The Executive Yuan has approved a draft amendment to the Act for Industrial Innovation to encourage businesses to invest more in research and development (R&D) innovation and to help them retain outstanding talent.
With domestic companies facing stiffening global competition for business and talent, the government has made it a top priority to craft appropriate policies to spur greater innovation and recruit more professionals, Premier Jiang Yi-huah remarked.
Some industries have expressed dissatisfaction with the current act, saying that the R&D expenditure tax credits provided under Article 10 do not benefit those companies that have yet to turn profitable. Other businesses bemoan the huge loss of talent to overseas firms offering higher salaries, Ministry of Economic Affairs (MOEA) officials said.
To help businesses retain talented employees and encourage them to introduce new and more competitive technologies, the MOEA has drafted this amendment, allowing the deferral of income tax payments (under certain conditions) for employees that are rewarded with stocks, or technology patent owners that form partnerships with companies as stakeholders.
The amendment, which will be forwarded to the Legislative Yuan for deliberation, may be summarized as follows:
1. Companies will have two options for applying R&D tax credits. They may either credit up to 15 percent of total R&D expenditures against their business income tax payable for that year (as under the current act), or credit up to 10 percent of the expenditures against taxes for the next three years. (Article 10)
2. Individuals or enterprises that transfer patents and exclusive technologies or authorize use of technologies to companies in exchange for stock ownership may choose to delay income tax payment on the shares gained for five years. (Article 10-1)
3. Employees granted stock-related rewards (including employee stock bonus, stock purchase, treasury stocks redistributed to employees, employee stock option certificates and restricted stocks) may choose to delay income tax payments by five years. (Article 19-1)
4. Notification mechanism and penalties will be set up for those who fail to report taxes correctly or within prescribed deadlines. (Article 67-1)