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To encourage investment by manufacturing companies and related technical service compa-nies, the amendments to the Statute for Upgrad-ing Industries (SUI) enacted on 6 February 2003 add a new Article 9-2, under which a company of either of the above types that is established or expanded with new investment in the period from 1 January 2002 to 31 December 2003 may enjoy exemption from corporate income tax for five years. The new article also empowers the Executive Yuan to define the scope of eligibility for the tax exemption, application procedures, and other related matters. Thus, on 20 March 2003 the Executive Yuan announced the Regu-lations Governing Five-Year Exemptions from Corporate Income Tax for New Investments in Manufacturing Industries and Related Technical Service Industries. The main content of the regulations is as follows:
Manufacturing industry, as referred to in Ar-ticle 9-2, Paragraph 1 of the SUI, means companies engaged in the manufacture or processing of physical products. Related technical service industry means companies providing to manufacturing industry services such as research and development, design, inspection, testing, manufacturing process improvement, engineering services for the in-stallation of automatic or electronic systems, engineering services for energy saving or for the use of new and clean energy sources, re-source recycling, pollution prevention, recy-cling of industrial water, reduction in green-house gas emissions, and technical services related to intellectual property.
Establishment of a company, as referred to in Article 9-2, Paragraph 1 of the SUI, means completion of company incorporation and registration procedures in accordance with the law. Increase in capital means completion and registration of an increase in capital in accor-dance with the law; the source of funds may be a cash injection or the conversion of retained earnings to capital. If a company registers a reduction in capital followed by an increase in capital, the capital reduction must be used en-tirely to offset losses, and the amount of the subsequent increase in capital must be greater than the reduction in capital.
The date of commencement of sale of a prod-uct or provision of a service, and the date of commencement of operation of new equip-ment or provision of a service, mean the date of completion of the company's investment plan.
To be eligible for the incentives under the regulations, a company must purchase entirely new machinery, equipment or technology. Within six months following the date of is-suance of the letter approving its incorporation, in the case of a new company, or approving its registration of an increase in capital, in the case of an expansion by increase in capital, the company should apply to the Industrial De-velopment Bureau (IDB), Ministry of Eco-nomic Affairs, for the issuance of a letter ap-proving the investment plan qualifying for a five-year tax exemption. The application should be supported by the following docu-ments:
1.The investment plan (seven copies).
2.Documents evidencing the raising of funds for capital, or evidencing an increase in capital by the conversion of retained earn-ings.
If the letter approving incorporation or ap-proving registration of an increase in capital was issued between 1 January 2002 and the date on which the regulations took effect, the company may apply to the IDB for a letter approving its investment plan within six months following the date of the regulations' entry into force.
A company that has obtained an investment plan approval letter should carry out the in-vestment plan within three years following the date of issuance of the approval letter, and should apply within a year following the date of completing the investment plan for a cer-tificate of completion, submitting the follow-ing related documents:
1.Photocopies of the company's business registration certificate upon its incorpora-tion or before and after its registration of a change in capital; or where the machinery or equipment purchased under the invest-ment plan is installed in a science-based industrial park or export processing zone, photocopies of the company's business and factory registration certificate upon its in-corporation or registration of change in capital.
2.Photocopy of the letter approving the in-vestment plan as qualifying for a five-year tax exemption.
3.A list of the completely new machinery, equipment or technology purchased (six copies).
4.Layout diagrams showing the purchased new machinery or equipment.
5.Photocopies of signed delivery notes, payment receipts, customs documents evidencing importation, or evidentiary documents audited by a certified public accountant, relating to the purchased new machinery, equipment or technology.
