Newsletter
New Tax Incentives for Small and Medium Sized Enterprises
The Act for Development of Small and Medium Enterprises ("SME Act") was amended to include the following three tax incentives for small and medium sized enterprises ("SME"). These incentives are in effect for 10 years starting from 20 May 2014.
1. The research and development ("R&D") expenses incurred by a SME can be used as a tax credit as follows: (i) up to 15% of R&D expenditures can be offset against the current year's income tax payable; or (ii) up to 10% of R&D expenditures can be offset against the income tax payable of the current year or the following two years. The amount of tax credit used each year under (i) or (ii) cannot exceed 30% of the SME's current income tax payable prior to applying the tax credit. Once option (i) or (ii) is chosen, it cannot be changed. (Article 35)
2. The income tax that is payable by a SME on the shares acquired through the contribution of intellectual properties to a company which is not a listed company or a company traded over the counter may be deferred until the date on which the shares are disposed of. (Article 35-1)
3. If a newly established SME or a SME with an increase in capital via cash for business expansion, (i) makes a certain amount of investment, and (ii) hires additional domestic employees and thus increases its total amount of salary expenditures, it may apply up to 130% of the salary payable to those additional employees as a tax credit, thereby reducing the income tax payable for the year of hiring those employees. (Article 36-2)
To qualify as an SME, an enterprise has to meet either of the following criteria:
(1) If the enterprise is in the manufacturing, construction, mining or quarrying industry, its paid-in capital is NT$80 million or less, or it has less than 200 regular employees; or
(2) If the enterprise is not in any of the industries listed above, its annual sales revenue is NT$100 million or less, or it has less than 100 regular employees.