RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/ACC/SPEC/TPKM/8/Add.1 
6 May 1999 
 (99-1822) 
Working Party on the  
Accession of Chinese Taipei Original:   English 
 
 
 
ACCESSION OF CHINESE TAIPEI 
 
Responses to questions concerning document WT/ACC/TPKM/8 and 9  
 
Addendum  
  The following additional responses to questions raised by members concerning document WT/ACC/TPKM/8 and 9 (regarding notifications) have been received from the Representation of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (hereinafter referred to 
as "Chinese Taipei"). 
 
_______________ 
 
 A. TAX CREDITS OR TAX EXEMPTIONS FOR DESIGNATED ENTERPRISES 
 
Five-year Tax Exemption for Designated Enterprises  
Question 1. 
 
Assistance under this programme is applied to "an important technology-based enterprise" or 
"an important invested enterprise".  What is the definition of such enterprises? 
 
Answer: 
 
 To qualify for "important technology-based enterprises", the following three criteria 
should be met: 
  (i) products to be produced under the investment plan should belong to the ten 
emerging industries; 
 
 (ii) the paid-in or increased paid-in capital for the investment plan should be over 
NT$ 200 million, and 
  (iii) the amount of the fund available for the purchase of brand-new 
machinery/equipment in the investment plan should be over NT$100 million. 
 
 "Important invested enterprises" include enterprises in the manufacturing as well as services industries.  In other words, the products to be produced under the investment plan are not limited to those of the ten emerging industries.  The criteria for paid-in or increased paid-in capital and the amounts of funds for purchasing brand new equipment/machinery are different from industry to industry: WT/ACC/SPEC/TPKM/8/Add.1 
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Unit:  NT $ billion 
Industries Paid-in capital $ or increased 
paid-in capital $ Machinery purchase $ 
Manufacturing 2 2 
Shopping mall 2 2 
Transportation 2 2 
Audio-visual service 0.2, 0.3, 0.6 or 1.2 for different 
enterprises 0.2, 0.3, 0.6 or 1.2 for different 
enterprises 
  Tax Credits for the Creation of Internationally Recognized Brands  
Question 2. 
 
Could the representative for Chinese Taipei explain why no amount is available for this 
programme?  To what extent has the programme been used?  Answer:  
The statistics of tax credits for the creation of internationally recognized brands are as follows: 
 
Year No. of Cases Tax Deduction Amount 
1994 16 16,304 
1995 31 31,574 
1996 34 18,987 
Total 81 66,865 
 
 Tax Deduction for Self-designed Automobile Components  Question 3.  Is the purpose and/or effect of this programme  to replace imported goods with domestically-
produced goods?  
Answer: 
 
 This measure is intended to encourage self-design of automotive engine, body and 
chassis, rather than import substitution.   
B. LOANS FOR SMALL AND MEDIUM ENTERPRISES (SME'S) 
 Specific and urgent financing and loans intended for promoting competitiveness, for plant site relocation, for working capital needed during periods of economic crisis and recession, and for recovery plans from damage caused by major natural disasters.  WT/ACC/SPEC/TPKM/8/Add.1 
 Page 3 
 
 
Question 4. 
 Could the representative for Chinese Taipei pl ease clarify the dates provided in question 2 
"period covered by the notification" for this programme.   
Answer: 
 
 The period covered by the notification is fiscal years 1995-1997 (July 1994 to June 1997). 
 
Question 5. 
 
Please explain what criteria are used in deciding to provide urgent financing for the provision of 
working capital during periods of significant financial crisis and recession?  Answer: 
  The pretext of applying for urgent financing of working capital is when the "Taiwan 
economic indicator" has revealed the "blue light*", i.e. signs of economic recession for nine consecutive months.  (* The Taiwan economic indicator uses four colours – red, yellow, green and blue – to illustrate 
the strength of the economy.  The different colours indicate different economic strength.  Each 
colour refers to a threshold number calculated from statistics, such as money supply, loans/credits, negotiable instruments paid through the clearing-house, stock and shares index and so forth.  When the number is below 16, the economy is predicted to be sliding into recession, this is when the economic indicator reveals the blue light.) 
 
Specific Loans for Mutual Cooperation  
Question 6. 
 What type of "mutual cooperation" is envisaged by this programme? 
 
Answer:  
 "Mutual cooperation" envisaged by this program refers to two or more small and 
medium enterprises implementing cooperation plans approved by a review group.  The types of 
mutual cooperation include, among others, R&D, marketing/distribution network, purchasing, 
accepting orders.  The review group consists of representatives from relevant government agencies, academics and industries, and is responsible for reviewing the feasibility of the applied plans.   
C. DUTY AND TAX EXEMPTIONS GRANTED TO ENTERPRISES LOCATED 
WITHIN A DESIGNATED ZONE 
 Duty and Tax Exemptions for High-technology Industries  Question 7.  The program on pages 14 and 15 (WT/ACC/TPKM/9) Duty and tax exemptions for in-zone enterprises would appear to be an export subsidy.   These appear to be special areas for export 
purposes where duty and tax exemptions go beyond the allowed exemption of import charges WT/ACC/SPEC/TPKM/8/Add.1 
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and indirect taxes borne by the like product or inputs consumed in the production process.  
Could Taiwan explain why these are not being repealed?  Answer:  
 In 1997, the Statute for Establishment and Administration of Exporting Processing 
Zones was amended.  After the amendment, export performance is not a condition on the producers located in the zone.  The program thus does not constitute export subsidy and does not need to be cancelled.  Question 8.  Are foreign-owned companies eligible  for assistance under this programme? 
 
Question 9. 
 
What sectors benefit from this programme?  Question 10.  Why are amounts not available for this pr ogramme?  When will amounts be available? 
 
Answer:  
 The Statute for the Establishment and Administration of a Science-Based Industrial 
Park does not discriminate against foreign-owned firms.  As long as a firm is a Park enterprise, 
it is eligible for the assistance under the program. 
  Up to the end of year 1997, there were 245 companies admitted to the Park, 202 local firms and 43 foreign firms.  By sector, there were 96 integrated circuit companies, 44 computer peripheral companies, 37 telecom companies, 35 opto-electronics companies, 18 precision machine companies, and 15 biotechnology companies.  All of these companies are eligible for the 
assistance, no distinction between firms in different industries, between export and local sales, 
nor between foreign and domestic firms.   For statistics relating to this program, please refer to Attachment VII.  
D. RESEARCH AND DEVELOPMENT 
 
Question 11. 
 What is the duration of this programme?  
Answer: 
 
 The program was implemented from 1991 and its not subject to a particular fixed end 
date.  Question 12.  Is the assistance provided under this programme in conformity with Article 8 of the Agreement on Subsidies and Countervailing Measures?  If  not, what plans are there to bring the 
programme into conformity?  WT/ACC/SPEC/TPKM/8/Add.1 
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Answer:  
 Chinese Taipei amended its "Measures for Assistance in the Development of New 
Leading Products" (hereinafter, "Measures") in 1995, so as to conform to Article 8 of the SCM 
Agreement which provides that assistance for research activities should not exceed 50% of the 
costs of pre-competitive development activity.  Following this amendment, Article 10 of the Measures provides that the total amount of grant and interest-free loan to be allocated to a leading product development plan shall be limited to not more that 50% of the total amount of the budgeted development costs.  Therefore since 1995, the program already fully complies with 
the relevant provisions of the SCM Agreement. 
 
Question 13.  Please provide a breakdown of the assistance provided in the form of grants versus that 
provided in the form of interest-free loans. 
 Answer:  
 Expenditure on R&D Assistance for the Ten emerging industries: 
 
1. Since the programme's inception, the accumulated grant is NT$5,266,646,560 as at the 
end of fiscal year 1998 (fiscal years 1992-1998) and the accumulated interest-free loan is NT$5,484,898,090.  2. For fiscal year 1998:  NT$882,038,000** of grant and interest free loan respectively.  A 
breakdown of the products involved is as follows: 
 
Name of Project (or Sector) Grant Interest-free loan 
Precision machinery and automation 214,938 214,938 
Communication 69,230 69,230 
Information 40,670 40,670 
Consumer electronics 177,460 177,460 
Aerospace 0 0 
Medical and health care 0 0 
Pollution control 0 0 
Advanced materials 59,700 59,700 
Semi-conductors 36,250 36,250 
Specialty chemicals and pharmaceuticals 223,790 223,790 
Total 882,038 882,038 
Note:  
*  In addition to the repayment of the interest-free loan, a manufacturer who received assistance from the 
program is also required to pay a feedback contribution in an amount equal to 1% to 4% of its sales derived 
from the sale of the newly developed products. 
**   Exchange rate on June 1998 is USD1=NT$34.39 
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