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Taiwan: Corporate Income Tax Reduced to 17%

(June 24, 2010) On June 15, 2010, an amendment to Taiwan's Income Tax Act was published that reduced the corporate income tax rate from 20% to 17%. (Text of the amendment [in Chinese], 6927 TSUNG-T'UNG Fu KUNG-PAO [Gazette of the Office of the President], June 15, 2010, available at
.) The new rate takes effect from this year, according to the amendment.

An amendment to the Income Tax Act published on May 27, 2009, set up a 20% rate on the income of profit-seeking enterprises (referring not only to corporations, but also to other business entities including sole proprietorships and partnerships). Previously, such income was subject to progressive tax rates, which could go as high as 25%. (Income Tax Act (as amended on May 27, 2009) [in English], Laws and Regulations Database of the Republic of China, (last visited June 21, 2010).) Profit-seeking enterprises whose total taxable income is NT$120,000 (about US$3,777) or less are exempted from the profit-seeking enterprise income tax (Income Tax Act, art. 5). In addition, the income tax must not exceed one-half of the portion of taxable income above NT$120,000 (id.).

“Profit-seeking enterprise” is defined by the Income Tax Act as an “industrial, commercial, agricultural, forestry, fishing, animal husbandry, mining or metallurgical enterprise operated by public, private, or joint public and private interests and having a business name or place and organized in the form of sole proprietorship, partnership, company or in any other form of organization” (Income Tax Act, art. 11).

The 2010 amendment was approved after Taiwan passed the Industrial Innovation Act on April 16, 2010, which grants tax breaks, subsidies, and other incentives to business in order to encourage innovation and employment. (Wendy Zeldin, Taiwan: Law on Industrial Innovation Adopted in Place of Expired Statute for Upgrading Industries, GLOBAL LEGAL MONITOR (Apr. 22, 2010),

According to a member of the legislature's Finance Committee, Alex Fai, this tax cut could enhance Taiwan's competitiveness and attract more foreign investors. “We hope to encourage international corporations to establish headquarters in Taiwan. We expect to see this happen in the near future,” Fai said. (Flora Wang, Business Income Tax Cut to 17 Percent, Taipei Times (May 29, 2010),