Incentives and Promotion of Investments
Foreign investors in Taiwan are governed by the Statute for Investment by Foreign Nationals and the Statute for Investment by Overseas Chinese. Thus, foreign investors involvement on puting in Taiwan are required to subject an application to the Investment Commission under the Ministry of Economic Affairs ( MOEA ) in conformity to the demands set by the statues. After obtaining blessing from MOEA, the foreign investors must register their company with competent authorization who is in charge of the company enrollment in conformity to the Taiwan Company Law. Those investors that planned to put up a subdivision for certain company will necessitate to seek blessing from MOEA Department of Commerce.
There are 22 industries that are accessible in Taiwan for foreign investors to put including:
Intelligent Roboticss Industry
Medical Device Industry
Biomass Energy Industry
Digital Content Industry
Retailing Servicess Industry
Medical Service & A ; Healthcare Industry
Tourism & A ; Recreation Industry
Meeting, Incentive, Convention and Exhibition ( MICE ) Industry
Nano-Technology & A ; Application
Information and Communications Technology Industry
Automobile Components & A ; Auto Electronics Industry
Over the past three decennaries, Taiwan ‘s authorities has undertaken several steps to promote houses to give more to advanced activity and to advance their technological capableness. Taiwan Government emphasizes on making a favourable invention environment and protective regularity, taking to advance houses ‘ advanced activities and accordingly to lend to sustainable economic growing. Hence, by supplying assorted revenue enhancement inducements, Taiwan Government aimed to do Taiwan more investor-friendly to accomplish its national aims. Assorted revenue enhancement inducements are provided under the Statute for Upgrading Industries ( SUI ) , which was introduced in 1991. SUI expired on 31 December 2009 and was replaced by Statute for Industrial Innovation ( SII ) .
Contained within the commissariats, there are assorted articles refering revenue enhancement inducements, including: accelerated depreciation ( Article 5 ) , investing revenue enhancement credits for R & A ; D, forces preparation, mechanization and pollution control ( Article 6 ) , investing revenue enhancement credits for the freshly emerging, of import and strategic industry stockholders ( Article 8 ) every bit good as five-year vacation or stockholder investing revenue enhancement credits for the freshly emerging, of import and strategic industries ( Article 9 ) . While the first two are functionally encouraging, the last two are industry particular.
Under the Taiwan Company Act, a revenue enhancement recognition up to 15 % of the R & A ; D investings against its income revenue enhancement liability is provided for companies that are incorporated in Taiwan. The sum of recognition is limited to 30 % of the income revenue enhancement payable of the companies.
Besides that, investors that invest in Biotechnology and New Pharmaceutical Industry are regulated by Biotech and New Pharmaceutical Development Act. The Act was introduced to advance the development of knowledge-intensive industries such as new drugs and bad medical devices, and to drive the transmutation of Taiwan ‘s economic system.
Taiwan Government has revenue enhancement recognition up to 30 % of the sum invested in R & A ; D for a company that is set up in conformity to the Company Law against its concern income payable. The company may amortise the recognition over five old ages get downing from the twelvemonth the outgo is made. The disbursals incurred for R & A ; D must be related to the company ‘s concern to be eligible for the revenue enhancement recognition. There is besides a revenue enhancement recognition for forces developing. A company set up in conformity to the Company Law is eligible up to 30 % of the sum invested in forces preparations against its concern income revenue enhancement collectible. The revenue enhancement recognition may be amortized over five old ages get downing from the twelvemonth the outgo is made. The outgo on the forces preparation must be related to the company ‘s concern.
Other than that, Taiwan has established its free trade zone ( FTZ ) where companies that have been approved to be free trade endeavors engage in trading, warehousing, logistics, container terminal operations, pass throughing, transshipment, forwarding, imposts clearance, piecing, remodifying, packaging, mending, piecing and administering, processing, fabrication, inspecting, proving, exposing or technological services. Taiwan ‘s FTZs offer multi-faceted benefits to concern endeavors. Broadly talking, on the functional side, they enable concerns to carry on a broad scope of production and trading activities at one fell slide, including transshipment, distribution, consolidation, multi-country vanning and devanning, . Among others, the chief revenue enhancement inducements available including:
Goods that are imported into FTZ by a FTZ endeavor or company for its operations are exempt from imposts responsibility, trade good revenue enhancement, concern revenue enhancement, baccy and spirits revenue enhancement, public wellness and public assistance responsibility on baccy merchandises, trade publicity service fees and harbor service fees.
Machinery and equipment imported into a FTZ by a FTZ endeavor for its ain usage are besides exempted from imposts responsibility, trade good revenue enhancement, concern revenue enhancement, trade publicity service fees and harbor service fees.
Trade publicity service fee is exempt on goods shipped overseas or to the bonded country from the free trade zone, and on goods shipped to the free trade zone from the revenue enhancement zone or bonded country.
Where goods of a FTZ endeavor are transported to the bonded countries, relevant revenue enhancements are exempted in conformity with relevant ordinances with regard to bonded goods.
Where a subdivision office of a foreign endeavor shops goods or behaviors simple processing in the FTZ by itself or through a FTZ endeavor, and so sells the goods to both domestic and foreign clients, the income so derived is exempt from income revenue enhancement.
In add-on, there is besides revenue enhancement freedom on royalty payment. As stated under Article 4, Paragraph 1, Item 21 of the Income Tax Act, if a Taiwan company, through proficient cooperation, pays royalties to utilize a foreign endeavor ‘s patents, hallmarks or specialised engineering, the royalties received may be exempt from Taiwan income revenue enhancement for the foreign endeavor. But there is a status where blessing is required from the Industrial Development Bureau ( IDB ) base on the Principles Regulating the Review of the Applications for Income Tax Exemption of Royalties and Technical Services Fees Received by Foreign Profit-Seeking Enterprises in Manufacturing, Related Technical Service, and Power Supply Industries. Once IDB blessing is obtained, the foreign endeavor should use with competent revenue enhancement authorization for concluding blessing of revenue enhancement freedom on the royalty income.
Other than that, Taiwan ‘s statutory corporate income revenue enhancement rate is reduced to 20 % from 25 % that effectual from 1st January 2010.
Strong and Weak point
Tax inducements play a major function in increasing the capital resources needed to develop the state through the injection of foreign direct investings and besides to later heighten the growing of Taiwan economic system. Besides that, revenue enhancement inducements relief the load of revenue enhancement liabilities of companies prosecuting in certain sectors. The inducements offered in Taiwan have facilitated in the growing of many freshly emerging industries while helping with the transmutation of Taiwan ‘s traditional industries, and their part to the upgrading of Taiwan ‘s industries and engineerings can non be ignored.
Investing from foreign will excite the transportation of cognition in technological and direction patterns into the bing Taiwan economic system. The transportation of knowledge really benefited Taiwan. Taiwan Government will be able to use that cognition into the bing environment and generates a better disposal and environment for the economic system.
Besides that, in Taiwan, revenue enhancement inducements are applicable on a broad scope of industries where investors can choose to put in industries that they believe will bring forth net incomes for them. There is besides the Free Trade Zone ( FTZ ) for endeavors that engage in trading, warehousing, logistics, container terminal operations, pass throughing, transshipment, forwarding, imposts clearance, piecing, remodifying, packaging, mending, piecing and administering, processing, fabrication, inspecting, proving, exposing or technological services. Similar to Taiwan, Malaysia has 11 Free Trade Zones ( FTZs ) as inducements to develop specific geographic countries. Within the FTZs, companies are capable to minimum imposts formalities and are exempt from import responsibilities on natural stuff, machinery, and constituent parts. The authorities has created pecuniary exchange control ordinances that ease the transportation of financess for sanctioned undertakings.
However, there are some drawbacks as good for the revenue enhancement inducements provided by Taiwan Government. The revenue enhancement inducements provided are good to investor but they are detriment to the Government. This is because revenue enhancement inducements will diminish the Government income. This will take to the Government inability to bring forth public substructure for the people in Taiwan.
Besides that, the revenue enhancement inducements for R & A ; D are lower where 15 % to 35 % is the bound and the sum of the revenue enhancement recognition can non transcend 30 % of the income revenue enhancement payable of the companies. Meanwhile, the revenue enhancement recognition for stockholders are merely limited to 20 % of the acquisition cost of the portions. This will non promote foreign investing in Taiwan.
In decision, there are pros and cons to the revenue enhancement inducements provided by the Taiwan Government. The revenue enhancement inducements should be revised continuously so that the Government can make better revenue enhancement inducements that will benefits both parties.
Comparison between Taiwan and Malaysia
The revenue enhancement freedom old ages in Taiwan scope from five old ages to eight old ages while Malaysia revenue enhancement freedom old ages range from five to ten old ages. In Malaysia, there is higher revenue enhancement freedom provided to company set abouting promoted activity or bring forthing promoted merchandise in promoted countries which including Sabah, Sarawak, the Federal Territory of Labuan* and the designated Eastern Corridor of Peninsular Malaysia [ which covers Kelantan, Terengganu, Pahang and the territory of Mersing in Johor ] and Perlis as compared to outside promoted countries.
Other than that, Taiwan does non hold Special Economiz Zone ( SEZ ) while Malaya has SEZ that focuses on fabrication, agro industry, petrochemical, touristry, ICT and logistics. Taiwan besides provides revenue enhancement freedom on royalty payment while Malaya does non hold such inducement. Besides that, Taiwan has a lower corporate income revenue enhancement rate at 20 % while Malaysia ‘s corporate revenue enhancement rate is 25 % .
As there are important differences of revenue enhancement inducements provided under the Taiwan and Malaysia revenue enhancement inducements system, Malaysia is recommended to reexamine the bing Taiwan revenue enhancement inducements system and some of the effectual revenue enhancement inducements in its system. For case, Malaysia can really increase the fluctuation of industries that are eligible for revenue enhancement inducements. This will increase the FDI into Malaysia. Malaya can besides take down the corporate income revenue enhancement charge on companies with foreign investing if making so will non ensuing in authorities ‘s budget shortage due to loss of revenue enhancement gross, or imply big disposal resources that will burthen the Malayan authorities. This suggestion make sense because the combination of the lower corporate revenue enhancement and bing inducements will pull more investors into Malaysia as it will supply greater net incomes for the investors.