Regulations for Tax Preference and Deduction of Amount of Taxation-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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Taxation - Taiwan

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Regulations for Tax Preference and Deduction of Amount of Taxation

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Q：

What kind of tax preference could be applied to the transfer or authorization of self-development intellectual property rights for Taiwan company or limited partnership?

A：

To promote the flow and application of innovative creation, the profit from transfer or authorization of self-development intellectual property rights shall be deducted with the expenses of research in 200% at that taxation year. But only one of the preferences between the article 10th in Statute for Industrial Innovation or deduction of investment for expenses of research is allowed to be applied to.
The issuance of shares from the transfer or authorization of self-development intellectual property rights for Taiwan company or limited partnership can be exempted to taxation at that year of holding such shares, but the alteration is not allowed to be occurred upon such act of holding is resolved.

Q：

How to deduct the profit-seeking enterprise income tax at the declaration of profit-and-loss offset and deduction of investment for profit-seeking enterprise in Taiwan?

A：

For profit-seeking enterprises which are applied to the regulation at article 39th in Income Tax Act, the losses verified by the revenue service office within the last 10 years in each term shall be deducted from the net income. The application of deduction shall be proceeded at the next year of such losses incurred in yearly order. For profit-seeking enterprise which is applied to the term of abolished Investment Incentive Act or Statute for Upgrading Industries to deduct the amount of taxation of profit-seeking enterprise, the deduction of losses shall be applied for in order pursuant to the article 39th in Income Tax Act priorly and applied to the regulation of taxation of profit-seeking enterprises income later. In the circumstance of the losses which affected the rights of deduction for profit-seeking enterprises, the amount of deduction at the year of next year is allowed to be applied for, but such losses shall be applied for in the regulated amount of “losses verified by the revenue service office within 10 years in each term” to deduct.

Q：

When to be applied to the exemption of profit-seeking enterprise income tax for profit-seeking enterprises which meet the requirements of article 8th in Statute for Upgrading Industries? How to compute the period of exemption?

A：

1.	For companies which are qualified for the industry of innovative strategic setup pursuant to the abolished article 8th in Statute for Upgrading Industries, the application of exemption of profit-seeking enterprises income tax is adopted by the board of shareholder from the date of paying the value of stocks within 2 years and the renunciation of adaption of regulations for deduction of investment of shareholders. The adoption cannot be altered upon the resolution.
2.	For companies which choose to apply the exemption of profit-seeking enterprises income tax shall be proceeded as following:
	(1.)	For setups, the profit-seeking income tax can be exempted in the consecutive 5 years from the date of sales of goods or provision of labor forces.
	(2.)	For enterprises which intend to increase the amount of capital and broaden their industry, the profit-seeking income tax can be exempted in the consecutive 5 years from the date of sales of goods or provision of labor forces, but only the goods, service units, main production or services made from the increase of amount of capital are limited.

The abovementioned conditions of exemption of profit-seeking income tax shall be selected the term of postponement of taxation within 2 years from the date of sales of goods or provision of labor forces. The maximum postponement term of taxation is not allowed to exceed more than 4 years from the date of sales of goods or provision of labor forces. The start date shall be the first day of fiscal year after postponement of taxation.

Q：

How to compute the depreciation of equipment for companies which applied to the regulation of exemption of profit-seeking income tax pursuant to the abolished Statute for Upgrading Industries? Is it available to extend the taxation preferences after the transfer of equipment?

A：

For profit-seeking enterprises which are applied to the abolished Statute for Upgrading Industries, the equipment shall be depreciated as fixed property in yearly order in accordance with the Income Tax Act.
For profit-seeking enterprises which are applied to the regulations of exemption of profit-seeking income tax, the chain of full production, service equipment or software which are allowed to transfer to other enterprise applied pursuant to taxation preference by the expiry date of exemption of profit-seeking enterprise income tax. Besides, in the circumstance of the transferred enterprise which is qualified for the article 8th in Statute for Upgrading Industries, the preferences within the period of exemption of taxation can still be enjoyed by the transferred company.

Q：

How to apply to the deduction of taxation for profit-seeking enterprises which are dissolved owing to consolidation for promoting the management?

A：

In case of a merger/consolidation, division or acquisition provided in Articles 27 and 28 of this Act by a company, the surviving company or the newly incorporated company after the merger/consolidation, the surviving company or the newly incorporated company after the division or the company of acquisition may respectively continue to assume any tax incentives entitled to the dissolved company, the company divided or the company acquired that is not yet deducted or not expired for the assets or business already acquired before that current acquisition; provided, however, that any company qualified for the incentive of exemption of business income tax shall continue to produce the product or labor service enjoying the incentives by the dissolved company, the company divided or the acquired company before the merger/consolidation and acquisition; such incentives shall be limited to the income accounted for the product independently manufactured or the labor service provided and otherwise enjoyed by the dissolved company, the company divided or the company acquired as of the surviving company or the newly incorporated company after the merger/consolidation, or the surviving company or the newly incorporated company after the division or the acquisition company. In case of being qualified for the incentives of investment offset, such shall be limited to the tax payable accounted for the part of the dissolved company, the company divided, or the company acquired as of the surviving company or the newly incorporated company after the merger/consolidation, or the surviving company or the newly incorporated company after the division or the acquisition company.
If any tax incentives continued to be enjoyed by the company pursuant to the requirements set forth in the preceding paragraph is required to comply with the conditions and standards as specified in applicable laws and ordinances, the company shall meet the same incentive conditions and standards after the assumption of the tax incentives.

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