Investment with Special Know-How Eligible for Tax Exemption.　Investments with Copyright, Integrated Circuit Layout, Plant Variety Are Eligible for The Tax Exemption.

In early February the Legislative Yuan passed the enactment of a five-year tax exemption provided under the Statute for Upgrading Industry on investments with capitalized special know-how.  According to the provision proposed by the Ministry of Economic Affairs, this tax exemption shall operate to special know-how including legally protected Taiwanese and foreign copyright, integrated circuit layout, plant variety, and trade secret.  Patents may be recognized as eligible special know-how for this five-year tax exemption.  In addition, whether the capitalized know-how is be eligible for the tax exemption may be determined by the central competent authority of the end business authorized to do so.  The MOEA has submitted the proposed amendment to the relevant implementation rules to the Executive Yuan for approval, which is expected to be promulgated and come into force soon.

 

Patents means patents obtained in accordance with the Taiwanese Patent Act or foreign patent laws.  With respect to the investment date when the special know-how is capitalized and entered as the subscription price paid by its holder, for start-up companies, it shall be the date of incorporation registration; in cases where such investment is recorded as capital increment, it shall be the date of the relevant capital increase.

 

By operation of the provision in respect of the five-year tax exemption, emerging industries may issue stock subscription warrants to the special know-how or patent holder as consideration for his/her investment by capitalizing the know-how and/or patent he/she owns.  Upon the holder’s exercise of the stock subscription right, only the amount of the market price of the stock in excess of the subscription price (if any) will be taxed.

 

This tax exemption shall operate retroactively from January 1, 2004.  For special know-how capitalized during the period from January 1, 2004 to the date when the implementation rules come into force, the assignee or licensee company will need to apply for an emerging industry and special know-how (or patent) recognition certificate from the Industrial Development Bureau after the implementation rules come into force in order to be eligible to claim the tax exemption.  (2005.7)

CYJ/EMA