. /.   WORLD TRADE  
ORGANIZATION  G/SCM/Q2/TPKM/10 
2 April 2008 
 (08-1454) 
Committee on Subsidies  
and Countervailing Measures Original:   English 
 
 
SUBSIDIES  
 
Reply to Question Posed by TURKEY1 Regarding the New and Full  
Notification of the SEPARATE CUSTOMS TERRITORY OF  
TAIWAN, PENGHU, KINMEN AND MATSU2 
 
 
 The following communication, dated 31 March 2008, is being circulated at the request of the Delegation of the Separate Customs Territory  of Taiwan, Penghu, Kinmen And Matsu.   
 
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  Tax Credits or Tax Exemptions for Designated Enterprises 
 
Question  
Could the Seperate Customs Territory of Taiwan, Penghu, Kinmen and Matsu provide 
industrial distribution of the companies benefited from the program?    
Reply
 
  We notice that there are two programmes stipul ated under Tax Credits of Tax Exemptions for 
designated Enterprises:  (1) Five-year tax exemption for the emerging, important and strategic 
industries ;  (2) Tax credit for investment in a disadvantaged region .  Therefore, we will try to respond 
to this question according to each programme, respectively.     As to the Five-year tax exemption for the emergi ng, important and strategic industries , we 
defined the scope of "emerging, important, and strategic industries" as industries comprising 
the "3Cs" (computer, communication and consumer electronics), precision electronic devices, 
precision machinery equipment, aerospace, biotechnol ogy and specialty chemicals, green technology, 
advanced materials, nanotechnology, and technical ser vice industries.  Applications are granted on the 
basis of competitive criteria such as (1) Emerging i ndustries (products):  there should be no domestic 
production or domestic production shou ld still be in the new technology product stage.  (2) High 
externalities (spillover):  the industry must engage  in a high level of research, development, and 
technological innovation due to the short product lif e cycles, various risks, and the difficulty of 
commanding key technology;  and the spillover fr om its products or services must benefit other 
economic agents.  (3) International competitive effect:  the industry should be one in which 
international competitor countries provide general tax incentives, thus requiring Chinese Taipei to 
offer comparable incentives to upgrade competitiv eness.  (4) No incentives provided under current 
laws:  duplicate incentives should be avoided in i ndustries that already receive tax incentives under 
current laws.    
                                                     
 
1 G/SCM/Q2/TPKM/8.   
2 G/SCM/N/155/TPKM.   G/SCM/Q2/TPKM/10 
Page 2  
 
   Regarding Tax credit for investment in a disadvantaged region , we have already stated in our 
Notification (page 23, G/SCM/N155/TPKM) that "Any company incorporated under the Company 
Law, which makes an investment in a region with scant natural resources or with slow development, 
may gain credits of up to 20 per cent of the tota l amount of its investment against the corporate 
income tax levied in the then current year, provide d it meets the threshold of capital or the threshold 
number of employees", and there is huge potential of the applications.  Therefore, we are unable to 
provide the statistics of industrial distribution of companies benefited from this programme.   
  
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