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(Apr 05, 2010) On March 25, 2010, Taiwan's Ministry of Transportation and Communications (MOTC) announced new measures that permit foreign firms or their branch companies that conduct warehousing or simple processing operations in Taiwan's free trade zones (FTZs) and that sell the goods from such operations to domestic and foreign clients, to apply for exemption from the 20% business income tax, beginning from July 10, 2009. In addition, such firms will be eligible for "tax-free treatment on the portion of their business income from sales of these goods within Taiwan that does not exceed 10 percent of their total sales" within Taiwan and abroad; income from Taiwan sales above the 10% threshold will be subject to the 20% tax rate. (Incentives Offered for Foreign Firms in FTZs, TAIWAN TODAY, Mar. 26, 2010, available at [from ECONOMIC DAILY NEWS]; Taiwan—Key Features, IBFD [International Bureau of Fiscal Documentation] online subscription database, (last visited Apr. 2, 2010); Measures on Exemption of Business Income Tax for Foreign Businesses Engaged in Goods' Warehousing and Simple Processing in Free Trade Zones [in Chinese] [Measures], MOTC website, Mar. 25, 2010, available at

Under the Measures, "simple processing" refers to such activities as inspection and testing of warehoused goods; conducting repairs of or adding labels to them; classifying them according to such features as their nature, shape, size, and color; using human labor or simple tools to assemble them; or remodeling or adding packaging to them. "Income" refers to Taiwan-source income. (Measures, supra.)

The new Measures succeed the Statute for Upgrading Industries, which had previously provided preferential tax rates for foreign companies with operations in the FTZs. The Statute expired at the end of 2009. According to MOTC estimates, "the new tax incentives will generate some NT$2.5 billion (US$78.4 million) in revenue for related industries and create more than 10,000 job opportunities." (TAIWAN TODAY, supra.)

Author: Wendy Zeldin More by this author
Topic: Taxation More on this topic
Jurisdiction: Taiwan More about this jurisdiction

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Last updated: 04/05/2010