Taxation

In Taiwan, each tax is legislated by a specific tax law. The most relevant tax law for the corporate investor is the Income Tax Law. Under this law, the tax rate for companies is 25%. However, the average effective tax rate from 2001 to 2003 was approximately 16% according to statistics from the Ministry of Finance’s (MOF). Especially for companies in high-tech industries, the effective tax rate was much lower than 16% because of available tax incentives. Besides income tax, other major taxes for companies are business tax, customs duty and commodity tax on certain goods. Regarding business tax, most of the business entities are subject to value-added tax (VAT) except for financial institutions which are subject to gross business receipt tax. The VAT does not result in an actual tax burden to the enterprises. As for customs duties, the average normal and effective tariff rates have been gradually reduced on a yearly basis following Taiwan's admission to the WTO.

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