RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/TPKM/9
29 June 1998
(98-2573)
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 25 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 Ma tsu with the request that it be circulated to
members of the Working Party.
_______________
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 XVI
of the General Agreement on Tariffs and Trade (GATT) 1994 and Article 25 of the Agreement on
Subsidies and Countervailing Measures (hereinafter referred to as the "Agreement").
Article 25 of the Agreement requires the notification of specific subsidies.  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."
In light of Article 25.7 of the Agreement, and the fact that the purpose of the notification
requirement is to achieve greater transparency, Chinese Taipei has included certain measures in this
notification which arguably are not "specific subsidies" within the meaning of the Agreement.  It may
also be that not all the subsidies listed hereunder, meet the requirement of specificity.  The evaluation
of trade effects, if any, also poses a difficult task.
While Chinese Taipei has made considerable efforts to submit a comprehensive notification,
there may still be room for supplementation through experience accumulated by reference to
Members' practices and comments and the Committee's review of notifications submitted by
Members.WT/ACC/TPKM/9
Page 2
Notification pursuant to Article XVI.1 of the GATT 1994 and Article 25 of the Agreement on
Subsidies and Countervailing Measures.
Contents
A. TAX CREDITS OR TAX EXEMPTIONS FOR DESIGNATED ENTERPRISES
(i) Five-year tax exemption for designated enterprises;
(ii) Accelerated depreciation against fixed assets;
(iii) Tax credits for the creation of internationally recognized brands;
(iv) Tax deduction for self-designed components of automobiles.
B. LOANS FOR SMALL AND MEDIUM ENTERPRISES
(i) 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;
(ii) Medium and long term loans for product marketing and loans for overseas investment
and construction projects;
(iii) Specific loans for mutual cooperation
C. DUTY AND TAX EXEMPTIONS GRANTED TO ENTERPRISES LOCATED WITHIN A DESIGNATED
ZONE
(i) Duty and tax exemptions for high-technology industries;
(ii) Duty and tax exemptions for in-zone enterprises.
D. RESEARCH AND DEVELOPMENT
(i) Fund granted for development of products of the ten new leading industries,WT/ACC/TPKM/9
Page 3
A. TAX CREDITS OR TAX EXEMPTIONS FOR DESIGNATED ENTERPRISES
1. Title of the programme
Five-year tax exemption for designated enterprises.
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 incentives is to promote the development of hi-tech and high
value-added industries.
4. Background and responsible authority
(a) Laws:
- 1995 amendment to the Statute for Upgrading Industries, Article 8(1) on five-year tax
exemption;
(b) Responsible authority:
The responsible authorities are the Industrial Development Bureau, the Ministry of Economic
Affairs;  and the Ministry of Finance.
Note: The SUI was promulgated on 29 December 1990, followed by an amendment on
10 January 1995, and will cease to be effective on 31 December 1999.
5. Form
Tax exemption.
6. To whom and how assistance is provided
An important technology-based enterprise or an important invested enterprise may apply
within two years from the beginning date for paym ent of the capital contributions by its shareholders
and with the approval of its shareholders meeting, to be exempted from corporate income tax.
In the case of a newly incorporated 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 enterprise, the exemption applies to the corporate
income tax levied on the increased income derived 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
services begins; provided, however, that the exemption applies only to an expansion in the form of the
establishment of additional independent production or service units, or for increase of major
production or service equipment.
An eligible enterprise applying the tax exemption may, within two years from the date on
which it starts to market its products or to render services, defer, at its own discretion, the
commencement date of the tax exemption period.  The maximum period of such deferment is four
years.  Furthermore, the commencement date of such deferred tax exemption period should be thebeginning date of a fiscal year.WT/ACC/TPKM/9
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7. Amount
While the programme was passed by the Legislative Yuan in 1995, the relevant enforcement
rules were not announced by the Executive Yuan until 31 January 1996. Furthermore, it normally
takes two to three years, or longer, from the enterp rise’s proposal of investment to the sale of the
products. Therefore, there is no official statistics so far with respect to the Programme.
8. Duration
The programme was initiated in 1995.  The Statute for Upgrading Industries will expire in
1999,at which time Chinese Taipei will conduct a  review of the Programme.
9. Trade effects or related statistical data
In light of the scope and nature of the programme, it is not possible to determine what, if any,
trade effects  may result from this programme.WT/ACC/TPKM/9
Page 5
1. Title of the programme
Accelerated depreciation against fixed assets.
2. Period covered by the notification
Fiscal years 1995-1997 (July 1994 to June 1997).
3. Policy objective and/or purpose
The measure is intended to encourage structural adjustment by labour-intensive industries
through automation of their operation.
4. Background and responsible authorities
(a) Laws :
Statute for Upgrading Industries (hereinafter referred to as the “SUI”) Sub-paragraph (2),
Paragraph 1 of Article 5.
(b) Responsible authorities:
- the Industrial Development Bureau, Ministry of Economic Affairs;
- Ministry of Finance.
Note: The SUI was promulgated on 29 December 1990 and an amendment on 10 January 1995, and
will cease to be effective on 31 December 1999.
5. Form
Accelerated appreciation against profit-seeking enterprise income tax.
6. To whom and how assistance is provided
In order to facilitate the adjustment of industrial structure and improvement of the economic
scale of operation and process of production, companies which are incorporated pursuant to the
Company Law and belong to the designated industries can have the service life of their machinery and
equipment accelerated by one-half of the number of years set forth under the Income Tax Law.  If the
period so derived is short of a full year, the portion short of a full year should not be counted.
In case of under-depreciation during the accelerated service life, asset depreciation may
continue for one year or several years within the service life of such asset as specified by the Income
Tax Law until permissible depreciation is fully made.
The scope of industries eligible for this tax benefit and the duration of the measure is
prescribed by the Executive Yuan and subject to review once every two years.
7. Amount
The Programme has never been operational because the scope of the “specifically designated
industries” has not been defined by Chinese Taipei since the promulgation of this provision; also, it is
because the current Schedule of Fixed Assets Service Life has been constantly adjusted downward byWT/ACC/TPKM/9
Page 6
the Ministry of Finance. As a result, there has been no application for the tax benefit under the
Programme.
8. Duration
The programme was initiated in 1991. The Statute for Upgrading Industries will expire in
1999 at which time Chinese Taipei will conduct a review of the Programme.
9. Trade effects or related statistical data
In light of the scope and nature of the programme, it is not possible to determine what, if any,
trade effects which may result from this programme.WT/ACC/TPKM/9
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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 (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:
- Industry Development Bureau, Mi nistry 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 internat ionally recognized brands are eligible for tax
credit.  Up to 15 per cent of expenditure spent for promoting in the 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 income tax payable for that year; if such total expenditure
reaches NT$5,000,000 and “Taiwan Exquisite Product Ma rk” authorized by MOEA is used with the
brand, 15 per cent of the total expenditure may be deducted from the income 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.
7. Amount
Not available.
8. Duration
The programme was initiated in 1991 and will terminate when the Statute expires.WT/ACC/TPKM/9
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9. Trade effects or related statistical data
In light of the scope and nature of the programme, it is not possible to determine what, if any,
trade effects which may result from this programme.WT/ACC/TPKM/9
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1. Title of the programme
Tax deduction for self-designed components of automobile.
2. Policy objective and/or purpose
The primary goal of the incentive is to encourage self design of automobiles and establish
research and development ability of the automobile industry.
3. The date of establishment of the programme
The programme was commenced in 1984.
4. Background and responsible authorities
(a) Law:
- Statute for Commodity Tax Article 12.II.
(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 MOEA and the MOF.  Upon
their approval, each item may enjoy a 3 per cent commodity tax reduction.
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 therelevant experts, the MOEA and the MOF.
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
8. Duration
Chinese Taipei will repeal the tax incentive provided for domestic design and use of
automotive parts by 31 December 2000. Chinese Taipei will not expand the programme through, forexample, increasing the parts covered or the amount of the incentive and the grant of incentives to
additional companies will be limited to the extent permitted by Chinese Taipei’s law.WT/ACC/TPKM/9
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9. Trade effects or related statistical data
Take FY 1997 for example, the production value of whole vehicles in Chinese Taipei was
NT$154.1 billion.  The reduced commodity tax was NT$264,868,000, which was 0.17 per cent of the
yearly auto production value.WT/ACC/TPKM/9
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B. LOANS FOR SMALL AND MEDIUM ENTERPRISES (SME S)
1. Title of the programme
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.
2. Period covered by the notification
Fiscal years 1995-1997 (May 1992 to June 1998).
3. Policy objective and or/purpose
The qualified SMEs which meet the following conditions are entitled to apply for the
financing and loans:
Specific financing is provided for management plans to enhance competitiveness, expand
research and development, prevent environmental contamination, invent new products, and upgrade
product quality and so on.
Urgent financing is provided for the provision of working capital during periods of significant
financial crisis, recession, and major natural disasters.
The loans are provided for helping enterprises restructure during periods of economic crisis
and recession, replace machinery, and purchase new automated equipment.
4. Background and responsible authorities
(a) Laws:
- Statute for the Development of SMEs (Articles 9,15,16,17,18);
- Regulation for Collection and Payment, Mana gement and Operation of the Fund for the
Development of SMEs;
- The Fund for the Development of SMEs was established Based on Article 9 of Statute for the
Development of SMEs.
(b) Responsible authorities:
The responsible Ministry is the Ministry of Economic Affairs.
Note: While the SME Development Fund was planned to be NT$12 billion, its accumulated amount
reached "NT$9.1 billion as of the end of fiscal year 1997.
5. Form
Financing and loan.
6. To whom and how assistance is provided
All enterprises which meet the Criteria for  Identification of SMEs set by the Executive Yuan
are eligible for application.WT/ACC/TPKM/9
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The loan granted is shared by the SME Development Fund and other participating banks on a
25/75 per cent basis.  The ceiling interest rate is 1 per cent above the prime rate of Bank of Taiwan.
7. Amount
(Unit: million NT$)
TITLE OF PROGRAMME FY 1994 FY 1995 FY 1996
Specific financing for enhancing competitiveness 922 834 879
Loans for helping enterprises restructure and plant site
relocation1,002 825 578
Urgent financing for the provision of working capital
during periods of significant financial crisis, recession000
Urgent financing for major natural  disasters 111 0 35
8. Duration
The programmes are not subject to any fixed completion date.
9. Trade effects or related statistical data
Given the fact that in Chinese Taipei 98% of enterprises can meet the criteria set by the
Executive Yuan and be termed as SMEs, it is difficult to estimate the trade effects of these
programmes.WT/ACC/TPKM/9
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1. Title of the programme
Medium and long term loans for product marketing, and loans for overseas investment and
construction projects.
2. Period covered by the notification
Fiscal years 1995-1997 (July 1994 to June 1997).
3. Policy objective and or/purpose
Those programmes are implemented with the purpose of providing SMEs with financial
assistance in exploring new markets for their machinery and equipment, in investing and establishing
plants in foreign countries, and in undertaking the overseas contracts for construction projects.
4. Background and responsible authorities
(a) Laws and regulations:
- Statute for the Development of SMEs (Articles 9, 15, 16);
- Regulation for Collection and Payment, Management, and Operation of the Fund for the
Development of SMEs (it is stipulated in Article 9 of Statute for the Development of SMEs).
(b) Responsible Ministry:
The responsible authority is the Ministry of Economic Affairs.
5. Form
Loan.
6. To whom and how assistance is provided
(a) All enterprises which meet the Criteria for  Identification of SMEs set by the Executive Yuan
are eligible to apply.
(b) The approved application for loans are implemented by  commercial banks; however, the
capital needed is provided entirely by the SME Development Fund.
7. Amount
FY 1995 NT$23 million;
FY 1996 NT$157 million;
FY 1997 NT$281 million.
8. Duration of subsidy
The programmes are not subject to any fixed completion date.WT/ACC/TPKM/9
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9. Trade effects or related statistical data
Given the fact that in Chinese Taipei 98 per cent of enterprises can meet the criteria set by the
Executive Yuan and be termed as SMEs, it is difficult to estimate the trade effects of these
programmes.WT/ACC/TPKM/9
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1. Title of the programme
Specific loans for mutual cooperation.
2. Period covered by the notification
Fiscal years 1996-1997 (July 1996 to June 1997).
3. Policy objective and/or purpose
The programme is implemented to encourage SMEs’ prosperity through their mutual
cooperation.
4. Background and responsible authority
(a) Law
- Statute for the Development of SMEs (Articles 7, 9, 25);
- Regulation for Collection and Payment, Management, and Operation of the Fund for the
Development of SMEs.
(b) Responsible authority
The responsible authority is the Ministry of Economic Affairs.
5. Form
Loan.
6. To whom and how assistance is provided
All enterprises which meet the Criteria for Identification of SMEs set by the Executive Yuan
are eligible to apply.
The granted loans are provided by the SME Development Fund and other undertaking banks
on a 50/50 basis. The interest rate is 1 per cent lower than the prime rate of Bank of Taiwan.
7. Amount
No loan has been granted during fiscal years 1995-1997.
8. Duration
The programme is not subject to any fixed completion date.
9. Trade effects or related statistical data
No data available.WT/ACC/TPKM/9
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C. DUTY AND TAX EXEMPTIONS GRANTED TO ENTERPRISES LOCATED WITHIN A DESIGNATED
ZONE
1. Title of the programme
Duty and tax exemptions for high-technology industries.
2. Period covered by the notification
Fiscal year 1995-1997.
3. Policy objective and/or purpose
This programme is implemented with a view to stimulate the research and innovation of
industrial technology and to promote the development of advanced technology industries in
Chinese Taipei.  The “Science-Based Industrial Park” (“the Park”)has been established by introducingthe sophisticated industries and personnel with advanced technological background within a
designated zone.
4. Background and the responsible authorities
(a) Laws and regulation:
- Statute for the Establishment and Administration of a Science-Based Industrial Park
(Articles 15 and 17);
- Implementing Regulation of Statute for the Establishment and Administration of a Science-
Based Industrial Park.
(b) Responsible authorities:
- The Park is managed by the Park Administration.
- The policy-making body is the National Science Council of the Executive Yuan.
5. Form
The subsidy programme will be implemented in  the form of Duty and tax exemptions.
6. To whom and how assistance is provided
(a) All high-tech industries located in the Park are exempted from Corporation income taxes for
five consecutive years from any date selected by them within their first two profit making year.
(b) All park enterprises are entitled to the following exemptions:
(i) customs duties, commodity tax, and business tax on imported machinery and
equipment, raw materials, commodities, fuel, and semi-finished products; and
(ii) commodity tax and business tax on exported goods or labour services.
Note: Park enterprises include high-tech industries and other enterprises in the Park relevant to the
production and sale of high-tech products. Such enterprises may include businesses dealingwith storage and transportation, packing, main tenance, leases on machinery and equipment,
and managerial or technological consultation and services.WT/ACC/TPKM/9
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7.  Amount
Not available.
8. Duration
There is no time limit attached to the programme.
9. Trade effects or related statistical data
FY 1995 FY 1996 FY 1997
Number of approved park
enterprises24 20 42
Total import value
(million NT)117,153 217,182 205,017
Total export value
(million NT)145,273 230,025 194,124
In light of the scope and nature of the programmes granted, it is not possible to determine what, if
any, trade effects  may result from this subsidy programme.WT/ACC/TPKM/9
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1. Title of the programme
Duty and tax exemptions for in-zone enterprises.
2. Period covered by the notification
Calendar year 1994-1996.
3. Policy objective and/or purpose
Export processing zones have been established for the purpose of promoting investment and
international trade.
4. Background and responsible authorities
(a) Laws:
- Statute for Establishment and Administration of Export processing Zones (Articles 1, 5, 13);
- Measures for the Screening of Application for Establishment of Enterprises in Export
Processing Zones;
- Categories of Industry Permissible to be established in Export Processing Zones.
(b) Responsible authorities:
- Export processing zones are managed by th e Export Processing Zone Administration;
- The policy-making body is the Ministry of Economic Affairs;
- The task of reviewing the eligibility of enterprises established in export processing zones shall
be undertaken by the Export Processing Zone Administration together with the othergovernment agencies involved.
Note: In-zone enterprises include industries authorized to be engaged in manufacture, processing,
assembly, research and development, trade, consultation, technical services, warehousing,
transportation, stevedoring, packing, repair, and other related business approved by the Ministry ofEconomic Affairs in exporting processing zones.
5. Form
Duty and tax exemptions.
6. To whom and how assistance is provided
All in-zone enterprises  industries are entitled to the following exemptions:
(a) Import duty, commodity tax, and business tax on imported machinery and equipment.
(b) Import duty, commodity tax, and business tax on imported raw and consumption
materials, fuels, semi-finished products, samples, and finished products for
transshipment by traders and warehousing operators.
(c) Deed tax when acquiring a new standard plant building in the export processing zone
or acquiring a building from the Export Processing Zone Administration.WT/ACC/TPKM/9
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It should be noted that all machinery and equipment within five years after import and other
imported goods are not entitled to duty and tax exemptions when they are shipped to leviable areas
from export processing zones. Moreover, products manufactured by in-zone enterprises shall be
subject to customs duties, commodity taxes, and business taxes on ex-factory prices minus value-
added basis when they are shipped to leviable areas.
7. Amount
Not available.
8. Duration
There is no time limit attached to the programme.
9. Trade effects or related statistical data
1994 1995 1996
Number of approved in-zone
enterprises233 235 231
Total import value
(million US dollar)2,801 3,777 3,987
Total export value
(million US dollar)4,780 6,271 6,897
In light of the scope and nature of the programmes granted, it is not possible to determine
what, if any, trade effects may result from this subsidy programmeWT/ACC/TPKM/9
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D. RESEARCH AND DEVELOPMENT
1. Title of the programme
Fund granted for development of products of the ten new leading industries.
2. Period covered by the notification
The fiscal year 1997 (July 1996 to June 1997).
3. Policy objective and/or purpose
In order to encourage research and development of new leading products and upgrade the
technical capability of new leading industries, the programme grants funds for private enterprises.
4. Background and authority
(a) Laws and regulation:
- Measures for Assistance in the Development of New Leading Products, is promulgated on
26 April 1991, and is amended on 30 June 1995.
(b) Responsible authority:
The Industrial Development Bureau, Ministry of Economic Affairs.
5. Form
Fund.
6. To whom and how assistance is provided
Any company incorporated under the Company Law with sound financial standing,
possessing a research and development department with sufficient R&D specialists in Chinese Taipei,
which have actually made research and development achievements, may apply for the assistance fund
relating to the development of a product within the scope of one of the ten newly emerging industries,i.e., communication, information, consumer electroni cs, aerospace, medical and health care, pollution
control, advanced materials, semi-conductors, specialty chemicals and pharmaceuticals, and precision
machinery and automation.
The assistance funds  granted total no more than 50 per cent of the amount of the following
expenses incurred exclusively for the development of  new leading products:
(a) Personnel costs incurred for full-time and/or part-time research personnel;
(b) Costs of consumable instruments and raw materials;
(c) Costs for use and maintenance of research and development equipment;
(d) Costs for technology transfer; and
(e) Domestic and overseas travel expenses.WT/ACC/TPKM/9
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In 1995,Chinese Taipei amended the “Measures for Assistance in the Development of New
Leading Products”. The amended Article 10 provides that: “the total amount of assistance and
matching funds to be allocated to a leading product development plan shall be limited to no more than
50 per cent of the total amount of the budgeted development costs.” While the assistance fund may be
defined as a grant, the matching fund is an interest-fee loan, whose repayment must be started uponthe first anniversary of the completion of research and development.  In addition to the repayment
term (two to five years) for the matching fund, a private enterprise receiving the matching fund must,
starting from the sale of the funded product, pay a quarterly feed-back fee, in an amount ranging from
1 to 4 per cent of the sales amount of such product. The total amount of the budgeted development
costs should be exclusively on the following items:
(a) Personnel costs for research personnel, technical personnel and other assistants
employed exclusively for performing research work;
(b) Costs of instruments, equipment, land and buildings exclusively and permanently
used for research activities except those used for commercial basis;
(c) Costs of consultation solely for the purpose of research activities and the same
services, including expenditures for purchase of research results, technical know-how, patents, etc.;
(d) Indirect costs arising directly from research activities; and
(e) Running expenses for materials, supplies and similar expenditures arising directly
from research activities.
7. Amount
(a) Since the programme's inception, the accumulated assistance fund by the end of fiscal year
1997 is NT$5,375,348,560 (Fiscal years 1992-1997);
(b) The fiscal year 1997:  NT$327,128,000 and a breakdown of those products are as follows:
(Unit: thousand NT)
NAME OF PROJECT (OR SECTOR) AMOUNT
Precision Machinery and Automation 72,008
Communication 26,290
Information 7,440
Consumer electronics 17,390
Aerospace 0
Medical and health care 0
Pollution control 0
Advanced materials 59,700
Semi-conductors 15,970
Specialty chemicals and pharmaceuticals 128,330
__________