RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/TPKM/8
29 June 1998
(98-2574)
Working Party on the
Accession of Chinese TaipeiOriginal:  English
ACCESSION OF CHINESE TAIPEI
Notification Pursuant to Article 28.1
of the Agreement on Subsidies and Countervailing Measures
Industrial subsidies
The following communication has been received from the Representation of the Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu with the request that it be circulated tomembers of the Working Party.
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I. INTRODUCTION AND GENERAL REMARKS
This notification is made in compliance with obligations of the Separate Customs Territory of
Taiwan, Penghu, Kinmen and Matsu (hereinafter referred to as “Chinese Taipei”) under Article 28.1(a)
of the Agreement on Subsidies and Countervailing Measures (hereinafter referred to as the
"Agreement").
Article 28.1(a) of the Agreement requires the no tification of subsidies programmes which were
established within Chinese Taipei before it signed the WTO Agreement and which are inconsistent with
the provisions of this Agreement.  This provision is understood to apply to subsidies within the meaningof Article 1 which are prohibited under Article 3.1 of the Agreement.
The decision whether to report any programme in this notification rests on the sometimes
difficult judgment as to whether a particular programme involves a "financial contribution" by a
government, a benefit being conferred, while meeting the requirement of being "specific" and"contingent upon export performance" or "contingent upon the use of domestic over imported goods."
Although Article 28 does not contain a provision similar to Article 25.7 of the Agreement, it is
Chinese Taipei’s position that in order to achieve greater transparency, any notification made under
Article 28.1(a) shall also not prejudge either the legal status of a measure notified under GATT 1994and the Agreement, the effects under this Agreement, or the nature of the measure itself.  Moreover, of
the subsidies notified hereunder, it may be that only part of the subsidies involves an element
inconsistent with the Agreement.
Furthermore, while Chinese Taipei has made considerable efforts to submit a comprehensive
notification, there may still be room for improvement through experience accumulated by reference to
Members' practices and comments and the Committee's review of notifications submitted by Members.WT/ACC/TPKM/8
Page 2
1. Title of the Programme
Tax credits for the purchase of automation and environmentally-friendly equipment.
2. Policy objective and/or purpose
The primary goal of the tax incentive is to achieve economic growth through industrial
restructuring by encouraging investment in certain desirable areas such as automation, energy
conservation, pollution control, reclamation of resources and reuse of industrial water.
3. The Date of Establishment of the Programme
The programme was commenced in 1990.
4. Background and responsible authorities
(a) Law:
- Statute for Upgrading Industries (hereinafter referred to as the "SUI"), Article 6.
The SUI was promulgated on 29 December 1990 and amended on 10 January 1995, and will
cease to be effective on 31 December 1999.
(b) Responsible authorities:
Companies are required to obtain a certificate fro m the relevant government agency before they
can apply for the tax credits with the tax collection au thorities.  The government  agencies involved for
the issuance of such certificates are as follows:
(a) For the manufacturing industry and technical services industry:  The Industrial
Development Bureau of the Minist ry of Economic Affairs("MOEA");
(b) For energy saving:  The Energy Commission, Ministry of Economic Affairs;
(c) For the construction industry:  The Construction & Planning Administration, Ministry
of the Interior;
(d) For the wholesale industry:  The Commence Department, MOEA;
(e) For the agriculture industry:  The Council of Agriculture, Executive Yuan;
(f) Ministry of Finance.
5. Form of subsidy
Credit against corporate income tax.
6. To whom and how assistance is provided
A firm may gain credits up to 20 per cent of the amount of fund disbursed for any of the
following purposes against the amount of corporate income tax payable for the current year:
(a) investment in equipment for automation of production;
(b) investment in the equipment used for reclamation of resources and/or pollution control;WT/ACC/TPKM/8
Page 3
(c) investment in the equipment for energy saving and/or recycling of industrial water.
In case the amount of corporate income tax levied for the current year is less than the amount of
tax credit, the balance of tax credit may be carried over to the next four years.  The total amount of
investment credit against tax in each year should not exceed fifty percent (50%) of the amount ofcorporate income tax levied in the then current y ear.  However, this limitation should not apply to the
final year.
The scope of application, implementation period and tax credit rate should be prescribed by the
Executive Yuan and is subject to adjustment once every two years.
All firms, regardless of their industry categories, are eligible for the tax credit; therefore, the
support should not be specific within the meaning of Article 2 of the Agreement.
For the manufacturing industries, the rate of investment credit available is 20 per cent for
procurement of domestically manufactured equipment for automation, and 10 per cent for foreign
manufactured equipment, respectively.  The rate of investment credit available for procurement of
domestically manufactured equipment for pollution control is 20 per cent, and 10 per cent for foreign
manufactured equipment. The discrepancy of the ra te of investment credit between domestic and
foreign equipment will be eliminated upon Chinese Taipei’s accession to the WTO.
The amount of investment credit for the most recent three years are listed as follows:WT/ACC/TPKM/8
Page 4(Unit: thousand NT$)
FY 1997 FY 1996 FY 1995
No. of
CaseAmount of
Tax ReductionNo. of
CaseAmount of
Tax ReductionNo. of
CaseAmount of
Tax Reduction
1. Investment credit for Procurement
of foreign manufactured equipment forautomation2,164 3,613,817 3,489 2,471,107 2,269 2,149,039
2. Investment credit for procurement
of domestically manufactured equipment for
automation14,371 4,809,874 953 1,847,189 770 1,810,162
3. Investment credit for procurement
of domestically manufactured equipment for
pollution control458 245,370 155 263,808 133 207,732
4. Investment credit for procurement
of foreign manufactured equipment for
pollution control77 70,558 49 60,557 39 48,963
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