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Taiwan Unveils New Chip Act Regulations: R&D Costs Must Reach NT$6 Billion

Taiwan has been making strides in its bid to become a global leader in the semiconductor industry. The latest development is "Article 10-2 of Statute for Industrial Innovation", also known as the Taiwan Chip Act. The Act aims to boost the country's semiconductor industry by providing tax incentives to companies engaged in research and development (R&D) and equipment investment.

The details of the act were finalized in April 2023 after close collaboration between the Ministry of Economic Affairs and the Ministry of Finance. The Act targets not only the semiconductor industry but also other industries such as electric vehicles, 5G, and low-orbit satellites that play a critical role in the international supply chain. As such, any company that meets the Act's criteria can apply for tax incentives.

The Act provides the "largest investment tax credit in history." Companies engaged in R&D can receive a tax credit of up to 25% of their R&D expenses. The companies investing in advanced equipment or machinery for advanced manufacturing processes can receive a tax credit of up to 5% of their equipment or machinery expenses. Both tax credits can be used to offset their corporate income tax liability.

To qualify for the tax incentives, companies must meet certain requirements, including R&D expenses of at least NT$6 billion, a minimum R&D density of 6%, and equipment investment of at least NT$10 billion. The Act also requires companies to comply with environmental, labor, and food safety laws and regulations.

The Act's implementation period runs from January 1, 2023, to December 31, 2029, providing a seven-year window for companies to benefit from the tax incentives. The Act's effective tax rate must be at least 12% in 2022, rising to 15% in 2023, in accordance with the Organization for Economic Cooperation and Development's(OECD) minimum tax rate standards.

In summary, the Taiwan Chip Act is a significant initiative by the Taiwanese government to bolster the country's semiconductor industry and other high-tech industries by providing tax incentives for R&D and equipment investment. The Act's inclusive scope means that companies engaged in various critical industries can benefit from the tax incentives, enhancing Taiwan's competitiveness in the global market.

Key PointsDetails
Act NameArticle 10-2 of Statute for Industrial Innovation (Taiwan Chip Act)
AimTo boost Taiwan's semiconductor and high-tech industries through tax incentives
IncentivesInvestment tax credits of up to 25% of R&D expenses and up to 5% of equipment expenses
Eligibility Criteria
  • R&D expenses of at least NT$6 billion
  • Minimum R&D density of 6%
  • Equipment investment of at least NT$10 billion
  • Compliance with environmental, labor, and food safety laws and regulations
Implementation PeriodJanuary 1, 2023 to December 31, 2029
Effective Tax RateAt least 12% in 2022, rising to 15% in 2023, in accordance with OECD minimum tax rate standards

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