The Taiwanese government has introduced the Industrial Innovation Act, similar to the U.S. CHIPS Act, aiming to provide tax breaks for semiconductor companies in Taiwan. This act allows eligible companies to benefit from a 25% tax deduction on research and development (R&D) expenses and a 5% deduction on expenditures for new machinery used in advanced processes.
Specific criteria, as reported by TechNews, include a requirement for R&D expenses to be at least 6 billion NTD ($193.25 billion), an R&D intensity of at least 6%, and expenditures on equipment for advanced processes totaling at least 10 billion NTD ($321 million). Notably, companies like TSMC, MediaTek, Realtek, Novatek, Phison, Delta Electronics, Nanya Technology, and Winbond are reported to meet these criteria based on their 2022 financial reports.
The Ministry of Economic Affairs is responsible for reviewing applications to ensure they meet the necessary criteria, including assessing the applying companies' key position in the international supply chain and other relevant factors. The review process is reported to be thorough to ensure that only qualifying companies can benefit from these tax incentives.
The overall aim of this act is to encourage investment in R&D and advanced technology sectors, with the intent to stimulate innovation and maintain Taiwan's competitive edge in the global technology market. This initiative is expected to have a particular impact on TSMC, a major semiconductor company, by supporting its costly process technology development, which, in the case of the 3nm technology, can cost well over $20 billion.
In summary, the Industrial Innovation Act in Taiwan is designed to promote R&D investment and technology innovation within the semiconductor industry, with specific tax incentives targeting eligible companies in this sector.
