December 25, 2006
The Ministry of Economic Affairs (
MOEA) is submitting a new draft plan that would continue incentives programs originally started under the Statute for Upgrading Industries, which conclude in 2009.
New tax incentives items have been also added to the proposed draft, which has been entitled the Statute for Creating New Value for Industries. The
MOEA proposed the name to reflect its emphasis on encouraging industries 'to create new value'.
Under the draft version of the new statute, a five-year tax exemption would remain in place for 'new and emerging industries'. New incentives include an exemption on stock transaction taxes for purchases of corporate and financial bonds, and tax breaks for bringing in skilled personnel from abroad.
In addition, the
MOEA is recommending that shares received as employee bonuses be taxed according to the price difference upon transfer of shares rather than face value. However, the
MOEA has requested either a separate tax or a five-year tax deferment.
The new draft consists of seven chapters: General Principles, Tax Incentives, Funds for National Development, Technical Assistance, Venture Capital, Operations Headquarters and Human Resources Incentives.
The main tax incentives of the new draft remain largely the same from the original Statute for Upgrading Industries, with a few additions. To encourage capital flow, operations headquarters are redefined as "regional headquarters" and "global headquarters", with different incentives provided for each.
The draft proposes that global headquarters receive tax exemptions on overseas income remittances. The
MOEA is recommending revisions to the Income Tax Act in which the overseas earnings of an operations headquarters are not calculated using the minimum base tax rate. For premiums that are earned from the overseas branch of a company headquarters and distributed to shareholders in the
ROC within the fiscal year, 50% of this amount is exempt from being calculated as part of the individual's overall income tax.
The "Human Resources Incentives Assistance" chapter -- a new addition to the existing Statute -- proposes reduced income taxes for 'international skilled personnel' to attract a higher-quality workforce. In its draft recommendations, the
MOEA cited the example of Mainland China's "51 Plans", which have attracted nearly 2 million international skilled personnel from Hong Kong, Taiwan, and Macao -- an investment of nearly RMB 3 billion. The draft also cites tax incentives granted to international skilled personnel in Singapore.
The draft bill also proposes revised tax deduction incentives. Deductions would no longer be available for individual shareholder investments but would be kept in place for corporate shareholders. Investment deduction rates would be adjusted for automation and communicable disease prevention, but would remain the same for
R&D personnel training and reducing greenhouse gases. Tax deductions for mortgages in disadvantaged areas would remain, but with the rates reduced from 20% to 15%.
(Economic Daily News)
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