WORLD TRADE  
ORGANIZATION  G/SCM/N/155/TPKM/Corr.1 
2 April 2008 
 (08-1455) 
Committee on Subsidies  
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
New and Full Notification Pursuant to Article XVI:1of  
the GATT 1994 and Article 25 of the Agreement  
on Subsidies and Countervailing Measures  
 
THE SEPARATE CUSTOMS TERRITORY OF TAIWAN,  
PENGHU, KINMEN AND MATSU 
 
Corrigendum  
   Please take note of the following changes indicated in bold type face  below and on pages 21, 
23, 27 and 33 of the original document (G/SCM/N/155/TPKM).    G/SCM/N/155/TPKM/Corr.1 
Page 2  
 
  III. INDUSTRY 
A. T
AX CREDITS OR TAX EXEMPTIONS FOR DESIGNATED ENTERPRISES  
1. Five-year tax exemption for the emergi ng, important and strategic industries  
1. Title of the programme  
 
 Five-year tax exemption for the emerging,  important and strategic industries.   
 2. Period covered by the notification
 
  Fiscal years 2005-2006 .   
 
3. Policy objective and/or purpose
 
  The primary goal of the tax incentives is to promote the development of hi-tech and high 
value-added industries.   
 
4. Background and responsible authority
 
  (a) Law and regulation:     1999 amendment to the Statute for Upgradi ng Industries (the SUI), Article 9 on five-
year tax exemption.   
 
 (b) Authorities:     The Industrial Development Bureau, the Ministry of Economic Affairs and the 
Ministry of Finance.   
 
Note
:  The SUI was promulgated on 29 December  1990, and amended on 10 January 1995, 
31 December 1999, and 6 February 2003.    5. Form
 
  Tax exemption.   
 
6. To whom and how assistance is provided
 
  An emerging, important and strategic industry w ithin two years of its start-up date, may apply 
for payment of the capital contributions by its sharehol ders and, with the approval of its shareholders 
meeting, to be exempted from corporate income tax.   
  To qualify as an "emerging, important and strategic industry", the following three criteria should be met:  (1) products to be produced under th e investment plan should belong to the emerging, 
important and strategic industry;  (2) the paid-in or  increased paid-in capital for the investment plan 
should be more than NT$ 200 million;  and, (3) the funds available for the purchase of brand-new 
machinery/equipment in the investment plan should be in excess of NT$ 100 million.   
  In the case of a newly incorpor ated enterprise, the tax exemption is for a period of five 
consecutive years from the date on which it begins to  market its products or to render services.   
 
 In the case of the expansion of an existing en terprise, the exemption applies to the corporate 
income tax levied on the increased income derive d as a result of such expansion for a period of 
five consecutive years from the date the newly-added equipment starts to operate or the rendition of  G/SCM/N/155/TPKM/Corr.1 
 Page 3 
 
 
  services begins;  provided, however, that the exempti on applies only to an expansion in the form of 
the establishment of additional independent producti on or service units, or to an increase in major 
production or service equipment.     An eligible enterprise applying the tax exempti on may, within two years of the date on which 
it starts to market its products or to render service s, defer, at its own discretion, the commencement 
date of the tax exemption period.  The maximu m period for such deferment is four years.  
Furthermore, the commencement date of such deferre d tax exemption period should be the beginning 
date of a fiscal year.    
7. Amount
 
   Unit:  thousand NT$ 
Fiscal Year 2005 Fiscal Year 2006 
491,083 6,305,539 
 8. Duration
 
  The programme was initiated in the year 2000.  Chapter 2 of the SUI concerning tax benefits 
will expire in 2009.    
9. Trade effects or related statistical data
 
  In light of the scope and nature of the progra mme, it is not yet possible to determine what, if 
any, trade effects may result from this programme.    2. Tax credit for investment in a disadvantaged region 
1. Title of the programme
 
  Tax credit for investment in a disadvantaged region.    2. Period covered by the notification
 
 
 The fiscal years 2005-2006 .   
 3. Policy objective and/or purpose
 
 
 With the overall objective of achieving bala nced economic growth within the Separate 
Customs Territory of Taiwan, Penghu, Kinmen and Ma tsu, the aim of the tax credit programme is to 
encourage investment in disadvantaged geographic regions.    4. Background and responsible authorities
 
 
 (a) Law and regulation:  Statute for Upgr ading Industries (the SUI), Article 7.   
  (b) Responsible authority:     The Industrial Development Bureau , Ministry of Economic Affairs 
 
Note
:  The SUI was promulgated on 29 December  1990, and amended on 10 January 1995, 
31 December 1999, and 6 February 2003.   G/SCM/N/155/TPKM/Corr.1 
Page 4  
 
  5. Form
 
  Tax credit against corporate income tax.    6. To whom and how assistance is provided
 
 
 Any company incorporated under the Company La w, which makes an investment in a region 
with scant natural resources or with slow developm ent, may gain credits of up to 20 per cent of the 
total amount of its investment against the corporat e income tax levied in the then current year, 
provided it meets the threshold of capital or the threshold number of employees.  If the amount of 
corporate income tax levied in that year is less than  the tax credit, the balance of the tax credit may be 
applied against the corporate income tax levied in the ensuing four years.   
  The "county or township areas with scanty natu ral resources or slow development" referred to 
in Article 7 of the SUI, with the exception of the villages in Kinmen County, Lien-chiang County, 
Penghu County, and the Lanyu Village  and the Green Island Village of Taitung County, as well as 
Ryukyu Village of Pingtung County, must satisfy  either of the following requirements:   
  (a) A village in the first eight (8) counti es as arranged in sequence based on the aggregate 
score of each of the 16 counties, from the lowest to the highest, as calculated on the 
basis of the following ten index items available in the preceding two years:  
population growth rate, society increase ra te, proportion of secondary and tertiary 
workers to total employed population, ta x revenue, average regular income of each 
household, proportion of urba n population to total population, availability of tap 
water supply, availability of telephone to every one hundred households in the city, 
highway density, and number of educational facilities of college level or higher.   
 
 (b) A village whose average c onsolidated income filed in the last three years fell within 
the lower half of all the average national consolidated incomes filed by all villages 
island-wide in the same period.   
  The threshold capital means the total amount used in procuring brand-new machinery, 
equipment and building aggregates up to NT$ 25 million.  The term minimum number of employees 
means the monthly average of the number of newl y employed employees in a full year, amounting to 
fifty (50) persons or more.     The criteria used by the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu 
are more stringent than those under Article 8 of  the SCM Agreement.  The main reason for the 
adoption of factors other than the two economic indi cators prescribed by the SCM Agreement is that 
these criteria reflect the real condition of scant r esources and the slow economic development in the 
areas concerned.  If the SCM index were applied,  more regional zones would be eligible for tax 
credits.    
7. Amount
 
   Unit:  thousand NT$.   
FY 2005 FY 2006 
10,239,049 19,699,144 
 
8. Duration  
  The programme was initiated in 1990 and Chapte r 2 of the SUI concerning tax benefits will 
expire in 2009.    G/SCM/N/155/TPKM/Corr.1 
 Page 5 
 
 
  9. Trade effects or related statistical data  
  In light of the scope and nature of the progra mme, it is not yet possible to determine what, if 
any, trade effects may result from this programme.   G/SCM/N/155/TPKM/Corr.1 
Page 6  
 
  B. L
OANS – LOANS FOR SMALL AND MEDIUM -SIZED ENTERPRISES (SME S) 
LOANS FOR PRIVATE ENTERPRISES  
 
3. Loans for small and medium-sized enterprises and private enterprises 
1. Title of the programme  
 
 Loans for small and medium-sized en terprises and private enterprises.   
 2. Period covered by the notification
 
 
 The fiscal years 2005  and 2006.   
 3. Policy objective and/or purpose
 
  The programme is implemented with the purpose of improving production technology and 
product quality, promoting industria l upgrading and to assist in the upgrading of small and medium-
sized enterprises and private enterprises.    4. Background and responsible authorities
 
  (a) Law and regulation:   
  The Statute for Upgrading Industries (the SUI), sub-paragraphs (2) and (3), 
paragraph 1 of Article 21.   
  (b) Authorities:     The guidelines for the loan programme are produced by the Development Fund.   
 
5. Form
 
  Loans:  each loan is provided by the Development Fund (25 per cent) and the bank 
(75 per cent).  
6. To whom and how assistance is provided
 
  The loans are available to all enterprises and are not limited to a specific industry or 
enterprise.    
7. Amount
 
  There are no official statistics with respect to the programme.    8. Duration
 
 
 The projects will be implemented until the expiration of the SUI.   
 9. Trade effects or related statistical data
 
  (a) Trade effects: 
 
 The programme is mainly used to promote industry upgrading.  In light of the scope and 
nature of the programme, it is not possible to dete rmine what, if any, trade effects may result.   
  G/SCM/N/155/TPKM/Corr.1 
 Page 7 
 
 
   (b) Related statistical data:   
 
Total amount of loans granted in 2005  
 
Name of Project Number of granted casesTotal amount of granted 
loans 
(hundred million NT$) 
Loans to assist in the upgrading of small and medium-sized enterprises 963 80.81 
 
Total amount of loans granted in 2006  
 
Name of Project Number of granted casesTotal amount of granted 
loans 
(hundred million NT$) 
Loans to assist in the upgrading of small and medium-sized enterprises 903 77.61 
 G/SCM/N/155/TPKM/Corr.1 
Page 8  
 
  IV. RESEARCH AND DEVELOPMENT 
A. F
UNDS GRANTED FOR DEVELOPMENT OF PRODUCTS OF THE NEW LEADING INDUSTRIES  
1. Title of the programme  
  Grants for development of products of the new leading industries.   
 
2. Period covered by the notification
 
  The fiscal years 2005  and 2006.   
 
3. Policy objective and/or purpose
 
  In order to encourage research and devel opment on new leading products and upgrade the 
technical capability of the leading newly-emerging industries, the programme grants funds for private enterprises.   
 
4. Background and responsible authorities
 
  (a) Law and regulation:     Measures for Assistance in the Development of New Leading Products was 
promulgated on 26 April 1991 and amended on 30 June 1995, 27 November 2002, 
23 July 2003, and 20 October 2005.   
  (b) Authority:     The Industrial Development Bureau, Ministry of Economic Affairs.   
 
5. Form
 
  Grant.    6. To whom and how assistance is provided
 
 
 (a) Any company incorporated under the Co mpany Law with sound financial standing, 
whose book value is over 50 per cent of the cap ital, never having record of refusal or 
bounced cheque of the bank and possessing a research and development department with sufficient R&D specialists in the Sepa rate Customs Territory of Taiwan, Penghu, 
Kinmen and Matsu, may apply for the assist ance fund relating to the development of 
a product within the scope of the "emerg ing, important and strategic industry".
1  The 
product should possess great market potential and its core technology should surpass 
the current level of domestic industrial t echnology.  Besides, products within the 
scope of the "Digital Content Industry", and whose innovative content reaches the 
level of international-class products, are also  eligible for the use of the measures.   
 
 (b) The assistance funds granted are a total of no more than forty percent (40 per cent) of 
the amount of the following expenses incurred exclusively for the development of new leading products:   
  1. Costs incurred for full-time and/ or part-time research personnel;   
 2. Costs of consumable instruments and raw materials;   
 3. Costs for use and maintenance of R&D equipment;   
                                                     
 
1 See page 23 for the definitions of the "emerging, important and strategic industry".    G/SCM/N/155/TPKM/Corr.1 
 Page 9 
 
 
   4. Costs for technology transfer;  and 
 5. Domestic and overseas travel expenses.    7. Amount
 
 
 (a) Since the programme's inception, th e cumulative amount of grant stands at 
NT$ 11,020,281,360 at the end of fiscal  year 2006 (fiscal years 1992-2006). 
  (b) For the fiscal year 2005 :  the amount of grant was NT$ 529,269,000 .  A breakdown of 
the products involved is shown below:   
 
  Unit:  thousand NT$ 
Name of Project (or Sector) Grant 
Precision machinery and automation 142,624 
Communication 55,523 
Information 149,242 
Consumer electronics 99,800 
Medical and health care 8,280 
Advanced materials 45,100 
Specialty chemicals and pharmaceuticals 16,700 
Pollution Prevention 12,000 
Total 529,269 
 
 (c) For the fiscal year 2006:  the amount of grant was NT$ 929,750,000.  A breakdown 
of the products involved is shown below:   
   Unit:  thousand NT$ 
Name of Project (or Sector) Grant 
Precision machinery and automation 269,350 
Communication 150,690 
Information 250,360 
Consumer electronics 57,690 
Medical and health care 72,730 
Advanced materials 61,580 
Semi-conductors 13,500 
Specialty chemicals and pharmaceuticals 37,530 
Aerospace 16,320 
Total 929,750 
 
8. Duration  
 
 There is no time-limit attached to the programme.    9. Trade effects or related statistical data
 
  It is not yet possible to determine what, if any, trade effects may result from this subsidy 
programme.   
  
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