The Legislative Yuan’s Economic Committee yesterday passed the preliminary review of an amendment to the Industrial Innovation Act (產業創新條例) that would grant tax breaks to firms for research and development spending.
“The tax incentives could encourage businesses to invest more in research and development innovation to help increase competitiveness,” Industrial Development Bureau Director-General Wu Ming-ji (吳明機) told reporters on the sidelines of the committee meeting.
Firms would have two options for applying the tax credits, depending on their profitability, Wu said.
Profitable firms can credit up to 15 percent of total research and development expenses against their business income tax due that year, Wu said.
However, companies that have invested in research and development, but not turned profitable, do not need to pay business tax and could not receive the credit, Wu said.
In light of this, the amendment stipulates that companies could choose to credit up to 10 percent of the expenditures against taxes for the next three years, in a bid to encourage firms to keep investing in new technologies, Wu said.
To help corporations retain talented employees, the amendment also adds a clause stipulating that employees who are offered stock-related rewards — such as stock bonuses, Treasury stocks and stock options — may choose to delay their related income tax payment by five years.
After five years, employees would pay the income tax for the stock-related rewards based on the stock price five years before, Wu said.
“This new clause will encourage employees to hold their companies’ stock longer and be more willing to work for the company, lowering the possibility of losing talented workers,” Wu said.
However, legislators could not reach a consensus with the Ministry of Economic Affairs on income tax payments for transferring patents and exclusive technologies, Wu said.
The ministry plans to allow individuals or companies to delay income tax payments on the share gains from transferring exclusive technologies or patents by five years, and then to tax them based on prices five years prior.
However, some lawmakers think that individuals or corporations should be taxed based on contemporary market prices.
As a result, the committee decided to send the clause for a cross-caucus negotiation, Wu said.
The ministry hopes that the amendment will clear the legislative floor before the end of the session next month, he said.
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