listed on the Taiwan Stock Exchange, OTC, or the Emerging Stock Board, shall be excluded from the current year taxable income of the said small and medium enterprise or individual. When the aforesaid shares of stock are transferred through an actual transaction, stock gift, or inheritance, the total stock value shall be included in the current year taxable income of the recipient(s), calculated based on the actual transaction price or the fair market value of the stock at the time of the transfer, minus the related expenses or cost, incurred but not realized yet, in obtaining the stock. | It is stipulated in Article 35-1 of the Act for Development of Small and Medium Enterprise. | ||||||||||||||
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It is stipulated in Paragraph 1,Article 36-2 of the Act for Development of Small and Medium Enterprises. | ||||||||||||||
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It is stipulated in Paragraph 2, Article 36-2 of the Act for Development of Small and Medium Enterprises. | |||||||||||||||
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During the period when the Composite Leading Indicators are above certain levels, if a small and medium enterprise raises the average salary paid to its domestic junior employees, it can deduct up to 130% of the incremental annual gross salary payments, excluding statutory basic wage adjustment, to the junior employees from its current year profit-seeking enterprise income. However, the additional salary paid to the new hires shall not be deducted here as it has been used for tax benefit applied to the provisions in the preceding two Paragraphs. | It is stipulated in Paragraph 3, Article 36-2 of the Act for Development of Small and Medium Enterprises. | ||||||||||||||
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It is stipulated in Paragraph 1, Article 29 of the Act for the Establishment and Management of Free Trade Zones and in Article 35 of the International Airport Park Development | ||||||||||||||
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It is stipulated in Paragraph 2, Article 29 of the Act for the Establishment and Management of Free Trade Zones | |||||||||||||||
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Foreign special professionals who meet certain conditions to have half of their annual salaries over NT$3 million exempted from individual income tax, and shall not be subject to inclusion of the overseas income in basic income in accordance with the Income Basic Tax Act during their first three years of coming to work in R.O.C. | It is stipulated in Article 9 of the Act for the Recruitment and Employment of Foreign Professional Talent. |
Source: Ministration of Finance, R.O.C.
