Taiwan government to remove tax incentives for industrial upgrades by year-end 2009

Taiwan's Executive Yuan on March 5 approved a tax reform program that will put an end to the current 'Statute for Encouragement of Industry Upgrading' that offers tax incentives to companies for upgrading their technologies. The reform is scheduled to take effect by December 31, 2009.

The removal of the statute will result in an increase of NT$118.3 billion (US$3.4 billion) a year in national tax income, government officials estimated.

However, current tax breaks for spending on R&D projects, talent cultivation, and the establishment of global logistics centers and operating headquarters will remain in force, the officials said.

In the meantime, the government will also begin to implement a single rate band of 20% business income tax, compared to the previous ceiling of up to 25%. This revision will result in a decrease in business income tax of NT$80.8 billion a year.

The tax reform also calls for a reduction of one percentage point each for the lowest three brackets of the consolidated personal income tax to 5%, 12% and 20%, while keeping the ratios of the two-top brackets unchanged at 30% and 40%, respectively.