Taiwan’s Cabinet will discuss a proposal Thursday to raise the income tax break for eligible local technology companies by 10 percent to 25 percent, which if passed would benefit large semiconductor manufacturers including Taiwan Semiconductor Manufacturing Co. (TSMC) and Mediatek.
The proposal, drafted by the Ministry of Economic Affairs, seeks to add article 10-2 to the Statute for Industrial Innovation stipulating the proposed 25 percent tax break, in addition to 5 percent income tax relief for the technology companies whose equipment investment reaches a predetermined level.
A Cabinet official who asked not to be named told CNA Wednesday that the proposed amendment is intended to encourage leading semiconductor companies to step up their research and development (R&D) into advanced manufacturing processes, and will therefore only apply to “industries or companies that occupy a critical position in global supply chains.”
To be eligible for the proposed tax break, companies must routinely allocate at least NT$5 billion (US$160.78 million) in R&D capital per year, the official said, adding that this threshold and other criteria will be defined in the enforcement rules.
Once given the greenlight by the Cabinet, the proposed amendment will be delivered to the Legislature for review, the official said.
Judging by the aforementioned level of R&D expenditure, TSMC, Mediatek, Novatek, ASE Group, United Microelectronics Corp. (UMC), Realtek Semiconductor Corp., and Nanya Technology Corp. would be eligible.
Meanwhile, for companies to be eligible for the increased tax break, they must also have been subject to a minimum tax corporate rate of at least 12 percent and could be subject to an increased rate of 15 percent starting in 2024.
The hike in minimum corporate tax rate was proposed to reflect the 15 percent effective tax rate introduced by the OECD for multinational enterprises in Dec. 2021, according to a finance official, who also requested anonymity.
A one-year grace period has been proposed for companies affected by the increased minimum corporate tax rate and is awaiting approval from the Executive Yuan, which is expected to delay the implementation date of the 15 percent rate to 2025, the official said.

Source: Focus Taiwan News Channel