RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/TPKM/9/Rev.1
3 May 1999
(99-1783)
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
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.
_______________
I. INTRODUCTION AND GENERAL REMARKS
This notification is made in compliance with obligations of the Customs Territory of Taiwan,
Penghu, Kinmen and Matsu (hereinafter referred to as “Chinese Taipei”) under Article XVI of theGeneral 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 program in this notification rests on the sometimes difficult judgement as to
whether a particular program 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 evaluationof 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 byMembers.WT/ACC/TPKM/9/Rev.1
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 purchase of automa tion and environmentally-friendly
equipment
(iii)       Tax credits for  the creation of internationally recognized brands
(iv) Tax deduction for self-designed components of automobile  automobiles using
domestic design of certain automobile components
(v) Tax credit for investment in disadvantaged region
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 industriesWT/ACC/TPKM/9/Rev.1
Page 3
A. T AX CREDITS OR TAX EXEMPTIONS  FOR DESIGNATED ENTERPRISES
1. Title of the program
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.
To qualify for “important technology-based enterprises”, the following three criteria
should be met: (1)products to be produced under the investment plan should belong to the ten
emerging industries;(2)the paid-in or increased paid-in capital for the investment plan should
be over NT$ 200 million; and(3)the amount of the fund available for the purchase of brand-newmachinery/equipment in the investment plan  should be over NT$100 million. "Important
invested enterprises" include en terprises 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 industryto industry.
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.WT/ACC/TPKM/9/Rev.1
Page 4
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 theestablishment 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.
7. Amount
While the program 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 Program.
8. Duration
The program was initiated in 1995. The Statute for Upgrading Industries will expire in
1999,at which time Chinese Taipei will conduct a review of the Program.
9. Trade effects or related statistical data
In light of the scope and nature of the program, it is not possible to determine what, if any,
trade effects  may result from this program.WT/ACC/TPKM/9/Rev.1
Page 5
1. Title of the program
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 December 29, 1990 and an amendment on 10 January 1995, and
will cease to be effective on December 31, 1999.
5. Form
Accelerated appreciation against profit-seeking enterprise  corporate  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 Program 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/Rev.1
Page 6
the Ministry of Finance. As a result, there has been no application for the tax benefit under the
Program.
8. Duration
The program was initiated in 1991. The Statute for Upgrading Industries will expire in
1999 at which time Chinese Taipei will conduct a review of the Program.
9. Trade effects or related statistical data
In light of the scope and nature of the program, it is not possible to determine what, if any,
trade effects which may result from this program.WT/ACC/TPKM/9/Rev.1
Page 7
1. Title of the Program
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 program
The program was commenced in 1990.
4. Background and responsible authorities(a) Law:- Statute for Upgrading Industries (hereinafte r   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 with th e tax collection authorities.  The government
agencies involved for the issuance of such certificates are as follows:
- For the manufacturing industry and technical services industry: The Industrial
Development Bureau of the Ministry of Economic Affairs("MOEA");
- For energy saving: The Energy Commission, Ministry of Economic Affairs;
- For the construction industry: The Construction & Planning Administration, Ministry
of the Interior;
- For the wholesale industry: The Commence Department, MOEA
- For agricultural industry: The Council of Agriculture, Executive Yuan.
- 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:
- investment in equipment for automation of production;
- investment in the equipment used for reclam ation of resources and/or pollution control;
- investment in the equipment for energy savi ng and/or recycling of industrial water.WT/ACC/TPKM/9/Rev.1
Page 8
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 within 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 for
procurement of domestically manufactured equipment for pollution control is 20 per cent, and10 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:
(Unit:  thousand NT)
FY 1997 FY 1996 FY 1995
No. of
CaseAmount of
Tax ReductionNo. of
CaseAmount of
Tax
ReductionNo. of
CaseAmount of
Tax
Reduction
1. Investment credit forProcurement of foreignManufactured equipment
for Automation2,164 3,613,817 3,489 2,471,107 2,269 2,149,039
2. Investment credit for
procurement of
domesticallymanufactured equipmentfor automation14,371 4,809,894 953 1,847,189 770 1,810,162
3. Investment credit for
procurement ofdomestically
manufactured equipment
for pollution control458 245,370 155 263,808 133 207,732
4. Investment credit for
procurement of foreignmanufactured equipmentfor pollution control77 70,558 49 60,557 39 48,963WT/ACC/TPKM/9/Rev.1
Page 9
1. Title of the program
Tax deduction for self-designed components of automobile  automobiles using domestic
design of certain automobile components
2. Policy objective and/or purpose
The primary goal of the incentive is to encourage self  domestic  design of automobiles  and its
components  and establish research and development ability of the automobile industry.
3. The date of establishment of the program
The program 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 MO EA 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 the
relevant experts, the MOEA and the MOF.
7. Amount
FY1995
FY1996 FY1997
No. of
CaseAmount of Tax
ReductionNo. of
CaseAmount of Tax
ReductionNo. of
CaseAmount of Tax
Reduction
3 425,607 3 340,192 3 264,868WT/ACC/TPKM/9/Rev.1
Page 10
Unit: thousand NT
B. FY
1995FY 1996 FY 1997
Domestic Design
of ComponentsNo. of
caseAmount of Tax
ReductionAmount of Tax
ReductionAmount of Tax
Reduction
Body 2 86,371 49,172 21,534
Chassis and Body 2 339,260 289,184 242,525
Total 4 425,631 338,356 264,059
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 reduction for automobiles
using self designed engine, chassis and body  by December 31, 2000. Chinese Taipei will not expand
the program through, for example, increasing the parts  types of components  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.
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,  264,059,000  which was 0.17
per cent of the yearly auto production value.WT/ACC/TPKM/9/Rev.1
Page 11
1. Title of the program
Tax credit for investment in disadvantaged region
2. Period covered by the notification
The fiscal year 1997 (July 1996 to June 1997).
3. Policy objective and/or purpose
With the aim of achieving balanced economi c growth within the territory of Chinese
Taipei, the means of tax credit is used to encourage investment in disadvantaged geographic
regions.
4. Background and authority(a) Law:
Statute for Upgrading Industries (hereinafter referred to as the "SUI"), Article 7.
(b) Responsible authority:
The Industrial Development Bureau, Ministry of Economic Affairs.
Note: The SUI was promulgated on 29 Dece mber 1990 followed by an amendment on 10
January 1995, and will cease to be effective on December 31, 1999.
5. Form
Tax credit against corporate income tax.
6. To whom and how assistance is provided
Any company incorporated under the Co mpany Law, which makes investment in
designated industries in a region with scanty natural resources or with slow development, may
gain credits of up to twenty per cent of the total amount of its investment against the corporate
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 credi t may be applied against the corporate income
tax levied in the ensuing four years.
The eligible geographical regions are the last ranking eight counties in Chinese Taipei in
terms of population, employment rate, communication facilities, tax revenue, average regular
income per household, infrastructure, and other indices, plus Kinmen County and Lien-chiangCounty. The latter two Counties are two small offshore islands with slow economic
development. They would always be eligible if the aforementioned criteria are applied on them.
The designated industries referred to above include all manufacturing industries and
several service industries.
The threshold capital means the total amount  used in procuring brand-new machinery,
equipment and building aggregates to NT$25 million. The minimum number of employeesWT/ACC/TPKM/9/Rev.1
Page 12
means the monthly average of the number of newly employed employees in a full year amounts
to fifty (50) persons or more.
The criteria used by Chinese Taipei are more  stringent than those under Article 8 of the
SCM Agreement. The reason for Chinese Taipei’s  adoption of factors other than the two
economic indicators prescribed by the SCM Agree ment is mainly based on the consideration
that these criteria reflect the real conditio n of scanty resources and the slow economic
development in the areas concerned. If the SC M’s index were applied, more regional zones
would be eligible for tax credits.
7.  Amount
- Since the program's inception, th e total accumulated amount is:
NT$700,929,000 (fiscal years 1993-1997)  (US$1=NT$27.81, June 1997 rate)
- For the fiscal year 1997:
NT$316,056,000
- Statistical data available for the three most recent years:
FY 1995 FY 1996 FY 1997
239,173,000 143,173,000 316,056,000
8. Duration
The program was initiated in 1993. The Statute for Upgrading Industries will expire in
1999, at which time Chinese Taipei will conduct a review of the Program.WT/ACC/TPKM/9/Rev.1
Page 13
B. L OANS FOR SMALL AND MEDIUM ENTERPRISES  (SMEs)
1. Title of the program
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  July 1994 to June 1997 )
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
R&D, prevent environmental contamination, invent new products, and upgrade product
quality, etc.;
- 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, Management 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 authority  is the Ministry of Economic Affairs.
Note: While the SME Development Fund was planned to be NT$12 billion, its accumulated amount
reached 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.
According to the “Standards for Recognition as SME”, published by the Ministry of
Economic Affairs, SME refers to an enterpri se which is a company or commercial enterpriseWT/ACC/TPKM/9/Rev.1
Page 14
registered in accordance with the law with capita lization or business volume below the following
thresholds:
- for enterprises engaged in manufacturing, construction, mining, or excavating business,
paid-in capital of less than NT$60 million.
- for enterprises engaged in agriculture, logging, fishing, the raising of livestock, utilities,
commerce, transport, warehousing, communicat ions, finance, insurance, real estate,
commercial, social or individual services, with annual business volume of less than
NT$80million in the previous year.
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
Statistics for Specific Programs: Loaned by the Fund for the Development of SMEs
 Unit: million NT
Title of ProgramFY
1994
1995FY 1995
1996FY 1996
1997
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, recession00 0
Urgent financing for major natural  disasters 111 0 35
8. Duration
The programs are not subject to any fixed completion date.
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 programs.WT/ACC/TPKM/9/Rev.1
Page 15
1. Title of the program
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 programs 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
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) ;
- 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 approved application for loans are implemented by commercial banks; however, the
capital needed is provided entirely by the SME Development Fund.
7. Amount
Loaned by the Fund for the Development of SMEs
FY 1995         NT$ 23 million
FY 1996         NT$ 157 million
FY 1997         NT$ 281 million
8. Duration of Subsidy
The programs are not subject to any fixed completion date.
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 programs.WT/ACC/TPKM/9/Rev.1
Page 16
1. Title of the program
Specific loans for mutual cooperation
2. Period covered by the notification
Fiscal years 1996 1995 -1997 (July 1996 1994  to June 1997)
3. Policy objective and/or purpose
The program is implemented to encourage SMEs’ prosperity through their mutual
cooperation.
4. Background and responsible authority
(a) Laws:
- 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 program is not subject to any fixed completion date.
9. Trade effects or related statistical data
No data available.WT/ACC/TPKM/9/Rev.1
Page 17
C. D UTY AND TAX EXEMPTIONS GRANTED TO ENTERPRISES LOCATED WITHIN A DESIGNATED
ZONE
1. Title of the program
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 program 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 introducing the
sophisticated industries and personnel with advanced technological background within a designatedzone.
4. Background and the responsible authorities
(a) Laws and Regulations:
- 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 program will be implemented in the form of duty and tax exemptions.
6. To whom and how assistance is provided
- 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.
- All park enterprises are entitled to the following exemptions:
- customs duties, commodity tax, and business tax on imported machinery and
equipment, raw materials, commodities, fuel, and semi-finished products; and
- commodity tax and business tax on exported goods or labour services.
Note 1: 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 dealing
with storage and transportation, packing, main tenance, leases on machinery and equipment,
and managerial or technological consultation and services.WT/ACC/TPKM/9/Rev.1
Page 18
Note 2: According to Section 2, Paragraph 1, Article 3 of the Commodity Tax Statute and
Article 7 of the Business Tax Statute, exports can be exempt from commodity tax, and
the business tax rate on exported goods is ze ro. These tax treatments are not specific to
enterprises located in the Park, as they are generally available for exported goods,
regardless of whether the manufacturers are located in the Park.
Note 3: (1) According to Articles 5 to 12 of th e Statute for Commodity Tax, only eight categories
of products are subject to such tax: tobaccos & alcoholic drinks, rubbers, cements, soft
drinks, flat-glasses, oils, electric appliances, and vehicles. It is clear from these
provisions that machinery and equipment is not subject to commodity tax. Thus, “no
commodity tax refund shall be made for imported machinery and equipment whichhave been duly taxed” provided for in Arti cle 18 of the Statute for the Establishment
and Administration of a Science-Based Industrial Park is actually not implemented.
Chinese Taipei would consider to amend the provision by deleting the reference to
commodity tax to provide greater clarity shou ld the inclusion of the phrase "commodity
tax" in the provision give false impression  that machinery and equipment are subject to
commodity tax.
(2) 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.
7. Amount
Not available
(1) 1995-1996 Corporate Income Tax Exemption in Science-Based Industrial Park
(By Sectors)
Unit: USD 1 million
Sector FY1995 FY1996
Integrated circuit 314 182
Computer 7 22
Telecom 6 3
Opto-electronics 1 2
Machinery 0.27 2
Biotechnology
Total 328 211
(2) 1995-1996 Tax Credit against Corporate Income Tax in Science-Based
Industrial Park (By Sectors)
Unit: USD 1 million
Sector FY1995 FY1996
Integrated circuit 70 59
Computer 16 15
Telecom 2 2
Opto-electronics 0.23 1
Machinery 0.15WT/ACC/TPKM/9/Rev.1
Page 19
Biotechnology
Total 89 77
Note: The assistance hereof is granted based on Article 6 of the Statute for Upgrading
Industries. Therefore, the assistance is not available only for Park Enterprises. All firmsmeeting the requirements of the said Article 6 are eligible for the assistance. However,
the amount provided hereof only represents the tax credit enjoyed by Park enterprises
under such assistance.
(3) 1995-1997 Duty & Business Tax Exemption for Imported Machinery and
Equipment
Unit: USD 1 million
Fiscal Year Import Value for
M&EAmount of Import
Duty ExemptionAmount of Business Tax
Exemption
1995 1,513 113 76
1996 3,287 247 164
1997 3,359 252 168
Note: The amount of import duty exemption for various tariff lines other than machinery and
equipment is not available because of the lack of statistics for imports into the Park by
tariff line. Since the duty rate applied aga inst each tariff line differs, we can not
calculate the exempted duty amount for all th e imports into the Park unless we have the
import statistics of the Park by tariff line.
(4) 1995-1997 Business Tax Exemption for All Imports
Unit: USD1million
Fiscal
YearTotal Import Value Total Amount of Business
Tax Exemption
1995 4,478 224
1996 8,020 401
1997 7,462 373
Note: Exchange rate in FY 1995: USD1=NT$26.16
FY 1996: USD1=NT$27.08
FY 1997: USD1=NT$27.52
8. Duration
There is no time limit attached to the program.
9. Trade effects or related statistical data
FY 1995 FY 1996 FY 1997
Number of approved park
enterprises24 20 42WT/ACC/TPKM/9/Rev.1
Page 20
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 programs granted, it is not possible to determine what,
if any, trade effects which may result from this subsidy program.WT/ACC/TPKM/9/Rev.1
Page 21
1. Title of the program
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 ( Article 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 other
government 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 of Economic 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 en titled to the following exemptions:
- Import duty, commodity tax, and business tax on imported machinery and equipment;
- 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;
- Deed tax when acquiring a new standard plant building in the export processing zone or
acquiring a building from the Export Processing Zone Administration.
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 beWT/ACC/TPKM/9/Rev.1
Page 22
subject to customs duties, commodity taxes, and business taxes on ex-factory prices minus value-
added basis when they are shipped to leviable areas.
Note: According to Articles 5 to 12 of the Stat ute for Commodity Tax, only eight categories of
products are subject to such tax: tobaccos & alcoholic drinks, rubbers, cements, softdrinks, flat-glasses, oils, electric appliances, and vehicles. It is clear from these
provisions that machinery and equipment is no t 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.
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.
7. Amount
Not available
Percentage of EPZ Payable Tax to Export Value
Unit: thousand USD
Item           Ye ar 1996(Jan.-Dec.) 1997(Jan.-Dec.)
Imported Machinery
Equipment200,447 545,365
Imported Machinery
Equipment Custom Duty5,011 13,634
Export Value Total 6,897,065 7,934,118
Percentage 0.07% 0.17%
Average Percentage 0.12%
Export and Import Value
Total10,884,117 13,040,026
Percentage 0.05% 0.10%
Average Percentage 0.08%
Item           Ye ar 1996(Jan.-Dec.) 1997(Jan.-Dec.)
Raw Material 3,786,605 4,560,543
Raw Material Custom Duty 189,330 228,027
Export Value Total 6,897,065 7,934,118
PERCENTAGE 2.75% 2.87%
Average Percentage 2.81%
Export and Import Value
Total10,884,117 13,040,026
Percentage 1.74% 1.75%
Average Percentage 1.74%
8. Duration
There is no time limit attached to the program.WT/ACC/TPKM/9/Rev.1
Page 23
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 programs granted, it is not possible to determine what,
if any, trade effects may result from this subsidy programWT/ACC/TPKM/9/Rev.1
Page 24
D. R ESEARCH AND DEVELOPMENT
1. Title of the program
Funds 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 program grants funds for private enterprises.
4. Background and authority
(a) Laws and regulations:
- Measures for Assistance in the Development of New Leading Products, is promulgated on
April 26, 1991, and is amended on June 30, 1995.
(b) Responsible authority:- The Industrial Development Bureau, Ministry of Economic Affairs.
5. Form
Fund
 Grant and interest-free loan.
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 R&D achievements, may apply for the assistance fund relating to the
development of a product within the scope of one of the ten (10) newly emerging industries, i.e.,
communication, information, consumer electronics, aerospace, medical and health care, pollutioncontrol, advanced materials, semi-conductors, specialty chemicals and pharmaceuticals, and precision
machinery and automation.
The assistance funds granted total no more than fifty percent (50 per cent) of the amount of
the following expenses incurred exclusively for the development of new leading products:
- Personnel costs incurred for full-time and/or part-time research personnel;
- Costs of consumable instruments and raw materials;
- Costs for use and maintenance of R&D equipment;
- Costs for technology transfer; and- Domestic and overseas travel expenses.
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 andWT/ACC/TPKM/9/Rev.1
Page 25
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 upon
the first anniversary of the completion of R&D. 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 ofthe funded product, pay a quarterly feed-back fee, in an amount ranging from 1 per cent to 4 per cent
of the sales amount of such product. The total amount of the budgeted development costs should be
expended exclusively on the following items:
- Personnel costs for research personnel, technical personnel and other assistants employed
exclusively for performing research work;
- Costs of instruments, equipment, land and bui ldings exclusively and permanently used for
research activities except those used for commercial basis;
- 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.;
- Indirect costs arising directly from research activities; and
- Running expenses for materials, supplies and similar expenditures arising directly from
research activities.
7.  Amount
(1) Since the program's inception, the accumulated assistance fund by the end of fiscal year 1997 is
NT$5,375,348,560(Fiscal years 1992-1997)
 (2) the fiscal year 1997:
 NT$327,128,000 and a breakdown of those products are as follows:
Unit: thousand NT
Name of Project (or Sector) Amount
Precision Machinery and Automation 72,008
Communication 26,290
Information 7,440
Consumer electronics 17,390
Aerospace 0
Medical and health care 0
Pollution control 0
Advanced materials 59,700
Semi-conductors 15,970
Specialty chemicals and
pharmaceuticals128,330
(1) Since the programme's inception, th e accumulated grant is NT$ 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:
Unit: thousand NT
Name of Project (or Sector) GrantInterest-free
loan
Precision machinery and automation 214,938 214,938WT/ACC/TPKM/9/Rev.1
Page 26
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 receives
assistance from the Program is also required to pay a feedback contribution in an
amount equal to 1 per cent to 4 per cent of it s sales derived from the sale of the newly
developed products.**Exchange rate on June 1998 is USD1=NT$34.39
__________