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Government investment incentives

In an effort to ensure Taiwan's biotechnology and pharmaceutical industries play an important role internationally, the Ministry of Economic Affairs (MOEA) and other government agencies offer investment incentives and low-interest financing to domestic and overseas firms investing in such industries.

This information is provided by the Biotechnology and Pharmaceutical Industries Program Office (BPIPO), of the Ministry of Economic Affairs (MOEA). For the official and unabridged version of this information, please visit the BPIPO website at www.biopharm.org.tw.

1. Tax benefits
2. Government R&D assistance program
3. Preferential loans
4. Executive Yuan's Development Fund
5. Stock listing (IPO) recommendation


 


Tax benefits

1. Benefits for the purchase of automation equipment

a. The said procured equipment or technology may credit a certain percentage of the investment against the amount of profit-seeking enterprise income tax payable for the then current year. For the purchase of production technology, ten percent (10%) may be credited. For the purchase of equipment, eleven percent (11%) may be credited.

b. Any investment plan that includes the purchasing of equipment for automation can qualify for a low-interest preferential loan.

2. Benefits for R&D expenditure

a. Expenditure concurred for developing new products, improving production technology, or improving label-providing technology may credit thirty percent (30%) of the investment against the amount of profit-seeking enterprise income tax payable for the then current year.

b. Instruments and equipment purchased by for exclusive R&D purposes, experimentation, and/or quality inspection may be accelerated to two years.

c. If a company is undertaking research for new industrial products, it can apply for a low-interest loan.

d. Traditional industries developing new industrial products, may apply for guidance from professionals within the government.

e. Guidelines for Considering Expenditures Incurred by Companies Involved in R&D Commissioned by Local Biotech and Pharmaceutical Companies as Investment - when a biotech company commissions a contract research organization to conduct clinical trials, it is considered to be equivalent to R&D conducted by the company itself and therefore eligible for a thirty percent (30%) deduction in business tax due.

3. Personnel training

a. If a company when training staff, registration for business-related business training course, may credit thirty percent (30%) of the training cost against the amount of profit-seeking enterprise income tax payable for the then current year

4. Benefits for newly emerging strategic industries

a. A profit-seeking enterprise may credit up to twenty percent (20%) of the price paid for acquisition of such stock against the profit-seeking enterprise income tax. An individual may credit up to ten percent (10%) of the price paid for acquisition of such stock against the consolidated income tax payable in the then current year.

b. A company, within two years from the beginning date for payment of the stock price by its shareholders, selects, with the approval of its shareholders meeting, the application of an exemption from profit-seeking enterprise income tax and waives the shareholders investment credit against payable income tax as set forth in the preceding Article; provided, however, that once the selection is made, no change shall be allowed.

5. Benefits for investment in equipment or technology used for pollution control

a. Investment in equipment or technology used in pollution control may credit thirteen percent (13%) of the equipment expenditure, and five percent (5%) of the expenditure on technology against the amount of profit-seeking enterprise income tax payable for the then current year.

b. Importation of equipment for air-pollution control, noise control, vibration control, environmental inspection, water pollution control, and waste management equipment may all be imported tax free.

c. Investment plans for the planned purchase of pollution control equipment, pollution control engineering, and waste management may qualify for a low interest loan.

6. Benefits for investment in energy saving equipment or technology

a. Investment in equipment or technology used for employing new and clean energy, energy saving systems, or energy efficiency may credit five to twenty percent (5%-20%) of the investment against the amount of profit-seeking enterprise income tax payable for the then current year.

b. Investment plans for planned implementation of energy saving systems can apply for a low-interest loan. c. Amortization on equipment or technology used for employing new and clean energy may be reduced to two years.

7. Benefits awarded to scientific industry companies

Benefits awarded to scientific industry companies (excluding those located in an official science-based industrial park) are contingent on recognition by the MOEA that the company in question does qualify as a company with the scientific industry sector. From Jan 1, 2002, equipment imported from overseas by such companies is exempt from import and business tax, provided said equipment is not available in Taiwan nor produced by local manufacturers.

8. Import tax exemption for imported machinery and equipment

The following machinery and equipment to be used by a manufacturer or technical service company conforming to the rules for factory administration, in developing new products, improving quality, increasing productivity, conserving energy, promoting reuse of waste or improving manufacturing process, or exclusively in research, experiment or quality control, and where said equipment is not available in Taiwan nor produced by local manufacturers, and with the approval of the MOEA, shall be exempt from import tax.

9. Incentive for operations headquarters

To encourage internationalization of the industry, companies that set up operations headquarters in Taiwan, having a certain scale and being of major economic benefit to Taiwan, will be exempt, in certain categories, from profit-seeking income tax. The following categories apply:

a. The income derived from provision of management services or R&D services.

b. The royalty payment received under its investments to its affiliates abroad.

c. The investment return and asset disposal profits received under its investments to its affiliates abroad.


 


Government R & D Assistance Program

To encourage enterprises to develop new products and technologies, the government has established R&D assistance programs to share a company's product/technology development risks.

R&D Incentive Programs for Taiwan's Biotech Industries

Loan Program

Convening authority

Subsidies and grants

Final ownership of intellectual property rights

Qualification

Program of Assistance in the Development of Innovative Products Industrial Development Bureau, MOEA a. Source of grant: Included in the annual budget drawn up by the Industrial Development Bureau, MOEA

b. Grant may not exceed 40% of the total R&D cost
Belongs to the company developing the new product 1. Limited to companies duly incorporated in accordance with the Company Law (including the manufacturing and technology service industries) and having a sound financial standing.

2. Having a research and development (R&D) department and sufficient R&D specialists in Taiwan.

3. Company or its R&D team have actual achievement of industry technology research.
Small Business Innovation Research Program (SBIR) Department of Industrial Technology, MOEA a. Initial Research Phase: Individual program shall be limited to six months; the total amount of assistance for each program shall be limited to not more than 50% of the total amount of assistance with a maximum of NT$1 million. Applicant first applies for grants supporting initial research. After recognizable achievement has been completed, grant is available for further research and development. The ceiling for the total amount of assistance can be increased to NT$6 million.

b. Research and Development Phase: Individual program shall be limited to two years. However, biotechnology and pharmaceutical programs approved by the Technical Review Committee can be extended to three years. The amount of assistance for each program shall be limited to not more than 50% of the total budgeted project assistance with maximum of NT$10 million. Annual maximum amount of assistance shall be limited to not more than NT$5 million.
Belongs to the company developing the new technology or product. However, the government may use the research results gratis, on a non-exclusive and non-transferable basis. If necessary, it may exercise its right to transfer the technology for use by a third party. 1. Company duly incorporated in accordance with the Company Law.

2. Small and medium business with capital below NT$80 million or number of registered employees less than 200.

3. Must not owe back taxes, nor have been involved with any government-contracted technology project terminated within the last five years.
Industrial Technology Development Program Department of Industrial Technology, MOEA The size of the grant provided shall be determined according to the nature of the program:

a. For innovative products or for technology with a vital impact on the industry as a whole: 40%.

b. For standard R&D: 30%.
Belongs to the company developing the technology or product. However, for the benefit of national and public welfare, the government may use the research results gratis, on a non-exclusive and non-transferable basis. 1. Company duly incorporated in accordance with the Company Law and having a sound financial standing.

2. Having a research and development (R&D) department and sufficient R&D specialists in Taiwan and having R&D management ability to execute projects.

3. Multiple companies with proven performance in previous technology projects may apply together, provided prior approval is obtained from the Industrial Development Bureau (IDB).

4. Company or firms are not eligible to apply if the company or firm executed a government-related technology project and recorded a major violation of the contract within the last five years.
Industrial Technology Innovation Center Program Department of Industrial Technology, MOEA a. The amount of assistance shall not exceed 50% of the approved R&D center's total budget.

b. The ratio of assistance will be adjusted depending on the efficiency of R&D on domestic industry and shall not exceed 50% of the total budget amount.
c. The cooperative research fee of the government's assistance shall not exceed 40% of the total budget.
Belongs to the company developing the technology or product. However, for the benefit of national and public welfare, the government may use the research results gratis, on a non-exclusive and non-transferable basis. 1. Company duly incorporated in accordance with the Company Law and having a sound financial standing.

2. Company or firms are not eligible to apply if the company or firm executed a government-related technology project and recorded a major violation of the contract within the last five years.
Industrial Technology Development Alliance Program Department of Industrial Technology, MOEA a. The span for initial research shall be limited to one year.

b. Total budget for initial research may not exceed NT$10 million and the amount of assistance provided by the government shall be limited to not more than 50% of the total budget.
Belongs to the company developing the technology or product. However, for the benefit of national and public welfare, the government may use the research results gratis.

1. Companies duly incorporated in accordance with the Company Law or firms with tax registration engaged in business related to R&D services.

2. For projects implemented by multiple companies, one leading company files the application with the MOEA.

3. Company or firms are not eligible to apply if the company or firm executed a government-related technology project and recorded a major violation of the contract within the last five years.

Strategic Service-Oriented Research and Development Program Department of Industrial Technology, MOEA The size of the grant provided shall be determined according to the nature of the program:

a. For innovative products or for technology with a vital impact on the industry as a whole: 40%.
b. For standard R&D: 30%.
Belongs to the company developing the technology or product. However, for the benefit of national and public welfare, the government may use the research results gratis, on a non-exclusive and non-transferable basis. 1. Companies duly incorporated in accordance with the Company Law or firms with tax registration engaged in business related to R&D services and having a sound financial standing.

2. Company, firm or its professional team engaged in providing knowledge creation, circulation or value-added and having actual achievements.

3. Company or firms are not eligible to apply if the company or firm executed a government-related technology project and recorded a major violation of the contract within the last five years.

4. Multiple companies with proven performance in previous technology projects may apply together, provided prior approval is obtained from the Industrial Development Bureau (IDB).

5. Company or firm are not eligible to apply if the company or firm had previous executed any government-assisted projects and still under probation period.
Innovation Research Program Science-Based Industrial Park Association a. The amount of assistance for this program shall be limited to not more than 50% of the total program budget and a maximum of NT$5 million.

b. Grants within NT$5 million shall be reviewed by the Review Board of the Park Association.

c. Grants more than NT$5 million shall be reviewed by the National Science Council Review Board.
a. Announcement of results: The Park Association reserves the right to make announcements about the research and its results.

b. Patent Rights: Belongs to the enterprise developing the product or technology.
1. Approved by the committee of the science-based park, and the company must complete the registrations and have a sound financial standing.

5. Company or firm are not eligible to apply if the company or firm had previous executed any government-assisted projects and still under probation period.


 


Preferential Loans

Government and participating banks together provide low interest preferential loans. Included are low interest loan for mid-long term financing sponsored by CEPD, low interest loan for the procurement of automated machinery, low interest loan for upgrading small and medium enterprises, low interest loans for private enterprises to procure pollution prevention equipment, low interest loans for the procurement of energy saving equipment, special project loan for small and medium enterprise and low interest loan for promoting industrial research and development, provided by the Industrial Development Bureau.

Summary of loans available to Taiwan's biotechnology and pharmaceutical industries

Loan Program

Total Amount Available (NT$)

Object of Loan

Interest Rate

Participating Bank(s)

Low interest loans for the procurement of imported automatic machinery NT$40 billion Domestic public and private enterprises 2.125% below the basic interest rate of Chiao Tung Bank Chiao Tung Bank and Taiwan Medium Business Bank
Low interest loans for the procurement of domestic automatic machinery for small and medium enterprises NT$10 billion Manufacturing enterprises and processing enterprises complying with standards for identification as a medium and small enterprises 1% over Central Bank discount rate Taiwan Medium Business Bank
Small and medium enterprises improvement loans NT$20 billion Manufacturing enterprises and processing enterprises complying with standards for identification as a medium and small enterprises 2.05% below the basic loan rate of Taiwan Medium Business Bank Taiwan Medium Business Bank
Pollution prevention equipment low interest loan for private enterprises NT$12 billion Private enterprises which procure or improve anti-pollution equipment 2.875% below the basic loan rate of Chiao Tung Bank Taiwan Medium Business Bank, Chiao Tung Bank, First Commercial Bank, Hwa Nan Bank, and Chang Hwa Bank;
29 banks in total (the pollution prevention plan shall be approved by the Industrial Development Bureau, then sent to the appointed banks)
Foreign currency credit loan by the Central Bank US$10 billion 1. Foreign investment plan by private and public enterprises

2. Public construction investment in 6-year National Development Plan

3. Ten emerging industries

4. Investment in eight key technologies

5. Important investment plan certified by the government
Shall be calculated once every 3 or 6 months and the interest rate is based on international or domestic prevailing inter-bank lending rates

Banks designated by the Central Bank

Long or medium term financing of the loan by the Council for Economic Planning and Development NT$100 billion 1. Important governmental construction plan (including investment plan by public or private enterprises)

2. The amount over NT$200 million in private investment
1% over interest rate of post saving 34 banks and 8 regional medium business banks (The plan shall be submitted to the Industrial Development Bureau for review and comment and transmitted to Council for Economic Planning and Development for approval)


 


Executive Yuan's Development Fund

Recent years have seen aggressive efforts on the part of the government in promoting the biotechnology industry; many business owners both within the industry as well as outside of it have taken note of the government's lead and are now also focusing on this emerging industry. The government has spearheaded efforts to directly promote the private sector, with the aim of scaling up the industry to competitive levels. One of the unique features of this effort is the establishment of the Executive Yuan's Development Fund. The Development Fund is primarily geared towards new investments, playing the role of a pioneering investor. The total investment by the Development Fund in any one corporation cannot exceed 49%. It is hoped that with the involvement of the Development Fund, the sector's development will surge.

In order to encourage the development of the biotech industry in Taiwan and speed up R&D of crucial technology, the Executive Yuan, following the directive of the "Promotion Plan for the Biotechnology Industry," announced the "5-Year Investment Plan of the Executive Yuan for Investing in the Biotech Industry." NT$20 billion has been set aside to encourage the private sector to participate and invest in the biotech industry. The scheme was later revised into the "Executive Yuan Development Fund Biotech Industry Investment Scheme," in 2001; with its implementation period extended to 2005.

Moreover, the fund has worked in conjunction with the government to promote the "Knowledge Economic Development Project". In 2001, the government drafted the "Development Fund Increasing Investment in Venture Capital Business Plan," whereby the Executive Yuan's Development Fund provided NT$30 billion to the private sector's NT$70 billion; a total of NT$100 billion has been earmarked for investment in VC businesses. By increasing the funds available to venture capitalists, the government aims to enhance the development of biotechnology on the island.


 


Stock Listing (IPO) Recommendation

The Industrial Development Bureau (IDB), MOEA, has promulgated the IDB of MOEA Contracted Proposal for Points Regarding Industry Technology and Production to be Developed Successfully and Having Marketability to relax the listing requirement of local biotechnology companies to apply for listing on the Taiwan Stock Exchange and OTC Exchange.

The biotechnology companies with developmental potential and marketable products and technology can apply for stock listing via the recommendation of the IDB. The criteria for application are as follows:

1. Technology enterprises with successfully developed product and with marketability shall meet the following requirements:

a. Companies within the scope of the biotechnology, pharmaceutical and medical health industries:

i. Companies engaged in human clinical trials or field tests that are legally permitted by the competent authority; or R&D for the biotechnology and pharmaceutical and medical health industries and have existing product manufacturing, sales, providing technology service for biotechnology, pharmaceuticals and medical health.

ii. The R&D expenditure for the previous year of companies engagede in relavant R&D with research results must exceed three percent (3%) of total net sales revenue of the said company or ten percent (10%) of total paid-in capital and employing five full-time college-above graduated R&D personnel can be excluded from the above limitation.

iii. If that product is within the scope of newly emerging industries and its relevant technical service scope has achieved the stage of production or provides service, and according to the laws and regulations the product has obtained the approval or certification by competent authorities before selling, carrying out human clinical trail or field tests.

iv. If that product or service is already on the market, or has the potential to be commercialized in 3 years, and approved by related market survey report.

b. Companies within other industries:

i. The net sales revenue generated by newly emerging industry products and related technical service shall exceed fifty percent (50%) of the total sales revenue of this company for the previous year upon application.

ii. Companies having an R&D department and research results, R&D expenditure for the previous year must exceed three percent (3%) of total net sales revenue of the said company or NT$ 70 million.

iii. If that product is within the scope of newly emerging industries and its relevant technical service scope has achieved the stage of production or provides service, If that product or service is already on the market, or has the potential to be commercialized in 3 years, and approved by related market survey report.

2. Technology enterprises with successfully developed technology and with marketability shall meet the following requirements:

a. The developed technology is within the scope of the newly emerging product industry and its relevant technical service.

b. Companies having an R&D department whose R&D expenditure for the previous year exceeded ten percent (10%) of total paid-in capital or NT$40 million.

c. Employs over fifteen full-time college-above graduated R&D personnel or personnel with relevant R&D experience.

d. The developed technology is leading and has market value, has obtained proper patent rights and intellectual property rights, shall provide results that can be transacted on the market, and shall provide a relevant market value appraisal report by a college or institute, research organization, intellectual property rights service company or professionals.

3. Future Development

It is widely recognized that as we enter the 21st century, biotechnology and pharmaceuticals hold great potential as newly emerging industries, and are regarded by the government as the key for promoting Taiwan as an Asia-Pacific region biotechnology and pharmaceuticals R&D, manufacturing and operations global operations management center. In its pursuit of this goal, not only has the government completed the related legal framework and certification system, established intellectual property rights protection, promoted international mutual accreditation, and established a biotechnology industry information database system, but has also actively transferred technology, strengthened assistance and incentives, and promoted R&D and the commercialization of its results to industry, based on its strengths.

Such strengths include its biotech clusters, in choosing the most suitable products to develop, and in focusing on Asian-prevalent disease therapeutics. Looking into the future, under the joint cooperation of industry, academia and research institutes, and with the government's policy to fully promote the sector, it is believed that Taiwan will have five major development directions.

These are: To become a research and clinical trials center focusing on Asia-prevalent diseases; to become a drug and biotech products manufacturing center, to become a biomedical engineering application and production hub; to become a worldwide subtropical floriculture and marine biotech hub; and to build the most vibrant biotech-focused venture capital industry in Asia.

It is Taiwan's overall goal to become the leading Asia-Pacific biotechnology R&D, manufacturing and operations center.


Source: Biotechnology and Pharmaceutical Industries Program Office (BPIPO), of the Ministry of Economic Affairs (MOEA). www.biopharm.org.tw


 




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