Tax Benefits Provided by the Statute for Upgrading Industries Not Necessarily Applicable to All Issued Patents.

According to the National Tax Administration of Northern Taiwan, Ministry of Finance, any business entity holding issued patents is not necessarily entitled to tax benefits provided by the Statute for Upgrading Industries. Tax benefit is precondition on such entity’s participation in the research and development programs with respect to industry upgrading and in compliance with “Regulations Governing the Reduction of Expenditures for Corporate Research and Development and Talent Training”.

In one actual case, company A accounts NTD50 million dollars as R&D expenses and NTD20 million dollars as tax reduction.  To supports its tax benefit, it produces simply patent certificate without presenting complete information regarding R&D plan, and then its request for tax benefit is rejected by tax administration.  Company A dissatisfies with the tax administration’s decision and files an administrative action, and the case ends up in the tax administration’s favor.

According to Taipei High Administrative Court’s reasoning, the purpose of the Patent Act is to encourage, protect, and take advantage of inventions and creations to expedite industrial development.  An invention meeting all patent requirements and passing governmental examination should be entitled to its exclusive right in the market, by which the inventor is able to recover the cost, earn profits, and the most important of all, to be persistently engaged in research.  On the contrary, the purpose of the Statute for Upgrading Industries is to promote industry upgrading.  Any R&D plan for industry upgrading should be substantiated by actual expenditure put therein to enjoy tax benefit.  The enactment purpose of the Patent Act and the Statute for Upgrading Industries is different, and that is why tax benefits are not necessarily applicable to all issued patents.  (2009.07)
/CCS