By Lu-Fa Tsai, Partner at Deep & Far Attorneys-at-law
Based in Taiwan, Deep & Far Attorneys-at-law provides foreign and outward investment consultation as well as advice regarding the establishment of business entities in Taiwan or foreign countries. This encompasses the following roles:
1. Act for Investment by Overseas Chinese
2. Act for Investment by Foreigners
3. Negative list of investment by overseas Chinese and foreigners
4. Regulation for Examination of Investment Capital of Overseas Chinese and Foreigners
5. Act for Industrial Innovation
6. Act for Development of Biotech and New Pharmaceuticals Industry
7. Regulation for Applications by Overseas Chinese, Foreigners and Persons from the Mainland China for Registration of Investment in Domestic Securities or Transaction of Domestic Futures
8. Regulation for Investment in Securities by Overseas Chinese and Foreigners
The incentives that our government is offering include "tax incentives" and "non-tax incentives". Some of the tax incentives are provided under the Act for Industrial Innovation (AII). The AII is meant to supplement other tax laws and regulations, which also provide for tax reliefs. Taiwan's corporate income tax rate has recently been reduced. In order to create a fair and competitive tax environment, the tax incentives under the AII are generally limited to "R&D expenditures". For non-tax incentives, considering the needs of developing companies, the government has provided "R&D subsidies", "land incentives", "low-interest loans" and "government participation in investment", etc, to reduce the operating costs of enterprises.
(1) Tax Incentives
A. Tax Incentives for Special Zones
B. Other Tax Incentives
(2) Non-tax Incentives
A. R&D Subsidies
In order to promote projects that advance commercial-academic R&D cooperation between firms located in science parks and academic institutions, the government provides subsidies for both the applicant and the academic institution up to a total of NTD 10 million, or 50% of the cost of the R&D project (including self-raised funds). The total subsidy for the academic institution may not be less than 30% of the gross subsidy.
In addition, the Department of Industrial Technology, MOEA, promotes a variety of technology-based projects that encourage enterprises to invest in developing promising technology. It also promotes cross-field integration to strengthen the industrial climate. Subsidies of up to 50% are offered based on the characteristics of the project.
B. Land Incentives
(A) Land Incentives for Industrial Parks
To increase the competitiveness of land in industrial parks and reduce the financial burden on companies, the Industrial Development Bureau (IDB) provides preferential measures for industrial parks, such as a parallel policy for renting and purchasing industrial land. Other measures include land lease incentives in industrial parks, industrial land sales discount measures, and market price discounts for land zones within industrial parks.
(B) Land Incentives for Export Processing Zones
(C) The Export Processing Zones Authority (EPZA) has stated that, to be competitive, it is necessary for existing industrial structures that are manufacturing-intensive to transform to a knowledge-intensive model. To facilitate this transformation, Kaohsiung and Taichung Software Parks have been established to integrate resources from the central government, local governments, and universities. The preferential measures provided in these two EPZs include preferential land rental for enterprises within the EPZs, preferential management fee for enterprises within the EPZs (6688 Program) and preferential land rental for land developers, for example.
C. Low-Interest Loans
(A) Loans for Promoting Industrial Innovation or R&D
Applicable to all innovation and R&D projects relating to Internet, manufacturing, technical services, distribution services, and cultural and creative industries. Loans can be up to 80% of the total expenses of the approved project and up to a maximum amount of NTD 65 million per loan. Government subsidies must be deducted first.
(B) Preferential Loans for Enterprises within Agricultural Technology Parks
Loans of up to NTD 80 million are available for the development or purchase of factories or related facilities and equipment, along with operational revolving funds. If the enterprise is 50% or more foreign-owned, its investment in the park must be at least NTD 80 million and its paid-in capital must be at least NTD 30 million.
(C) Loans for Production, Marketing, Operations and R&D by Farmers' Associations and Agricultural Enterprises
Loans of up to NTD 50 million are available for production, marketing, operations and R&D by farmers' associations and agricultural enterprises engaged in businesses that promote government agricultural policy.
(D) Loans for Machinery and Equipment Upgrades
Loans are available primarily for the purchase of automated machinery and equipment, pollution prevention equipment and energy efficient equipment. The loans provided for each investment project shall not exceed 80% of the total cost of the project, and the total loans provided to each applicant shall not exceed NTD 400 million. For projects for the purchase of pollution prevention equipment, the maximum investment value is NTD 1 billion.
D. Government Participation in Investment
The National Development Fund targets the six emerging industries, the four major smart industries and key service sectors, with government-held shares not to exceed 49% of the total equity of the invested enterprise. Moreover, the government has allocated NTD 10 billion each for investment in SMEs, cultural/creative industries, strategic services and strategic manufacturing industries, with government-held shares also limited to 49%. Government investment is conducted in conjunction with a professional management company.
Zensho Holdings Co., Ltd.
One of our investment case studies for Taiwan is the establishment of a company limited by shares by a Japanese company, Zensho Holdings Co., Ltd. (Zensho), in Taiwan. Zensho Holdings Co., Ltd. signed a letter of interest with the MOEA at the 2013 Business Alliance Conference and fulfilled it by launching its first business venture in Taiwan in 2013.
Zensho is the largest restaurant conglomerate in Japan and has always upheld its enterprise philosophy of "eradicating hunger and poverty from the world." This insistence on food safety and customer confidence has become deeply rooted in its brand image. The group greatly values Taiwan's restaurant industry, and has invested massive capital to the amount of 100 million NTD for the establishment of a Taiwanese company limited by shares, Zensho Taiwan Co., Ltd. The sole purpose of this investment is to develop its catering business in the Taiwanese restaurant market. Zensho's chain stores in Taiwan are known as Sukiya. It hopes to eventually open 300 Sukiya restaurants in Taiwan and plans to introduce other restaurant brands to the Taiwanese market, including conveyor-belt sushi.
For the case of Zensho, the services we can offer include provision of information on the Taiwanese market, applicable laws and regulations, taxes as well as customs, establishment of business entities and assistance in locating business offices or stores. Our mission is to assist foreign investors to open their businesses on schedule.
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