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 |
|---|---|
| Organization | Business entity or NPO. Practitioners of professions, such as law firms, are excluded. |
| Nationality | Applicants must originate from countries belonging to the World Trade Organization. |
| Technical Depth | 1. The technology is not available in Taiwan, or 2. The technology is available in Taiwan but not satisfying. |
| Industry | The 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 |
| Effects | 1. 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. |
| Royalties | Total revenue from royalties is applicable, but income from the sale of the patent is excluded. |
| Related-party Transaction | If the payer and payee are related in any other way, additionally to the transaction itself, the pricing and necessity will be assessed carefully. |
| Cost calculation | No limitation. |
| Deadline | The application should be submitted within 5 years after the payment takes place. |
Procedures
There are two stages:
| Stage | Authority | Purpose | Time |
|---|---|---|---|
| 1. Technical Review | Industrial Development Burea | Evaluate technical depth, applicable industries, and effects. | 2-4 weeks |
| 2. Transaction Review | Tax Bureau | Clarify transaction details. | 4-8 weeks |
Assessment
Both the contract and the evidence of service provision will be required.