萬國法律事務所

Taiwan’s Executive Yuan on October 6, 2004 acted to expedite the development of emerging industries when it approved a draft revision of Articles 19-2 and 19-3 of the Statute for Upgrading Industries and sent the draft to the Legislative Yuan for deliberation by lawmakers. The revised draft provides for a five-year tax holiday for investments made in the form of identifiable intangible assets in enterprises engaged in any of the emerging industries that are recognized by Taiwan’s Ministry of Economic Affairs.

It is hoped that the revisions will facilitate the exchange of shares for imported technology, thereby easing the pressure on Taiwanese companies in connection with raising capital during the start-up phase of their operations. It is further expected that the revisions will also encourage patent owners and owners of special technology to conduct research and development in Taiwan with respect to newer industries such as biotechnology.

The two major points of revision in the draft are as follows:

1. Where shares in a company are purchased with identifiable intangible assets (both domestic and foreign patents rights or specialized technology as stipulated in the Enforcement Rules for the Statute for Upgrading Industries) and the value of such shares exceeds 20% of the company’s equity, and where the number of shareholders purchasing such shares numbers five or fewer, such shareholders shall be exempted from paying income tax that would otherwise be payable when purchasing the shares and the shareholders may elect to delay payment of the entire amount of income-tax for a period of five-years starting in the year subsequent the year in which the shares were purchased with the intangible assets.

2. In order to enhance the willingness of companies to industrialize innovative technologies, the draft revision permits ordinary small- and medium-sized enterprises to offer stock options to owners of identifiable intangible assets in payment for such assets. Additionally, the revisions provides that in the event that such stock options are exercised, income tax shall only be due on the portion of the value of the shares that exceeds the value at the time the shares were purchased.