Logistics Enterprises Offered Five-Year Income Tax Holiday

The Council for Economic Planning and Development (CEPD) recently called related ministries and commissions together for a joint review of draft “Incentive Regulations for International Logistics Enterprises in Newly Emerging, Important and Strategic Industries” designed to reinforce Taiwan’s international logistics functions and help develop the island into a key hub for industrial value-added-services. International logistics enterprises that engage in value-added freight consolidation and distribution services or after-sales maintenance services, and that have investment plans that are approved by the Ministry of Economic Affairs and reach the incentive threshold, will be allowed to choose between a shareholder investment tax offset or a five-year income tax holiday as provided by the Statute for Upgrading Industries.

The CEPD notes that the new Regulations were drawn up in accordance with the Statute for Upgrading Industries, so enterprises eligible for the incentives must conform to the principles for the screening of newly emerging, important, and strategic industries. These include four categories: newly emerging industries or products, those with large externality or spillover effects, those with international competitiveness, and those not provided incentives under existing laws. Applicable investment projects must be approved by the Ministry of Economic Affairs and must accept commissions from domestic or foreign companies for the value-added freight consolidation and logistics services or after-sales maintenance services listed below. In addition, the goods involved must finally be exported.

1.      Value-added freight consolidation and distribution services: Staging and warehousing, storage management, transshipment, and distribution of domestic and overseas materials, semi-products, or finished products; resorting, testing, inspection, simple processing, and subcontract processing services.

2.      After-sales maintenance services: Storage management of parts and components under maintenance for domestic and overseas companies; and testing, inspection, maintenance, and subcontract maintenance, testing, and inspection in regard to the logistics and customs-clearance operations for customer-retired goods.

Projects that fall within the scope of applicability of these Regulations and that reach the threshold for incentives, investment in which will be completed within three years, and which receive project-completion certification from the Ministry of Economic Affairs may choose either a shareholder tax offset or a five-year income-tax holiday under the Statute for Upgrading Industries. Conditions for meeting the threshold mentioned above include 1) at least NT$100 million in paid-in capital or in increased paid-in capital, of which at least NT$50 million must be real investment; if the procurement of civil engineering is not included, the amount must reach NT$30 million; or 2) at least NT$10 million in paid-in capital or increased paid-in capital; for providers of after-sales maintenance services the accumulated net increase in operating income during the period of investment must reach NT$300 million and for companies that provide value-added freight consolidation and distribution services or that concurrently engage in both the provision of value-added freight consolidation and distribution services and after-sales maintenance services the accumulated net increase in operating income must reach NT$400 million.

The Ministry of Economic Affairs will complete the notice of proposed rulemaking procedure as quickly as possible, and the Regulations will be promulgated and implemented following their approval by the Executive Yuan. For additional related information, please consult http://www.cepd.gov.tw/m1.aspx?sNo=0009011.

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