| Legislative： |
Decree No. 10404634860 by the Ministry of Finance and Decree No. 10404604500 by the Ministry of Economic Affairs were issued on September 25, 2015, regarding the amendments to Article 8 and Article 11-1 of “The Rules Governing the Applications for Exemption
from Income Tax on Royalty and Technical Service Fees Collected by Foreign Profit-Seeking Enterprises from Manufacturing Industries, Technical Service Industries and Power-Generating Industries” and became effective as of the promulgation date. |
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1.
The purpose of these Rules is to govern the approval of applications for exemption from income tax on royalty and technical service fees collected by foreign profit-seeking enterprises from domestic manufacturing industries, technical service industries and
power-generating industry.
2.
The terms referred to in these Rules are defined as follows:
(1)The term “profit-seeking enterprise” referred to in these Rules shall mean the enterprise as stipulated in Paragraph 2 of Article 11 of the Income Tax Act, as well as the educational, cultural, public welfare and charitable organizations or institutions,
as stipulated in Paragraph 4 of Article 11 of the Income Tax Act, which operate the business of selling goods or providing services.
(2)The term “foreign profit-seeking enterprise” referred to in these Rules denotes any profit-seeking enterprise or any educational, cultural, public welfare and charitable organizations or institutions operating the business of selling goods or providing services
that have their head offices without the territory of the Republic of China ( hereinafter referred to as" the ROC").
3.
The term "technical cooperation" referred to in these Rules shall mean where a foreign profit-seeking enterprise provides a domestic profit-seeking enterprise with its patent right, which may achieve one of the following purposes relevant to the products or
services of the domestic profit-seeking enterprise:
(1)To facilitate the production of new products;
(2)To increase the volume of production, improve the quality or reduce the production cost of products; or
(3) To provide new manufacturing technology.
Where a foreign profit-seeking enterprise transfers the ownership of its own patent right to a domestic profit-seeking enterprise, the consideration received for such patent right falls within the category of income from property transaction and is excluded
from the application of these rules.
4.
The market for the products made with technical cooperation shall not be limited to the territory of the ROC.
5.
A foreign profit-seeking enterprise that provides industries as stipulated in Paragraph 3 with its own patent right to be exploited by way of technical cooperation, during the validity period of such patent right, and such right having been verified and approved
by the Industrial Development Bureau of the Ministry of Economic Affairs on a case-by-case basis for the virtual introduction of such technical know-how which is a key technology that domestic units are unable to provide or able to provide, but its performance
can not meet the profit-seeking enterprise’s product specifications, may apply for income tax exemption for the royalties received therefrom in accordance with Subparagraph 21, Paragraph 1 of Article 4 of the Income Tax Act.
The home country of such foreign profit-seeking enterprise as referred to in the preceding paragraph shall be the country which reciprocally allows ROC nationals to claim patent priority, or the member of the World Trade Organization.
The patent as referred to in Paragraph 1 shall be within the scope of the use of following industries:
(1)Precision Machinery and Intelligent Automation Industry
(2)Vehical Industry
(3)High Value-Added Metal Materials Industry
(4)Wind Power Industry
(5)Solar Energy Industry
(6)Next Generation Communications and Smart Handheld Device
Industries
(7)Intelligent Electronics and Electronic Components Industry
(8)Display Industry
(9)LED Lighting Industry
(10)Intelligent Living Industry
(11)Cloud Computing Industry
(12)High Value-Added Petrochemical Industry
(13)High Value-Added Textile Industry
(14)Optoelectronic Chemical Materials Industry
(15)Health Foods Industry
(16)Biotechnology Industry
(17)Resource Recycling Industry
(18)Water Reclaim and Reuse Industry
(19)Information Services Industry
(20)Design Services Industry
The term " domestic units " referred to in Paragraph 1 shall mean the ROC government agencies or institutions, individuals residing in the ROC, profit-seeking enterprises having head offices within the territory of ROC and education, culture, public welfare,
or charity institutions or organizations.
6.
A foreign profit-seeking enterprise that licenses manufacturing industries and related technical services industries by way of technical cooperation to use its trademark which is registered with the Intellectual Property Office of the Ministry of Economic Affairs
during the validity period of such trademark as recorded with the Intellectual Property Office of the Ministry of Economic Affairs, and with such trademark being displayed in parallel with the trademark of the domestic technical cooperation industry on the
commodity, service or other related items, may apply to the Industrial Development Bureau of the Ministry of Economic Affairs for income tax exemption on the royalties received therefrom in accordance with Subparagraph 21, Paragraph 1 of Article 4 of the Income
Tax Act.
7.
A foreign profit-seeking enterprise that licenses manufacturing industries and related technical services industries by way of technical cooperation as approved by the Industrial Development Bureau of the Ministry of Economic Affairs to exploit its computer
programs which may enjoy copyright under Article 4 of the Copyright Act during the term of protection of such computer programs, may apply for income tax exemption on the royalties received therefrom in accordance with Subparagraph 21, Paragraph 1 of Article
4 of the Income Tax Act.
8.
The patents, trademarks, and copyrights of computer programs as referred to in Articles 5, 6, and 7 are limited to those for self-use by domestic profit-seeking enterprises only.
Application for the approval to use the rights as referred to in the preceding paragraph can be given only by the competent authority on a case-by-case basis during the validity period of the contract.
9.
Where a company limited by shares specially approved by the Industrial Development Bureau of the Ministry of Economic Affairs as in conformity with industries specified in Subparagraph 1 to 18, Paragraph 3 of Articles 5 of these Rules, engages a foreign profit-seeking
enterprise to render technical services, including the production method, the process design, the basic or detailed engineering design and/or the machinery/equipment design, which are needed prior to the construction and start-up of its factory, being verified
and approved as such by the Industrial Development Bureau of the Ministry of Economic Affairs on a case-by-case basis, the technical service fees received therefrom by the foreign profit-seeking enterprise may be exempted from income tax in accordance with
Subparagraph 21, Paragraph 1 of Article 4 of the Income Tax Act.
10.
Where a power-generating enterprise incorporated in the form of a company limited by shares engages a foreign profit-seeking enterprise to render technical services, including the construction planning, basic or detailed engineering design and the machinery/equipment
design, which are needed prior to the construction and start-up of its plant, being verified and approved as such by the Bureau of Energy, Ministry of Economic Affairs on a case-by-case basis, the technical service fees received therefrom by the foreign profit-seeking
enterprise may be exempted from income tax in accordance with Subparagraph 21, Paragraph 1 of Article 4 of the Income Tax Act. The power-generating enterprise as referred to in the preceding paragraph shall mean a power-generating company engaging in generating
electric power energy.
11.
Any profit-seeking enterprise pays its foreign affiliated enterprises the royalties or technical service fees which may be exempted from income tax in accordance with Subparagraph 21, Paragraph 1 of Article 4 of the Income Tax Act, shall evaluate whether such
costs or expenditures are at arm’s-length in accordance with the “Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing”. If the profit-seeking enterprise evaluate that such costs or expenditures are
not at arm’s-length and would result in an evasion or reduction of their tax liabilities within the ROC, he shall voluntarily adjust them based upon the results of the arm’s length transactions. The amount in excess of the results of the arm’s length transactions
shall not be considered as costs or expenditures.
11-1.
Any profit-seeking enterprise which pays foreign enterprises royalties or technical service fees may be exempted from income tax in accordance with Subparagraph 21, Paragraph 1 of Article 4 of the Income Tax Act, the approved exemption period shall be limited
to 3 years. However, if a foreign profit-seeking enterprise applies for a shorter period of authorization or construction of a factory, approval shall be based on the above period for exemption.
Before the expiration of the approved exemption period as referred to in the preceding paragraph, a foreign profit-seeking enterprise may apply again in accordance with Subparagraph 21, Paragraph 1 of Article 4 of the Income Tax Act.
The amended Article 11-1 came into force on September 25, 2015 and shall apply to cases in which foreign profit-seeking enterprises have applied but have not yet been approved by the competent authority before the above effective day. |