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Taiwan Launches Historic Investment Deduction for Tech Firms Under New Chip Act

New tax incentives target R&D and advanced technology investments, with leading firms like TSMC and MediaTek poised to benefit
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Taiwan’s Ministry of Economic Affairs has announced a landmark investment deduction initiative, set to bolster the nation’s technology sector. This move, part of the Industrial Innovation Ordinance and often likened to the “Taiwanese version of the Chip Act,” marks a significant step in encouraging technological advancements.

Starting February 1, applications for this substantial tax deduction are open, continuing through May 31. The incentives are substantial, offering 25% deductions on R&D expenses and a 5% deduction on expenditures for new, advanced machinery. These benefits are designed to be deducted from the current year’s business tax, providing immediate financial relief and incentive for companies to invest further in research and development.

Eligibility for these deductions is stringent but clear. Companies must have R&D expenses exceeding 6 billion yuan, an R&D intensity of at least 6%, or spend over 10 billion yuan on advanced process equipment. There’s no industry restriction, allowing a broad range of technology companies to benefit.

This policy also aims to encourage companies to strive for greater innovation. With a set effective tax rate threshold of 12% in 2012 and 15% in 2013, firms below this threshold are incentivized to increase their efforts in R&D to qualify for these tax benefits.

The financial reports from 2022 indicate that major companies such as TSMC, MediaTek, Realtek, and others meet these application thresholds, positioning them to take full advantage of this program. The Ministry will rigorously review each applicant, assessing their contributions to technological innovation and their role in the global supply chain.

The initiative underscores Taiwan’s commitment to strengthening its position as a leader in the technology sector, particularly in the competitive and ever-evolving field of semiconductor manufacturing and related technologies. It represents a strategic investment in the future of Taiwan’s economy, aiming to spur innovation and maintain its critical role in the global technology landscape.

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