Introduction:
In a significant move to boost Taiwan’s technological innovation and support sustainability efforts, the Executive Yuan approved amendments to the Statute for Industrial Innovation on Thursday. These amendments introduce a new investment tax credit for businesses investing in artificial intelligence (AI) and carbon emissions reduction technologies.
Key Amendments and Tax Incentives:
Investment Tax Credit Expansion:
Previously, businesses investing between NT$1 million (US$30,675) and NT$1 billion in sectors such as smart machinery, 5G technology, cybersecurity, and software/hardware services were eligible for a 5% tax credit for one year or a 3% annual reduction over three years. Under the newly proposed changes to Article 10-1 of the statute, companies investing in AI and carbon emissions reduction technology will now qualify for similar tax incentives.
This expansion is designed to accelerate the adoption of AI applications and promote the transition to cleaner, more sustainable technologies that align with Taiwan’s commitment to the global zero-emissions goal by 2025.
Increased Investment Cap:
To further support companies in adopting cutting-edge technologies, the investment ceiling has been raised to NT$1.8 billion. This increase will help companies adopt AI-assisted systems and improve carbon efficiency, giving businesses the financial flexibility to invest in advanced technologies and contribute to environmental sustainability.
Extension of Tax Credit Period:
Additionally, the duration of the tax credit has been extended. The existing incentives, which were set to end on December 31, 2024, will now remain in effect until December 31, 2029. This five-year extension is expected to provide long-term support for businesses and startups that are investing in innovative technologies.
Support for Innovative Startups:
The Cabinet also introduced changes aimed at fostering Taiwan’s startup ecosystem. Amendments to Articles 23-1 and 23-2 expand the eligibility for tax credits to include innovative startups that have been in operation for 2 to 5 years. These startups, backed by investments of at least NT$500,000, will now be able to take advantage of these financial incentives, fostering a more dynamic and competitive startup environment in Taiwan.
Stricter Regulations for Overseas Investments:
In addition to encouraging local technological innovation, the Cabinet also introduced stricter regulations regarding overseas investments. Under the proposed amendments to Article 22, investments in specific high-tech industries will require government approval if the investment exceeds NT$3 billion. This is an increase from the previous threshold of NT$1.5 billion.
These regulations primarily target industries such as carbon fiber for military use, semiconductor technologies, satellite space technology, and post-quantum computing. Investments from certain regions, including Iran and Iraq, will also be subject to closer scrutiny to protect Taiwan’s key technologies and national security.
Failure to comply with these regulations could result in significant fines ranging from NT$50,000 to NT$10 million, depending on the severity of the violation.
Table: Key Highlights of the Tax Credit Proposal
| Aspect | Details |
|---|---|
| Newly Eligible Technologies | AI and carbon emissions reduction technology |
| Investment Tax Credit | 5% for one year or 3% annually for up to 3 years |
| Increased Investment Cap | NT$1.8 billion (US$55 million) |
| Extension of Tax Credit Period | Extended until December 31, 2029 |
| Targeted Industries for Overseas Investment Scrutiny | Carbon fiber, semiconductor, satellite technology, post-quantum tech |
| Overseas Investment Threshold | NT$3 billion or higher for scrutiny |
| Penalties for Non-Compliance | Fines from NT$50,000 to NT$10 million |
Frequently Asked Questions (FAQs):
1. What new sectors are eligible for the investment tax credit?
The proposed amendments to the Statute for Industrial Innovation now include artificial intelligence (AI) and carbon emissions reduction technologies as eligible sectors for the tax credit, providing businesses with financial incentives to invest in these areas.
2. How much can businesses invest to qualify for the tax credit?
Under the new proposal, businesses can invest up to NT$1.8 billion to qualify for the investment tax credit, which is an increase from the previous cap of NT$1 billion.
3. How long will the investment tax credits be available?
The investment tax credit period has been extended until December 31, 2029, giving businesses more time to benefit from these incentives.
4. Who benefits from the changes to the startup tax credit eligibility?
Startups that have been in operation for 2 to 5 years and have received investments of at least NT$500,000 are now eligible for tax credits, encouraging the growth of Taiwan’s innovative startup ecosystem.
5. What penalties are there for not complying with the overseas investment regulations?
Overseas investments exceeding NT$3 billion in certain industries without prior government approval could result in fines ranging from NT$50,000 to NT$10 million, depending on the severity of the violation.
Conclusion:
Taiwan’s introduction of investment tax credits for AI and carbon emissions reduction technology, along with other proposed amendments, signals the country’s ongoing commitment to technological innovation, environmental sustainability, and support for startups. These measures are expected to strengthen Taiwan’s competitive position in the global economy while ensuring the protection of its key technologies. The proposed amendments now await legislative approval before they take effect.
