National Taxation Bureau of Taipei（hereinafter referred to as the NTBT）, Ministry of Finance expressed that the companies whose application for status of biotech and new pharmaceutical companies (hereinafter referred to as the BNP) is approved by Ministry of Economic Affairs (hereinafter referred to as MOEA) may enjoy a reduction in their profit-seeking enterprise income tax payable based on their expenditure on the field of R&D and personnel training.  Where a profit-seeking enterprise that is registered share-subscriber of initial issue or capital increase of the BNP may also enjoy a reduction in its profit-seeking enterprise income tax payable based on the aforesaid subscription.  However, if the BNP is found unqualified within the validity date of the approval letter issued by the MOEA, MOEA may invite representatives of related agencies, scholars and experts to confirm the said unqualified item.  Once the approval letter is canceled or abolished after confirmation, the aforesaid tax reduction should be paid back accordingly.
The NTBT explained that, according to Paragraph 1 of Article 2 of amended “Regulations Governing Investment Tax Credits for R&D and Personnel Training Expenditure of Biotech and New Pharmaceuticals Companies” and “Regulations Governing Shareholder Investment Tax Credits for Profit-Seeking Enterprises on Subscription of Biotech and New Pharmaceuticals Companies”, the qualification criteria for the BNP status includes all terms and conditions as follows: (1) The R&D activities of the biotech or new pharmaceuticals must not be wholly carried out overseas; (2) the R&D expenditure must be at least 5% of the net operating revenue or account for at least 10% of the paid-in capital; (3) must employ at least 5 full-time R&D workers who are with bachelor's degree or higher degree; and (4) must with no material violation in the related laws and regulations of environmental protection, labor or food safety and sanitation for the past 3 years.
The NTBT indicated that once the BNP which has received approval letter issued by MOEA is found fail to comply with the aforesaid qualification criteria upon application or within validity date of approval letter and its approve letter is canceled or abolished thereof, the tax reduction associated with the aforesaid BNP should be paid back.  Accordingly, tax reduction in profit-seeking enterprise income tax payable as prescribed in Articles 5 and 6 of Act For The Development Of Biotech and New Pharmaceuticals Industry shall be repaid to tax collection authority once approval letter is canceled.  While the tax reduction in profit-seeking enterprise income tax shall be repaid to tax collection authority from the year failing to comply with the qualification criteria once approval letter is abolished.  Repayment of tax reduction shall be charged interest which is calculated from the next day after the deadline of profit-seeking enterprise income tax return filing based on the fixed interest rate of one-year postal time deposit on daily basis to the payment date.
The NTBT reminded that to protect their rights and interest with respect to tax reduction, companies who would like to apply for implementation of the aforesaid two kinds of tax reductions shall review the qualification criteria based on Paragraph 1 of Article 2 of the aforesaid two regulations from time to time within validity date of approval letter.
(Contact: Mr. Chen, Section Head of the First Examination Division; 886-2- 2311-3711 Ext. 1284)