The Ministry of Economic Affairs yesterday set the research-and-development (R&D) investment threshold at NT$6 billion (US$195.2 million) for companies to qualify for tax incentives under recently approved amendments to the Act for Industrial Innovation (產業創新條例), or Taiwan’s version of the US’ CHIPS and Science Act.
That requirement is less strict than the government’s original plan of setting a threshold of between NT$5 billion and NT$10 billion. However, it is much higher than the annual average of NT$3 billion spent on R&D by the nation’s top 100 companies, Industrial Development Bureau data showed.
Companies are also required to set aside at least 6 percent of their revenue for R&D to qualify for the incentives, the ministry said.
Photo courtesy of Siliconware Precision Industries Co
Top businesses that are strategically important to global supply chains are the target of the new tax break program, rather than small and medium-sized companies, which are eligible for similar tax breaks on smart manufacturing under other rules, the bureau said.
Besides, the program is aimed at encouraging more overseas Taiwanese businesses to invest back home, it said.
Semiconductor firms are not the only companies eligible for the tax breaks, the ministry said. The program is also applicable to companies that are capable of developing world-leading or innovative and scalable technology in strategic industries such as 5G, electric vehicles and low Earth orbit satellites.
The Legislative Yuan passed the amendments to the Act for Industrial Innovation in January, boosting tax breaks for local companies’ R&D investment from 15 percent to 25 percent, and offering an additional 5 percent tax credit for NT$10 billion spent on new equipment for advanced process technology, in parallel with the US’ Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act to boost advanced chip capacity.
As for the minimum corporate income tax rate, it would remain at 12 percent this year for qualified businesses and rise to 15 percent in 2025, the ministry said.
The ministry said it prefers to maintain some flexibility regarding the minimum rate for next year, which would likely hinge on the tax rates imposed by Organisation for Economic Co-operation and Development members.
The new tax incentives will be in place for seven years, starting this year, and the ministry will start accepting applications next year based on their investments this year.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is widely considered to be on top of the short list for tax breaks, as the world’s biggest contract chipmaker plans has set capital expenditure this year at US$32 billion to US$36 billion.
TSMC allocates about 8 percent of its annual revenue to R&D expenditure, with 80 percent of the amount going into next-generation technology, the company’s annual report says.
TSMC has said that its 2-nanometer process technology would be the world’s most advanced technology when it becomes commercially available in 2025.
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