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Taiwan: Law on Industrial Innovation Adopted in Place of Expired Statute for Upgrading Industries

(Apr. 22, 2010) On April 16, 2010, Taiwan's Legislative Yuan adopted the Statute for Industrial Innovation, which will take the place of the expired Statute for Upgrading Industries. Under the new law, the government will be able to encourage innovation and employment by offering tax breaks, subsidies, and other incentives to businesses. (Legislature Approves Statute for Industrial Innovation, TAIWAN TODAY, Apr. 19, 2010, available at; Chih-ting ch'an-yeh ch'uang-hsin t'iao-li [Formulation of the Statute for Industrial Innovation], Legislative Yuan website, Apr. 16, 2010, available at

Highlights of the law are:

  • a 15% tax credit for research and development expenses for companies in Taiwan, during the ten-year period from January 1, 2010 through December 31, 2019, with the restriction that the offset amount may not exceed 30% of the business income tax paid in the given year;
  • subsidies for small- and medium-sized enterprises that make an extra effort to create job opportunities (subsidy levels will be determined by the Council for Labor Affairs);
  • a special provision, aimed at preventing larger business groups from engaging in real estate speculation in industrial parks or development zones, requiring the investors to allocate at least 60% of the land area in such zones for the purpose at hand (rather than for other purposes such as construction of residential or commercial buildings), to reserve at least 20% of the area for public facilities, and to limit residential space to no more than 10%;
  • granting of permission to municipalities and local governments to draw up their own industrial development policies, establish industrial parks, and seek subsidies and incentives from the central government (certain sectors, e.g., medical services, creative industries, and environmental technology, may apply to set up their own industrial parks); and
  • a provision stipulating that the Executive Yuan (Cabinet) is to establish national development funds for the financing of investment in major projects or businesses geared towards increasing industrial output or improving industrial structures. (TAIWAN TODAY, supra; Industrial Innovation Bill Passed, CHINA POST, Apr. 17, 2010, available at

It was reported in related news that a proposal to reduce the business income tax rate to 17% is also expected to be approved by the legislature very shortly. (TAIWAN TODAY, supra.)