[News] Taiwan’s Chip Act Takes Effect in February, TSMC to Benefit from Historic Tax Incentives

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According to a report by TechNews, Taiwan has introduced its largest-ever investment deduction incentives under the “Statute for Industrial Innovation,” often referred to as the “Taiwanese Chip Act.” Articles 10-2 and 72 of the statute came into effect, and the Ministry of Economic Affairs announced that it would accept company applications from February 1 to May 31 this year.

The Ministry of Economic Affairs stated that applications for deductions would be accepted starting February this year. The provided tax incentives include a 25% deduction for research and development expenses and a 5% deduction for expenditures on acquiring new eqipment for advanced processes, all of which can be deducted from the current year’s corporate income tax.

Eligibility criteria include companies with research and development expenses of at least NT$6 billion, a research and development density of 6%, and expenditures of NT$10 billion for the purchase of equipment for advanced processes, with no restrictions on industry category.

The Ministry of Economic Affairs emphasized that as the parent law already specifies an effective tax rate of 12% for the fiscal year 112 and a threshold of 15% from the fiscal year 113 onwards, this measure aims to encourage businesses that do not meet these tax rate qualifications to strive for them and become eligible for tax incentives.

A review panel will be formed to assess whether applying companies meet the criteria for a critical position in the international supply chain and other qualification requirements.

The Ministry of Economic Affairs shared that the application period for Article 10-2 of the Statute for Industrial Innovation is from February 1 to May 31 this year. Companies are required to provide explanatory documents and supporting evidence, including data on products, international market share, rankings, import-export trade, and other statistics, serving as indicators for the assessment of technological innovation and critical positions.

According to the financial reports of publicly listed companies in 2022, including TSMC, MediaTek, Realtek, Novatek, Delta Electronics, Nanya Technology, Phison and Winbond, their research and development expenses and research and development density all meet the application thresholds.

(Image: TSMC)