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AMENDED SUI ENFORCEMENT RULES TOOK EFFECT RETRO-ACTIVELY
Patrick Wong
To bring the Enforcement Rules of the Statute for Upgrading Industries into line with the most recent amendments to the statute, simplify pro-cedures, encourage investment and provide in-centives for the merger of companies, the Min-istry of Finance (MOF) and the MOEA jointly submitted amendments to the enforcement rules to the Executive Yuan, which have now been approved and promulgated. The main changes include:
The investment tax credit can be offset not only against tax liability for the year in which the relevant expenditure is incurred, but any excess amount may also be offset against corporate income tax assessed at the rate of 10% on any undistributed surplus for the preceding year.
It is explicitly provided that where an enter-prise in an emerging strategic industry dis-poses of a full set of equipment capable of independent operation to another enterprise, the remaining period of tax credit enjoyed by the disposing company may be transferred to the acquiring company, if so approved by the MOEA and MOF.
Under the old rules, the five-year tax holiday available to a newly incorporated company in an emerging strategic industry ran from the date of the first invoice issued for a qualifying product after completion of the investment. To more clearly define the commencement date of the tax holiday, and to simplify related procedures, this rule is amended so that the tax holiday commences from the date when the investment is completed, as was already the case for projects involving an expansion of capital rather than new incorporation.
To encourage the merger of companies, it is explicitly provided that unexpired periods or undeducted amounts of tax incentives trans-ferable from a dissolved company to a new or surviving company after a merger include those based on the statute prior to its January 2000 amendments. To continue enjoying transferred incentives, separate accounting records must be maintained for the business units derived from the dissolved company, as the basis for calculating the income derived from, and tax liability attributable to, its in-dependently produced eligible products or its eligible services. Management costs and non-operating profits and losses relating to tax-exempt income must also be apportioned on a strictly commensurate basis.
The above amendments took effect retroactively from 1 January 2000. Eligible companies can take advantage of the provisions when declaring their taxes this year.
