萬國法律事務所

Taiwan’s Legislative Yuan on 7 January 2005 took an important step in the direction of speeding the development of new and emerging industries in Taiwan with the passage of revisions of Articles 19-2 and 19-3 of the Statute for Upgrading Industries.

These revisions were originally suggested by the Ministry of Economic Affairs and provide a five-year tax holiday for investments of intangible assets made in new and emerging industries as recognized by the Ministry of Economic Affairs in the form of patent rights or other specialized technology. The revisions will be made effective retroactively from 1 January 2004.

Under the new revisions, investors will be permitted to have the value of their technology assessed by an assessment agency or by agreement between the investors and then to trade that technology for shares in the invested enterprise. This new system will allow Taiwanese firms to reduce the pressure encountered when funds accumulate during the initial stage of an enterprise’s start-up by swapping shares for foreign-owned technology. At the same time, the new system will act as an incentive and encourage foreign owners of patents or specialized technology to make such investments. It is hoped that the new system will be particularly attractive to foreign companies owning technology for research and development in high-risk ventures, including biotechnology.

The major points of the revisions include the following:

1. For emerging-industry companies that trade patent rights or specialized technology for more than 20% of total equity in an investment, and where the number of persons trading technology for shares is five or fewer, the shareholders who trade technology for shares will not be required to pay any income tax at the time they acquire the shares. They may, however, defer the entire amount of income-tax payable until the fifth year after the year in which the shares were obtained.

2. To facilitate the commercialization of new technologies, enterprises will be permitted to provide stock options to technology owners as a form of compensation for the value of the technology. Income tax will not be due until such options are exercised, and payments will be due only on the amount by which the price of the shares on the day when the options are exercised exceeds the price to which the shares were subscribed.

Taiwan’s Ministry of Economic Affairs has indicated that the patent rights that can be traded for shares include both foreign and Taiwanese patent rights. The scope of the “specialized technology” will be identified in the implementation rules of the Statute for Upgrading Industries.

Additionally, Taiwan’s Legislative Yuan passed a revision of Article 53 of the Statute for Upgrading Industries. This revision provides that industrialists who apply to utilize adjacent non-urban lands to expand industrial estates will not be required to make any payment for the land while the land utilized is subject to severe subsidence as announced by the Ministry of Economic Affairs or where such land is designated by the central government authority in charge of agriculture as being in either a remote or offshore area.

It is expected that this revision will reduce the cost of expanding factory size and promote further industrial investment. Additionally, it is hoped that this measure will significantly increase land development for land that is subsiding or is located in remote or offshore areas, and in turn facilitate industrialization in those areas.