TAX INCENTIVES FOR PRIVATE PARTICIPANTS IN INFRA-STRUCTURE PROJECTS

09/01/2001

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On 28 June 2001 the Ministry of Finance (MOF) promulgated its Regulations Governing Tax Credits for Private Entities Participating in Major Public Infrastructure Projects. The tax incen-tives available are as follows:

Equipment and technology: Where a private entity participating in a major public infra-structure project purchases equipment or technology for (i) construction and operation; or (ii) pollution control for its own use, at a purchase price of at least NT$600,000 re-spectively in a single tax year, it may offset 5% to 20% of the purchase price against its corporate income tax liability for the same year.

R&D: Where a private entity participating in a major infrastructure project invests at least NT$1.5 million, or 2% of its net operating revenue, in research and development in a single tax year, it may offset 20% of such expenditure against its corporate income tax liability for the same year.

Personnel training: Where a private entity par-ticipating in a major infrastructure project in-vests at least NT$300,000 in personnel train-ing in a single tax year, it may offset 20% of such expenditure against its corporate income tax liability for the same year.

If the entity's corporate income tax liability for the year in question is insufficient to offset the full amount of tax credits, the residual amount may be carried over and offset against corporate income tax over the ensuring four years. Fur-thermore, the investment tax credits may not be applied against more than 50% of the corporate income tax liability in a year. But application of the investment tax credits in the last year is unlimited.

An entity that takes advantage of the incentives for the purchase of equipment or technology must place purchase orders within two years af-ter its construction or operating plan is approved by the authority-in-charge of the infrastructure project, and must take delivery within three years after the date of order. Where delivery cannot be made within the specified period due to special circumstances, the entity may apply for an ex-tension on a case-by-case basis, stating the rea-sons. Within six months after the date of deliv-ery, or within six months after promulgation of the regulations, the entity must apply with the authority-in-charge for certification, and on the basis of the certification documents and original receipts for the purchase cost, apply with the tax collection authorities for relief of income tax. The regulations are effective retroactively from 21 February 2000, which is when the Law for Promotion of Private Participation in Public In-frastructure Projects came into force.