Reduced Withholding Tax

Exemption for royalties

In order to encourage Taiwanese manufacturers to adopt advanced manufacturing technologies, income tax on the royalties paid to a foreign company shall be exempted if the royalties are paid in order to introduce new production technology or products, to improve product quality, or to reduce production costs; the same is true for remunerations paid to foreign companies for technical services rendered in construction of factories for an important production enterprises.

Reduced Rates

The tax on the royalty would be exempted if approved.

Requirements

To apply for the tax incentive,

Condition
Requirements
OrganizationBusiness entity or NPO. Practitioners of professions, such as law firms, are excluded.
NationalityApplicants must originate from countries belonging to the World Trade Organization.
Technical Depth1. The technology is not available in Taiwan, or
2. The technology is available in Taiwan but not satisfying.
IndustryThe technology is to be applied in the following industries:
1. Precision machinery and automation intelligence
2. Automotive
3. High-value metal materials
4. Wind energy
5. Solar energy
6. Communication of next-generation communication and smart handheld devices
7. Smart electronic components
8. Displays 9. LED lighting
10. Smart living environments
11. Cloud computing
12. High-value petrochemicals
13. High-value textiles
14. Electro-optical chemicals
15. Healthy food
16. Biotechnology
17. Recycling
18. Water recycling
19. information services
20. design
Effects1. The patent introduces new production technology to be applied in manufacturing new products, or it promotes product quality or efficiency, or it reduces production costs.
2. The technical service is provided to an important Taiwanese manufacturing company, for the construction of a factory.
RoyaltiesTotal revenue from royalties is applicable, but income from the sale of the patent is excluded.
Related-party TransactionIf the payer and payee are related in any other way, additionally to the transaction itself, the pricing and necessity will be assessed carefully.
Cost calculationNo limitation.
DeadlineThe application should be submitted within 5 years after the payment takes place.

Procedures

There are two stages:

StageAuthorityPurposeTime
1. Technical ReviewIndustrial Development BureaEvaluate technical depth, applicable industries, and effects.2-4 weeks
2. Transaction ReviewTax BureauClarify transaction details.4-8 weeks

Assessment

Both the contract and the evidence of service provision will be required.

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