December 2017
The Legislative Yuan adopted the Statute for Industry Innovation as amended by three readings (Taiwan)
2017.11.3
Debby Yu
The Legislative Yuan adopted the Statute for Industry Innovation (hereinafter, the "Statute") as amended during the 7th Meeting of the 4th Session of the 9th Term on November 3, 2017. The amendments are highlighted below:
I.Provisions are amended to encourage state-owned enterprises to engage in research and development.
To encourage state-owned enterprises to engage in research and development, Article 9-1 of the Statute is added to stipulate that the research and development expenditure of a state-owned enterprise shall reach a certain percentage of the total expenditure and budget with review and adjustment mechanisms established to carry out this requirement. In addition, Paragraph 3 of the same article also allows a state-owned enterprise to conduct a restrictive tender for a procurement involving innovation or research and development collaboration or commissioned research with a value above the announced amount where the Government Procurement Law is not applied, provided that such procurement is still supervised by the competent authority for the state-owned enterprise.
II.Limited partnerships are included in the scope of regulation with tax incentives provided to limited partnerships that satisfy certain threshold requirements.
Subparagraph 2 of Article 2, which defines "Limited Partnership," is added to the Statute, and limited partnerships are included in the scope of "Enterprise" under Subparagraph 3 of the same article. In addition, to accommodate the international trend that venture capital enterprises are mostly set up in a format of limited partnership and to achieve the policy objective of attracting international capital, tax incentive measures are added to Article 23-1 of the Statute where a venture capital enterprise which is set up pursuant to the Limited Partnership Law during 2017 through 2019 and to which the "pass-through taxation" principle applies if specific threshold requirements are met, such as an agreed-upon capital contribution totaling NT$300 million in the year of establishment and in the second year; a paid-in contribution amounting to NT$100 million in the third year of establishment; a paid-in contribution amounting to NT$200 million in the fourth year of establishment with its investment in start-ups accounting for 30% of its paid-in contribution or amounting to NT$300 million; a paid-in contribution amounting to NT$300 million in the fifth year with its investment in start-ups accounting for 30% of its paid-in contribution or amounting to NT$300 million. To wit, the limited partnership per se is not subject to profit-seeking enterprise income taxes, and it is not until the profits are distributed to the partners by way of dividends or earnings that personal income taxes are levied on individual partners. Such preferential tax treatment is in place for ten years and a five-year extension may be filed.
III.To encourage personal investment, income tax reduction or exemption is offered and capped at NT$3 million.
Since investment in risky start-ups entails higher risks, Article 23-2 is added to the Statute to encourage personal investment. If an individual makes a cash investment of at least NT$1 million in a risky start-up which has been established for less than two years, up to 50% of the investment amount may be deducted from the total consolidated income in the year where the shareholding in the start-up has continued for two years, provided that the amount which may be deducted from the total consolidated income by an individual investor each year is capped at NT$3 million.
IV.If a land in an industrial park is idled by its owner, the land may be subject to compulsory auction.
To fulfill the objective of efficient land usage within industrial parks and prevent the profit-oriented resale of idle lands from undermining the national economic development and the balanced development of national economy, Article 46-1 is added to the Statute to stipulate that where the owner of a land in an industrial park has continuously idled the land for a specific period without justification, if it is announced and the land owner and interested parties are informed that this situation should be improved in two years but no improvement is made, a fine of up to 10% of the current total announced present value of the idle land may be imposed. In addition, if the land owner fails to submit an improvement plan or complete the negotiation with the competent authority within the period, the competent authority may conduct a compulsory open auction of the land in order to accelerate the revitalization and utilization of industrial lands.
Debby Yu
The Legislative Yuan adopted the Statute for Industry Innovation (hereinafter, the "Statute") as amended during the 7th Meeting of the 4th Session of the 9th Term on November 3, 2017. The amendments are highlighted below:
I.Provisions are amended to encourage state-owned enterprises to engage in research and development.
To encourage state-owned enterprises to engage in research and development, Article 9-1 of the Statute is added to stipulate that the research and development expenditure of a state-owned enterprise shall reach a certain percentage of the total expenditure and budget with review and adjustment mechanisms established to carry out this requirement. In addition, Paragraph 3 of the same article also allows a state-owned enterprise to conduct a restrictive tender for a procurement involving innovation or research and development collaboration or commissioned research with a value above the announced amount where the Government Procurement Law is not applied, provided that such procurement is still supervised by the competent authority for the state-owned enterprise.
II.Limited partnerships are included in the scope of regulation with tax incentives provided to limited partnerships that satisfy certain threshold requirements.
Subparagraph 2 of Article 2, which defines "Limited Partnership," is added to the Statute, and limited partnerships are included in the scope of "Enterprise" under Subparagraph 3 of the same article. In addition, to accommodate the international trend that venture capital enterprises are mostly set up in a format of limited partnership and to achieve the policy objective of attracting international capital, tax incentive measures are added to Article 23-1 of the Statute where a venture capital enterprise which is set up pursuant to the Limited Partnership Law during 2017 through 2019 and to which the "pass-through taxation" principle applies if specific threshold requirements are met, such as an agreed-upon capital contribution totaling NT$300 million in the year of establishment and in the second year; a paid-in contribution amounting to NT$100 million in the third year of establishment; a paid-in contribution amounting to NT$200 million in the fourth year of establishment with its investment in start-ups accounting for 30% of its paid-in contribution or amounting to NT$300 million; a paid-in contribution amounting to NT$300 million in the fifth year with its investment in start-ups accounting for 30% of its paid-in contribution or amounting to NT$300 million. To wit, the limited partnership per se is not subject to profit-seeking enterprise income taxes, and it is not until the profits are distributed to the partners by way of dividends or earnings that personal income taxes are levied on individual partners. Such preferential tax treatment is in place for ten years and a five-year extension may be filed.
III.To encourage personal investment, income tax reduction or exemption is offered and capped at NT$3 million.
Since investment in risky start-ups entails higher risks, Article 23-2 is added to the Statute to encourage personal investment. If an individual makes a cash investment of at least NT$1 million in a risky start-up which has been established for less than two years, up to 50% of the investment amount may be deducted from the total consolidated income in the year where the shareholding in the start-up has continued for two years, provided that the amount which may be deducted from the total consolidated income by an individual investor each year is capped at NT$3 million.
IV.If a land in an industrial park is idled by its owner, the land may be subject to compulsory auction.
To fulfill the objective of efficient land usage within industrial parks and prevent the profit-oriented resale of idle lands from undermining the national economic development and the balanced development of national economy, Article 46-1 is added to the Statute to stipulate that where the owner of a land in an industrial park has continuously idled the land for a specific period without justification, if it is announced and the land owner and interested parties are informed that this situation should be improved in two years but no improvement is made, a fine of up to 10% of the current total announced present value of the idle land may be imposed. In addition, if the land owner fails to submit an improvement plan or complete the negotiation with the competent authority within the period, the competent authority may conduct a compulsory open auction of the land in order to accelerate the revitalization and utilization of industrial lands.
