Newsletter
AMENDMENTS TO EXPORT PROCESSING ZONE LAW
In a joint session on 27 December 2000, the Economics and Energy Committee and the Ju-diciary Committee of the Legislative Yuan re-viewed and passed draft amendments to the Statute for the Establishment and Management of Export Processing Zones. The main change is to repeal the proviso to Article 17 Paragraph 1 which grants a prohibited subsidy in order to facilitate Taiwan's accession to the World Trade Organization (WTO). Additionally the draft amendments grant powers to draw up opera-tional rules or standards affecting the rights and duties of citizens, in order to bring the statute into line with the Law of Administrative Pro-ceedings, which came into force on 1 January 2001.
The existing Article 17 Paragraph 1 reads: goods sold by a business in the taxable zone to an en-terprise within an export processing zone shall be treated as exported goods; but duties already paid on imported machinery and equipment shall not be refundable. The effect of this provision is that different taxation regimes apply to machinery and equipment purchased by an enterprise in an export processing zone, depending on whether they are imported or domestically produced. This constitutes a prohibited subsidy under the WTO Agreement on Subsidies and Counter-vailing Measures, and must be abolished before WTO accession.
The proposed repeal of the proviso to Article 17 Paragraph 1 will remove this fiscal barrier to the importation of goods. Once the legislative process is completed and the amendment takes effect, a company in the taxable zone selling imported machinery to an enterprise in an export processing zone will be able to apply for the re-fund of customs duties, commodity tax and business tax already paid. This will make im-ported machinery and equipment more competi-tive, and reduce their purchase cost for compa-nies located in export processing zones.