RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/TPKM/8/Rev.2
11 June 1999
(99-2343)
Working Party on the
Accession of Chinese TaipeiOriginal:  English
ACCESSION OF CHINESE TAIPEI
Notification Pursuant to Article XVI.1 of the GATT 1994 and
Article 28.1 of the Agreement on Subsidies and
Countervailing Measures
Industrial subsidies
Revision
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 to
members of the Working Party.
_______________
CONTENTS
Programme Page No.
i. Tax credits for the creation of internationally recognized 2
ii. No duty and tax is to be refunded for imported machinery and
equipment resold to a Science-Based Industrial Park ("the Park")4
iii. No duty and tax is to be refunded for imported machinery and
equipment resold to the economic processing zones6
iv. Tax  credits for the purchase of automation and environmentally-
friendly equipment8
v. Tax deduction for automobiles and motorcycle using domestic design of
certain automobile and motorcycle components11WT/ACC/TPKM/8/Rev.2
Page 2
1. Title of the Programme
Tax credits for the creation of internationally recognized brands.
2. Period Covered by the Notification
Fiscal years 1995-1997(July 1994 to June 1997)
3. Policy objective and/or purpose
The primary goal of the tax incentive is to encourage private enterprises to create their
own internationally recognized brands.
4. Background and responsible authorities
(a) Law:
- Statute for Upgrading Industries (herein after   referred to as the "SUI"),
Article 6.
The SUI was promulgated on December 29,1990 and amended on January 10, 1995, and
will cease to be effective on December 31, 1999.
(b) Responsible authorities:
Industry Development Bureau, Ministry of Economic Affairs
Ministry of Finance
5.  Form
Credit against Corporate income tax
6. To whom and how assistance is provided
All companies invested in the creation of in ternationally recognized brands are eligible
for tax credit. Up to 15 per cent of expenditure sp ent for promoting in th e international market
any trademark, service mark or certification mark created by company itself and registered
with Bureau of National Standards, MOEA, can be deducted from payable corporate income
tax.
If the total expenditure reaches NT$3,000,000 in the same taxable year, 10 per cent
thereof may be deducted from the corporate inco me tax payable for that year; if such total
expenditure reaches NT$5,000,000 and “Taiwan Exquisite Product Mark” authorized by
MOEA is used with the brand, 15 per cent of the total expenditure may be deducted from theincome tax payable for that year . 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 ensuing four years.
The regulation on creation of international br ands will be amended to be consistent with
WTO requirements, upon accession, without any recourse to a transition period. Any future
programme in this area would be consistent with WTO requirements and would not
reintroduce prohibited subsidies.WT/ACC/TPKM/8/Rev.2
Page 3
7. Amount
Not available
Unit: thousand NT
Year No. of Cases Tax Deduction Amount
1994 16 16,304
1995 31 31,574
1996 34 18,987
Total 81 66,865
8. Duration
The programme was initiated in 1991 and w ill terminate when the Statute expires.
9. Trade effects or related statistical data
In light of the scope and nature of the program me, it is not possible to determine what, if
any, trade effects which may  result from this programme.WT/ACC/TPKM/8/Rev.2
Page 4
1. Title of the programme
No duty and tax is to be refunded for imported machinery and equipment resold to a
Science-Based Industrial Park ("the Park").
2. Period covered by the notification
Calendar year 1998
3. Policy objective and/or purpose
The legislative background of this policy is to enhance administrative efficiency by
reducing administrative burden and waste of resources in keeping track of the importedmachinery and equipment. To illustrate hypothetic ally, the actual importer (located outside the
Park) of the machinery and equipment should be the legitimate receiver of any tax/duty refund
due when the imported products are resold to the Park. However, prior to the re-selling, the
imported goods may have undergone several transactions, or “change of hands” before the
imported machinery and equipment are resold to th e Park. In this regard, it would be difficult
to trace the actual importer, the legitimate recipient of any tax/duty refund, of the machinery
and equipment after a series of transactions.
4. Background and the responsible authorities
(a) Laws and regulations:
- Paragraph 1, Article 18, Statute for the Establishment and Administration of a
Science-Based Industrial Park (the “SSP”).
(b) Responsible authorities:
- The Science-based Industrial Park Administration, National Science Council
- Directorate General of Customs, Ministry of Finance
5. Form
Favourable tax/duty treatment for domestic machinery and equipment.
6. To whom and how assistance is provided
When a firm located in areas where tariff is leviable sells goods to the Park enterprises,
the goods shall be deemed as export commodities. The firm is not eligible for customs duty and
commodity tax refund if the good is imported machinery and equipment which have been duly
taxed. On the other hand, refund is not an issue for the sale of domestic machinery and
equipment to the Park as no customs duty and co mmodity tax is leviable on domestic machinery
and equipment sold to the Park.
7. Amount
Not availableWT/ACC/TPKM/8/Rev.2
Page 5
8. Duration
(a) According to Articles 5 to 12 of the St atute for Commodity Tax, machinery and
equipment is not subject to commodity tax. Thus, “no commodity tax refund shall be
made for imported machinery and equipment wh ich have been duly taxed” provided for
in Article 18 of the SSP is actually not implemented.
(b) Chinese Taipei does not permit the refund of customs duty unless clearly mandated by
the laws in order to ensure the stability and predictability of the tax regime. This is not
an uncommon practice in the world. The laws  provide for very few situations for duty
refund. One example is Article 36 of the Customs Law.
(c) Chinese Taipei will amend Article 18 of the SSP by deleting “[n]o customs duty and
commodity tax refund shall be made for imported machinery and equipment which
have been duly taxed” upon Chinese Taipei’s accession to the WTO.
9. Trade effects or related statistical data
Most of the machinery and equipment utilized  by Park enterprises tend to be of high
technology and of high precision nature which are not manufactured by local manufacturers.
Therefore, these machinery and equipment are most ly directly imported from abroad by Park
enterprises. In 1997, the total amount of machinery and equipment imported by Park
enterprises was US$ 3.4 billion and only US$ 32 million worth of machinery and equipment are
procured locally, including domestic machinery a nd equipment. The rate of procurement locally
is only 0.94 per cent, which clearly indicate the trade effect is de minimis .WT/ACC/TPKM/8/Rev.2
Page 6
1. Title of the programme
No duty and tax is to be refunded for imported machinery and equipment resold to the
economic processing zone (EPZ).
2. Period covered by the notification
Calendar year 1998
3.  Policy objective and/or purpose
The legislative background of this policy is to enhance administrative efficiency by
reducing administrative burden and waste of resources in keeping track of the importedmachinery and equipment. To illustrate hypothetic ally, the actual importer (located outside the
EPZ) of the machinery and equipment should be  the legitimate receiver of any tax/duty refund
due when the imported products are resold to the EPZ. However, prior to the re-selling, the
imported goods may have undergone several transactions, or “change of hands” before the
imported machinery and equipment are resold to the EPZ. In this regard, it would be difficult
to trace the actual importer, the legitimate recipient of any tax/duty refund, of the machinery
and equipment after a series of transactions.
4.  Background and the responsible authorities
(a) Laws and regulations:
- Paragraph 1, Article 17, Statute for Establishment and Management of
Economic Processing Zones
(b) Responsible authorities:
- the Economic Processing Zone Administration, Ministry of Economic Affairs
- Directorate General of Customs, Ministry of Finance
5. Form
Favourable tax/duty treatment for domestic machinery and equipment.
6. To whom and how assistance is provided
When a firm located in areas where tariff is leviable sells goods to EPZ enterprises, the
goods shall be deemed as export commodities. The firm is not eligible for duty/tax refund if the
good is imported machinery and equipment whic h have been duly taxed. On the other hand,
refund is not an issue for the sale of domestic machinery and equipment to the EPZ as no duty/
tax is leviable on domestic machin ery and equipment sold to the EPZ.
7. Amount
Not availableWT/ACC/TPKM/8/Rev.2
Page 7
8. Duration
(a) According to Articles 5 to 12 of the St atute for Commodity Tax, machinery and
equipment are not subject to commodity tax. Thus, “no tax paid for imported
machinery and equipment is to be refunded” provided for in Article 17 of the EPZ Law
is actually not implemented.
(b) Chinese Taipei does not permit the refund of customs duty unless clearly mandated by
the laws in order to ensure the stability and predictability of the tax regime. This is not
an uncommon practice in the world. The laws  provide for very few situations for duty
refund. One example is Article 36 of the Customs Law.
(c) The provision in Article 17 of the EPZ Law which reads, “[n]o duty and tax paid for
imported machinery and equipment is to be refunded” will be deleted upon Chinese
Taipei’s accession to the WTO.
9. Trade effects or related statistical data
There are no related statistical data for impo rted machinery and equipment sold to in-
zone enterprises by firms in areas where tariff is leviable. Therefore, it is not possible to
determine what, if any, trade effects m ay result from this subsidy regulation.WT/ACC/TPKM/8/Rev.2
Page 8
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 cert ain 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 (herein after   referred to as the "SUI"),
Article 6.
The SUI was promulgated on December 29,1990 and amended on January 10, 1995, and
will cease to be effective on December 31, 1999.
(b) Responsible authorities:
Companies are required to obtain a certifi cate from the relevant government agency
before they can apply for the tax credits wi th the tax collection  authorities.  The
government agencies involved for the issuance of such certificates are as follows:
i. For the manufacturing industry and technical services industry: The Industrial
Development Bureau of the Ministry of Economic Affairs("MOEA");
ii. For energy saving: The Energy Commission, Ministry of Economic Affairs;
iii. For the construction industry: The Construction & Planning Administration,
Ministry of the Interior;
iv. For the wholesale industry: The Commence Department, MOEA
v. For agricultural industry: The Council of Agriculture, Executive Yuan.
vi. 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 twenty percent 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 reclam ation of resources and/or pollution control;WT/ACC/TPKM/8/Rev.2
Page 9
(c) investment in the equipment for energy savi ng 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
per cent) of the amount of corporate income tax le vied in the then current year.  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 ca tegories, are eligible for the tax credit;
therefore, the support should not be specific wi thin 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 forprocurement of domestically manufactured equipment for pollution control is 20 per cent, and
10 per cent for foreign manufactured equipment.  The discrepancy of the rate of investment
credit between domestic and foreign equipmen t 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/Rev.2
Page 10
(Unit:  thousand NT)
FY 1997 FY 1996 FY 1995
No. of Cases Amount of Tax
ReductionNo. of Cases Amount of Tax
ReductionNo. of Cases Amount of Tax
Reduction
Investment credit for procurement offoreign manufactured equipment for
Automation2,164 3,613,817 3,489 2,471,107 2,269 2,149,039
Investment credit for procurement of
domestically manufacturedequipment for automation14,371 4,809,894 953 1,847,189 770 1,810,162
Investment credit for procurement of
domestically manufactured
equipment for pollution control458 245,370 155 263,808 133 207,732
Investment credit for procurement of
foreign manufactured equipment for
pollution control77 70,558 49 60,557 39 48,963WT/ACC/TPKM/8/Rev.2
Page 11
1. Title of the programme
     Tax deduction for self-designed components of automobile  automobiles and motorcycles
using domestic design of certain automobile and motorcycle components
2. Policy objective and/or purpose
The primary goal of the incentive is to encourage self  domestic  design, research and
development capability of  automobiles, motorcycles and their components.
3. The date of establishment of the programme
The programme commenced in 1984.
4. Background and responsible authorities
(a) Law:
             Statute for Commodity Tax, Paragraph 2, Article 12(b) Responsible authorities:
- Ministry of Economic Affairs (MOEA)
- Ministry of Finance (MOF)
5. Form
For the self-designed components of the automobile (vehicle engines, bodies or chassis) a
review will be conducted by the relevant expe rts commissioned by the MO EA and the MOF. Upon
their approval, each item may enjoy a 3 per cent commodity tax reduction.
Automobiles and motorcycles using domestic design of certain components may enjoy
commodity tax deduction.
6. To whom and how assistance is provided
In order to upgrade the independent auto-design capability of Chinese Taipei, the vehicle
engines,  bodies or chassis designed by its domestic companies may, from the time the first vehicle is
out of factory, enjoy a 3 per cent commodity tax reduction, upon the review and approval of the
relevant experts, the MOEA and the MOF.
In order to upgrade the automobile and motorcycle design capability of Chinese Taipei,
upon review and approval by the MOEA and the MOF, automobiles using domestic designed
engines, chassis or bodies, for each of the used  item, the automobiles will, from the date the
model rolls out, enjoy a 3 per cent commodity tax deduction for a period of 4 years. In addition,
motorcycles using self-developed brand and domestic designed engines, frames and models
certified by the MOEA, may enjoy a 3 per cent commodity tax deduction for a period of 3 years
from the date the model rolls out.WT/ACC/TPKM/8/Rev.2
Page 12
7. Amount
FY1995 FY1996 FY1997
No. of Case Amount of Tax
ReductionNo. of Case Amount of Tax
ReductionNo. of Case Amount of Tax
Reduction
3 425,607 3 340,192 3 264,868
Unit: thousand NT
FY 1995 FY 1996 FY 1997
Domestic Design
of ComponentsNo. of
casesAmount of Tax
ReductionNo. of
casesAmount of Tax
ReductionNo. of
casesAmount of Tax
Reduction
Body ofAutomobile1 86,371 2 49,172 2 21,534
Chassis and
Body of
Automobile2 339,260 1 289,184 1 242,525
The Frame,
Engine and Body
of Motorcycle12 264,475 10 217,601 11 121,032
Total 15 690,106 13 555,957 14 385,091
8. Duration
Chinese Taipei will repeal the tax incentive provided for domestic design and use of
automotive parts  the relevant provisions of its law related to the tax incentive provided for
automobiles & motorcycles using domestic desi gn of components, specifically, the engine,
chassis (or frame) and body by December 31, 2000. Chinese Taipei will not expand the programme
through, for example, increasing the parts  components  covered or the amount of the incentive. In
addition, the grant of incentives to additional co mpanies will be limited to the extent permitted by
Chinese Taipei’s law.
9. Trade effects or related statistical data
Take FY 1997 for example, the production value of whole vehicles  automobiles  in Chinese
Taipei was NT$200.3 billion. The reduced commodity tax was NT$ 264,868,000,  385,091,000  which
was 0.19 per cent of the yearly motor vehicles production value.
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