Promulgated on September 10, 1960, as Amended on January 5, 1965
Chapter I General Provisions
ARTICLE 1:
This Statute is enacted for the purpose of encouraging investment and accelerating economic development.
ARTICLE 2:
This Statute shall apply to all matters concerning the encouragement of investment. Any such matters not provided for in this Statute shall be governed by the provisions of other relevant laws; provided that where the provisions of such other laws are more favorable than those included herein, the most favorable provisions shall apply.
ARTICLE 3:
The term "productive enterprise" as used in this Statute refers to any one of the following types of operation which produces goods and/or renders services, and which is organized as a company limited by shares in accordance with the Company Law:
1. Manufacturing: Any operation which makes or processes products with machinery and manual labor.
2. Handicraft: Any operation which makes or processes products with manual labor and skill.
3. Mining: Any operation which prospects or works mines with machinery and manual labor for the purpose of producing mineral products.
4. Agriculture: Any operation which utilizes land and equipment for growing plants and producing crops.
5. Forestry: Any operation which utilizes forest land and equipment for planting or replanting forests and for felling or cutting trees for forestry products and by-products.
6. Fishery: Any operation which catches and cultures marine animals and plants with fishing craft or fish ponds and fishing gear.
7. Animal Husbandry: Any operation which raises and breeds livestock on farm or ranch or by mechanical means.
8. Transportation: Any operation which undertakes, with sufficient power driven equipment and capacity, to transport passengers and/or goods by land, sea or air.
9. Public Utility: Any operation in municipal transportation, telecommunications, health, irrigation, municipal water supply, electricity or municipal gas supply, which provides services to the public.
10. Public Housing Construction: Any operation which specializes in large scale construction of modern public housing units.
11. Technical Services: Any operation which specializes in the furnishing of technical know-how or patent rights of international repute for the purpose of assisting domestic productive enterprises in the manufacture of machinery whereof local manufacture without such assistance is impossible.
The respective encouragement criteria for the different operations specified in the preceding paragraph shall be prescribed and promulgated by the Executive Yuan.
ARTICLE 4:
The term "Industry" as used in this Statute refers to manufacturing, handicraft, transportation, and public utility enterprises as defined in the preceding Article.
The term "profit-seeking enterprise" as used in this Statute refers to any government, private, or joint organization with business name or place engaged in industry, commerce, agriculture, forestry, fishery, pasturage, mining, metallurgical operations or others for profit-seeking purposes, and organized in the form of sole proprietorship, company or in any other form of association.
Chapter II Tax Exemption Benefits
ARTICLE 5:
Where a productive enterprise conforming to the encouragement criteria referred to in Article 3 is one established through new investment, it shall be exempt from profit-seeking-enterprise income tax for a period of five consecutive years from the date on which it begins to market its products or to render services. In the case of a plant expansion through the increase of funds in a productive enterprise, it is likewise entitled to the five-year tax exemption, from the date on which the newly added equipment thereof starts to operate or to render services, in respect to the income increased as a result of such expansion and computed on the basis of its total income, if it is found at the time of closing of accounts for the year that the expansion has resulted in a thirty per cent or more increase in its productive or service capacity over the productive or service capacity prior to such increase of funds and plant expansion.
Where a three-year tax exemption already granted to a productive enterprise under Article 39 of the Income Tax Law of December 23, 1955, has not expired by the date when this Statute comes into force, such exemption shall be extended up to five years beginning from the date of commencement of its operation.
Where the project for plant expansion and increase of funds of a productive enterprise is approved for completion by stages, the five-year tax exemption provision set forth in the first paragraph of this Article shall be applicable thereto from the year in which the completed portion of the plant expansion project has resulted in thirty per cent or more increase in the enterprise's productive or service capacity over its productive or service capacity prior to the increase of funds and plant expansion.
This Article shall apply only to those productive enterprise which have duly filed their income tax returns by using the blue return form and have not been penalized under Article 110 of the Income Tax Law in the year for which income returns are filed.
ARTICLE 6:
The maximum rate of profit seeking-enterprise income tax, including all forms of surtax payable by a productive enterprise, shall not exceed eighteen per cent of its total annual income.
All productive enterprise conforming to encouragement criteria prescribed by the Government, as referred to in Article 3 herein, are entitled to a ten per cent reduction of the profit-seeking enterprise income tax; provided, that this shall be subject to the restrictions set forth in Paragraph 4 of the preceding Article:
The provision of Paragraph 1 shall become effective as of January 1, 1961.
ARTICLE 7:
Where a productive enterprise invests, on or following to January 1, 1961, its undistributed profits for the taxable year in an expansion of its machinery or equipment used for production or rendition of services, it shall, in applying for exclusion of the amount of such investments from its taxable income, make application therefore at the time of filing final returns for the current taxable year, which shall be accompanied by documents relevant to its investment plan; provided that the undistributed profits eligible for such exclusion shall not exceed an amount equal to twenty-five per cent of its taxable income for the current taxable year.
The productive enterprise which invests its undistributed profits for expansion of equipment as referred to in the preceding paragraph shall, prior to the expiration of the statutory period for filing of final income tax returns for the next following year, submit an application, together with an operational plan, to the authority-in-charge for approval to register an increase of capital. In case of failure to do so within the prescribed period, the tax collection authority-in-charge when collecting its profit-seeking-enterprise income tax for the following year shall collect that amount of tax which was not collected under the exemption allowed in the preceding year.
ARTICLE 8:
Where a productive enterprise invests under Article 7 its undistributed profits in an expansion of its machinery or equipment, the new stocks issued to shareholders or the increased value of old stocks held by shareholders or the increased value of old stocks held by shareholders as a result of the capital increase shall be excludible from the shareholders' consolidated income or profit-seeking-enterprise income of the taxable year for taxation.
Where a productive enterprise uses its undistributed profit of the current year as in excess of the percentage provided for in the preceding Article, for payment of machinery and equipment purchased with loans or on installment payment basis, the income tax as shall be withheld for the income of dividends distributed to shareholders in the form of new registered stocks issued as a result of the capital increase may be paid at the time when such stocks are transferred to other persons.
ARTICLE 9:
Where a productive enterprise organized as a company makes investments in other domestic companies limited by shares, which are not exempt from profit-seeking-enterprise income tax, its income from such investments shall be excludible from the amount of its taxable income for taxation.
ARTICLE 10:
Where a productive enterprise sets aside as reserve the gain realized from the issue of spare certificates above par value, as it is so provided in the Company Law, the amount of such gain shall be excludible from its taxable income.
ARTICLE 11:
Where a person sells corporate stocks or bonds issued by profit-seeking-enterprises or Government bonds which he previously purchased or otherwise acquired and which he has held for one year or more, the gain realized from such a sale above the cost shall be excludible from his taxable income. In the case of losses incurred as a result of such sale, a deduction for such losses is allowed from his taxable income for the taxable year.
ARTICLE 12:
The Income Tax Law provisions for filing of final income tax returns shall not apply to an individual who has no domicile or residence within the territory of the Republic of China, nor to a foreign profit-seeking-enterprise which has no branch or sub-branch office or agent within the territory of the Republic of China, but who or which has profit earnings as shareholder of a corporation or as partner of a partnership. The income tax payable by any such taxpayer shall be withheld by the withholder as defined by the Income Tax Law at the time of payment at ten per cent of the amount payable or distributable.
ARTICLE 13:
A productive enterprise which incurs a foreign currency debt for purchase of productive equipment with approval of the authority-in-charge may set aside each year from its profits, starting from the year in which such debt is incurred, as special reserve for foreign currency debt exchange loss to be used solely for compensating losses incident to exchange rate adjustment, an amount not exceeding seven per cent of the unpaid balance of the foreign currency debt calculated in local currency at the exchange rate prevailing at the time of closing of accounts for the current year, in accordance with the following provisions. Such special reserve shall not be included as taxable profit-seeking enterprise income.
1. In case a reserve for compensation for assets appreciation has been set aside or a revaluation of the fixed assets has been made in accordance with law, the special reserve for foreign currency debt exchange loss to be set aside for the current year as provided for in this paragraph shall be limited to the amount in excess of the reserve for compensation for assets appreciation set aside for the current year or the amount of depreciation charge additionally set aside as a result of appreciation of assets through revaluation.
2. The aggregate of accumulated balances of special reserve for foreign currency debt exchange Joss, reserve for compensation for assets appreciation and additional depreciation charge set aside after assets appreciation through revaluation shall not exceed the unpaid balance of foreign currency debt, calculated in local currency at the exchange rate prevailing at the time of closing of accounts for the current year.
A financial institution which loans its foreign currency obligation funds to any such enterprises as referred to in the preceding paragraph may set aside each year, as special reserve for foreign currency debt exchange loss, an amount not exceeding seven per cent of the unpaid balance of the foreign currency debt calculated in local currency at the exchange rate prevailing at the time of closing of accounts for the current year; provided, however, that this provision shall not apply to any portion of the foreign currency obligation funds which has not been so loaned, or if so loaned, is contracted for repayment by the borrowing enterprise in the original foreign currency or in local currency at the exchange rate then in effect.
Sub-paragraph 2 of Paragraph 1 shall apply, mutatis mutandis, to the limitation on the accumulated balance of special reserve for foreign currency debt exchange loss provided for in the preceding paragraph.
In the event there is a loss in exchange from adjustment in foreign exchange rate when the enterprise or financial institution referred to in this Article makes repayments, the loss in exchange actually incurred shall first be set off against the special reserve for foreign currency debt exchange loss mentioned above. When foreign currency obligations are fully liquidated, the special reserve for foreign currency debt exchange loss shall be transferred as profit for the current year and be distributed and taxed accordingly.
Foreign currency obligations referred to in this article mean such obligations which must be repaid in the original foreign currency or the equivalent thereof in local currency calculated at the foreign exchange rate prevailing at the time of repayment, as may be provided for in the loan agreement.
ARTICLE 14:
Profit-seeking enterprises operating in the Province of Taiwan may revalue their assets in accordance with the following provisions, with the first day of January 1961 as the base day for revaluation. Thereafter, whenever the wholesale price index of Taipei as compiled by the Controller's Office of the Taiwan Provincial Government exceeds by twenty-five per cent or more such same index for the year in which this Statute came into force or in which the last revaluation was made, similar revaluation may be effected, subject to the approval of the Ministry of Finance and the competent authorities-in-charge, in accordance with the following provisions, with the ending day of the fiscal year of the enterprise concerned as the base day for such revaluation:
1. Scope of revaluation: Limited to the three categories of assets referred to in Article 50, 59 and 60 of the Income Tax Law, namely: general fixed assets, depletion assets in the nature of resources and amortizable intangible assets.
2. Quantity of assets to be revalued: Limited to the quantity of assets referred to in the preceding sub-paragraph on the base day, as shown in the books.
3. Method of revaluation:
(1) The value of revalued assets shall not exceed that worked out by the following formulae of revaluation as the case may be:
(a) Assets acquired in Taiwan prior to 1945:
(Book value as of 12/31/1945 - Accumulated depreciation reserve starting 1946)
x General wholesale price index in Taipei of the year in which the current revaluation is made
___________________________________________________________________________
Wholesale price index in Taipei of 1945
= Value of revalued assets.
(b) Assets acquired in Taiwan subsequent to 1945:
(Value of acquisition - Accumulated depreciation reserve)
x General wholesale price index in Taipei of the year in which the current revaluation is made
___________________________________________________________________________
General wholesale price index in Taipei of the year of acquisition
= Value of revalued assets.
(c) Assets acquired outside of Taiwan and brought to Taiwan subsequent to October 25, 1945:
(Book value in old or new Taiwan dollars in the year of import into Taiwan - Accumulated depreciation reserve starting that year)
x General wholesale price index in Taipei of the year in which the current revaluation is made
___________________________________________________________________________
General wholesale price index of the year of import
= Value of revalued assets.
(d) Assets revalued in 1949, the year of currency reform, or in subsequent years:
(Value as determined by previous revaluation - Accumulated depreciation reserve)
x General wholesale price index in Taipei of the year in which the current revaluation is made
___________________________________________________________________________
General wholesale price index in Taipei of the year in which the previous revaluation was made
= Value of revalued assets.
(2) Where the assets acquired prior to the currency reform of 1949 have not been revalued thereafter, the amount of the accumulative depreciation reserve in the formulae shall be converted into the old Taiwan dollars according to the exchange rate of the old Taiwan currency to the new Taiwan currency and then be deducted.
(3) If, at the time of revaluation, the general index of wholesale prices of the year in which the revaluation is to be made has not yet been compiled due to the fact that it has not yet reached the end of the year, the average of the general indices of wholesale prices of the twelve months preceding the month to which the base day for revaluation belongs shall be taken as the general index of wholesale prices of the revaluation year.
The appreciated value of assets resulting from revaluation shall not be taxed as income.
Regulations for revaluation of as sets shall be prescribed by the Executive Yuan.
ARTICLE 15:
Where an individual subscribes to the registered shares or registered corporate bonds maturing in not less than three years, or registered government development bonds, as referred to in Article 48 of this Statute, maturing in not less than three years, on their original issue for the establishment or expansion of an enterprise engaged in any of the basic metal industries, electrical and electronic industries, machinery manufacturing industries, transportation equipment manufacturing industries, chemical fertilizer industries, petro-chemical industries, pulp manufacturing industries, or industries for construction of pipelines for supply of natural gas conforming to the standards as may be prescribed by the Ministry of Economic Affairs, the amount of money paid for acquisition of such shares or bonds may be deducted, up to 25 per cent of the taxpayer's net income for the year of acquisition, from the subscriber's total income for the third year of continuous holding subsequent to acquisition, leaving only the balance thereof for taxation. In case the total deducible amount cannot be fully deducted in the third year, the balance may be deducted from the consolidated incomes, if any, in the years subsequent to that third year; provided, however, no deduction shall be made from the income obtained in the years later than the fifth year after acquisition.
The subscribers to the original issue of registered shares or bonds referred to in the preceding paragraph who fall under the provision of this Article may apply to the tax collection authority for exemption or deduction of income tax, as the case may be, against the certificates furnished by enterprises or government agencies issuing such registered shares or bonds.
ARTICLE 16:
When an individual makes a fixed-term savings deposit for two years or more with a financial institution handling savings deposits under the chapter on Savings Bank of the Banking Law, the interest accrued thereon shall be exempt from withholding and from levy of consolidated income tax; provided, that this shall not apply where such deposit is withdrawn before the expiration of the period of two years.
Where a depositor withdraws his fixed-term savings deposit before the expiration of the two-year period, the financial institution handling the savings deposit shall withhold at the withholding rate of the current year income tax payable by the depositor for the interest payable to him on such deposit. In case the deposit is so made that interest is payable at fixed intervals, withholding of income tax for previously paid interest as originally exempted shall be made in a lump sum at the time of withdrawal of the deposit and at the prevailing withholding rate of the year in which withdrawal of the deposit is made.
Where income tax has been made good in accordance with the preceding paragraph for the interest paid on fixed-term savings deposit on which interest is payable at fixed intervals, in consequence of withdrawal of the deposit before the expiration of the period of two years, the amount of income tax so withheld shall be included in the total amount of consolidated income tax payable for the year of withdrawal when such consolidated income tax is assessed.
The receipt for such fixed-term savings deposit, for which income tax is exempt under this Article, may not be pledged as collateral for loan from any financial institution.
ARTICLE 17:
A profit-seeking enterprise engaged in any of the following export business activities shall be exempt from business tax on its amount of business as stated in the invoices issued by it:
1. Export of goods;
2. Commission or sale of goods to exporters for export or direct sale of raw materials to exporters who undertake the processing of the raw materials into finished goods and the export of such goods;
3. Processing of export goods by commission from the exporters;
4. Furnishing of raw materials, goods or services among factories or suppliers who are shareholders of united export trade companies for the purpose of facilitating export business under joint management;
5. Handling international transportation; and
6. Obtaining of foreign exchange through the rendition of services, which is settled with the banks designated by the government.
In applying for the exemption from business tax for export business activities described in the preceding paragraph, the taxpayer shall make an application to the tax collection authority-in-charge against evidence of export at the time when business tax returns are filed; provided, however, that for business activities specified in sub-paragraphs 2, and 4 of the preceding paragraph, if no such evidence of export can be presented at the time of filing business tax returns, exemption may be granted against uniform invoices issued by the taxpayer and certified by the exporter, who shall submit, within a prescribed period of time after export of the goods involved, the required evidence of export to the original tax collection authority-in-charge for checking. Exporters who are qualified for certifying such invoices are limited to those having good credit standing in handling export business and are approved by the authorities in charge of foreign exchange and foreign trade. If the goods or raw materials listed in the uniform invoices certified by exporters are not, partially or totally, exported within the prescribed period of time, the exporters who have certified such invoices shall, within ten days after expiration of the prescribed period of time, effect payment of the business tax exempted. For each day of delay in payment after the ten-day period, a surcharge for belated payment equal to one per cent of the amount of tax payable shall be paid. If payment of the tax payable is still in default after 30 days, the case shall be referred to the court for compulsory execution, and, in addition thereto, the exporter involved may be ordered to suspend its business operation.
ARTICLE 18:
Where a profit-seeking enterprise obtains income in foreign exchange by engaging in export business described in Paragraph 1 of the preceding article, an exclusion in an amount equal to two per cent of the total amount of its income derived from settlement of such foreign exchange is allowed from its total income of the current year, if evidence of export is presented.
The provision of the preceding paragraph shall apply mutatis mutandis to the income in foreign exchange obtained by individuals through the rendition of services.
ARTICLE 19:
A profit-seeking enterprise engaged in export business may, upon approval of the authority-in-charge according to prescribed criteria, charge the actual amount of expenses defrayed for sending its personnel abroad to promote export business as its operational expenses in case the amount of such expenses exceeds the amount authorized under the criteria set forth in the Income Tax Law.
The prescribed criteria referred to in the preceding paragraph shall be stipulated by the Ministry of Finance in conjunction with other government agencies concerned.
ARTICLE 20:
For the purpose of promoting export trade, the Government may appropriate funds to conduct export insurance on a non-profit-seeking basis. Regulations governing the enforcement of such an undertaking shall be prescribed by the Executive Yuan.
If the establishment of the fund mentioned in the preceding paragraph is to be financed with appropriations from the national Treasury, a budget and a project plan shall be transmitted to the Legislative Yuan.
ARTICLE 21:
The levy of security exchange tax shall be suspended.
ARTICLE 22:
Where investment of land is made into a productive enterprise conforming to the encouragement criteria set forth in this Statute, the land value increment tax payable by the investor may be paid in five equal annual installments starting from the year in which the land is invested if the payment of such increment tax in installments is secured, by consent of said productive enterprise, by the land involved in the investment and to be acquired by the enterprise or by the share certificates issued by the enterprise and to be acquired by the investor.
The land for investment as mentioned in the preceding paragraph shall be limited to land for the productive enterprise's own use. In case of retransfer thereof, the unpaid balance of the land value increment tax shall be paid by the investor in a lump sum.
ARTICLE 23:
Where a productive enterprise imports from foreign country machinery or equipment, of which kind domestically manufactured items are unavailable, for use by the enterprise for the production of goods or rendition of services, the import duties and dues payable on such machinery or equipment may, upon furnishing guarantee by the enterprise, be paid in installments beginning one year after the date on which such machinery or equipment begins to produce goods or to render services. In case of failure to pay the installment when due, the case shall be referred to the court for compulsory execution. Regulations governing the enforcement thereof shall be prescribed by the Ministry of Finance in conjunction with the Ministry of Justice.
An enterprise organized in the form of a company limited by shares under the Company Law and engaged in any of the basic metal industries, electrical and electronics industries, machinery manufacturing industries, transportation equipment manufacturing industries, chemical fertilizer industries, petrochemical industries, pulp manufacturing industries, or industries for the installation of pipelines for supply of natural gas in conformity with the standards as may be prescribed by the Ministry of Economic Affairs, which has received a total paid-up capital of 30,000,000 yuan or more at one investment, shall be exempt from payment of import duties and dues on machinery or equipment, of which kind domestically manufactured items are unavailable, imported by the enterprise for its own use at the time of the establishment of the enterprise according to the approved plant establishment project; provided that such import duties and dues originally exempted shall be collected if the enterprise involved reduces its capital or transfers the imported machinery or equipment in any manner to other persons for use within five years after the import of such machinery or equipment.
ARTICLE 24:
Where a productive enterprise, with special approval of the authority-in-charge, renovates its machinery or equipment for the purpose of increasing its productive or service capacity, the service years of such machinery or equipment may be reduced by one-third of the service years prescribed by the Income Tax Law for the same kind of fixed assets, for the purpose of depreciation. If the period of time thus left over does not amount to one year, it shall not be counted.
The machinery and equipment referred to in the preceding paragraph shall be limited to entirely new and unused machinery and equipment and, within one month after completion of the installation of such machinery or equipment, an application shall be submitted, together with pertinent certificates, to the authority-in-charge for inspection certificates which will serve as evidences for accelerated calculation of depreciation.
In case the productive enterprise involved is a public-operated enterprise, whether its machinery and equipment shall be depreciated at an accelerated rate as provided in this Statute shall be determined by budgetary procedures.
ARTICLE 25:
Stamp tax shall be exempt on the execution, delivery, or use of the following types of documents to which the provisions of the Stamp Tax Law are applicable:
1. Any document executed abroad.
2. Receipts for delivery of goods.
3. Contract slips, receipts or other written evidence of transaction in securities.
ARTICLE 26:
Stamp tax or stamp tax rates on the following types of documents are revised as follows:
1. Books recording capital investments, one yuan a piece per year;
2. Agreements of loans, mortgages, or pledges, and written acknowledgment of debts and debentures, 0.02 per cent apiece on the amount involved if less than 500,000 yuan or 100 yuan apiece if the amount exceeds 500,000 yuan, with revenue stamp for the appropriate amount to be affixed thereon by the person executing or issuing any such document;
3. Discount contracts, acceptance contracts, promissory notes, bank drafts, or bills of exchange, one yuan apiece if the amount involved is less than 100,000 yuan, or four yuan apiece if the amount exceeds 100,000 yuan, with revenue stamp for the appropriate amount to be affixed thereon by the person executing or issuing any such document;
4. Contract for future delivery of goods or services, four yuan on each contract and 20 cents apiece for receipts or other written evidence in respect thereof, with revenue stamp for the appropriate amount to be affixed thereon by the person executing any such document. Where a contract and a delivery order are executed on one and the same transaction, revenue stamps shall be affixed on both of them;
5. Invoices issued for transactions referred to in Article 17, 0.1 per cent apiece on the amount stated in the invoices, with revenue stamp for the appropriate amount to be affixed thereon by the person executing or issuing any such document.
ARTICLE 27:
In the case of a profit-seeking enterprise having its headquarters or principal office within the territory of the Republic of China but maintaining branch or sub-branch offices or agents abroad, business tax shall be imposed only on the amount of business done by its headquarters or principal office, exclusive of the amount of business done by its branch or sub-branch offices or agents abroad.
A foreign profit-seeking enterprise which has no branch or sub-branch offices or agents within the territory of the Republic of China shall be exempt from business tax on any business originating within the territory of the Republic of China; provided that this shall apply only to those foreign enterprises in whose countries business tax is also exempted on business originating within the territory of such countries and conducted by profit-seeking enterprises of the Republic of China having no branch or sub-branch offices or agents therein.
ARTICLE 28:
Deed tax on real property used by productive enterprises directly for productive purposes shall be imposed at half the statutory rate.
ARTICLE 29:
Buildings, machinery and equipment owned by a productive enterprise for its own use shall be exempt from household tax.
ARTICLE 30:
Except otherwise provided for in Article 12 of this Statute, the income tax exemption and deduction provisions of this Statute shall not apply unless the profit-seeking enterprise or individual concerned has duly filed its or his income tax returns in conformity to the Income Tax Law; provided that this restriction does not affect the applicability of the profit-seeking-enterprise income tax rates as provided for in Article 6 of this Statute.
ARTICLE 31:
Productive enterprises the operation of which is economically inadvisable and are thus specially approved by the Ministry of Economic Affairs for merger or consolidation for the purpose of promoting reasonable operation and management shall be exempt from all income tax, stamp tax and deed tax payable as a result of such merger or consolidation. Where the industrial or mining land previously used by these enterprises directly are transferred along with the merger or consolidation, registration shall be effected for the transfer of the ownership of the land immediately after the current value of the land have been duly assessed. The land value increment tax payable may be entered to credit and paid by the enterprise resulting from the merger or consolidation at the time when the land is further transferred.
In the case of bankruptcy or dissolution of the enterprise resulting from merger or consolidation, as referred to in the preceding paragraph, the land value increment tax previously entered to its credit shall be paid in priority over all other indebtedness.
If the enterprise resulting from merger or consolidation as referred to in the first paragraph above is a productive enterprise conforming to the encouragement criteria set forth in Article 3 herein, it may continue to enjoy the five-year income tax exemption as may be originally granted to any of its predecessors prior to the merger or consolidation, until the expiration of the period of tax exemption previously approved for such preceding productive enterprises.
ARTICLE 32:
The house tax payable on standard factory buildings constructed for lease in industrial districts shall be exempt to such an extent as shall be annually decreased, for a period of five years starting from the tax collection period in which the date of the lease of such buildings falls. The tax is totally exempt for the first year, reduced by eighty per cent in second year, sixty per cent in the third year, forty per cent in the fourth year, and twenty per cent in the fifth year.
Chapter III Acquisition of Land for Industrial Use
ARTICLE 33:
In order to meet the needs of economic development, the Executive Yuan shall first allocate public land areas to be designated as industrial land for industrial development purposes.
Where public land referred to in the preceding paragraph is insufficient for such allocation, private farmland may be converted for use and designated as industrial land.
ARTICLE 34:
Land which has been designated as industrial land under this Statute shall not be put to any use unrelated with industry; provided that this restriction shall not apply to using the land in the same manner as it has been used before it is actually converted into industrial use.
ARTICLE 35:
Where any land designated as industrial land under this Statute is located within the jurisdiction of the Statute for Equalization of Urban Land Rights, prices for such land shall be prescribed and land tax shall be collected in accordance with the provisions of said Statute. Where any such land is beyond the jurisdiction of said Statute, prices for such land shall be prescribed in accordance with the provisions of the Land Law and land tax shall be levied at the time when the land is converted into direct industrial use, in which case, the provision of Article 15, Paragraph 2, of the Statute for Equalization of Urban Land Rights concerning tax rates shall apply.
Upon transfer of any such land as referred to in the preceding paragraph, land value increment tax shall be levied. Revenue from the collection of such land value increment tax shall be dealt with as provided in Article 37 of the Statute for Equalization of Urban Land Rights.
ARTICLE 36:
If land in a designated industrial land area is needed by an entrepreneur for industrial establishment, the government shall effect zone requisition in accordance with the Land Law, make necessary adjustments thereon, sub-divide the land into lots, and sell the land to him. The original land owner or other title holder is entitled to priority to acquire the land if he is to use it for establishing an industry or for expanding an existing industry.
ARTICLE 37:
Deed tax shall be exempt for registration for transfer of ownership of the land expropriated by the Government or purchased upon mutual agreement for the purpose of developing industrial districts approved by the Government.
Where it is proved that no gaining was realized out of the land expropriated or purchased, as referred to in the preceding paragraph, prior to its sale to an entrepreneur, no land tax shall be levied.
ARTICLE 38:
Where a tenanted farmland within the area of designated industrial land is to be converted to industrial use, the lessor may terminate the lease with the lessee in respect of that part of the land as may be converted to such use, irrespective of whether the land is to be so used by the owner himself or to be sold or leased for such use.
In case the lessor terminates the lease under the preceding paragraph, he shall, in addition to paying the lessee for the cost of land improvement and unharvested crops, pay a compensation to the lessee amounting to one-third of the land price.
The land price referred to in the preceding paragraph shall be determined in accordance with Article 239 of the Land Law.
ARTICLE 39:
Private-owned farmland outside the limits of areas designated by the government as industrial district may be purchased or leased for conversion into industrial land, if it is certified by the Ministry of Economic Affairs that such farmland is necessary for the establishment of new industries or the expansion of existing industries.
If the farmland referred to in the preceding paragraph is cultivated land held under a lease, the lessor may terminate the lease by applying, mutatis mutandis, the preceding Article. If the land is government distributed land under the public farmland sales program, the purchaser may make full payment of the land price any time in advance of maturity.
ARTICLE 40:
Where purchase or lease of the land adjacent to an existing industrial enterprise is required thereby for the construction of necessary access roads and the construction project thereof has been approved by the authority-in-charge, it may, by mutatis mutandis application of the preceding article, convert such land into industrial use by having the original lease terminated or the full land price paid in advance of maturity, if the land has not been designated as industrial land.
ARTICLE 41:
For the construction of public housing units, the provision of Article 39, Paragraph 2, of this Statute may be applied mutatis mutandis to enable the investors to purchase farmland or to hold same under lease for conversion into land for construction use.
Acquisition of land for construction of public housing units under the preceding paragraph may be sought only by those investors whose investment projects have been approved by the Ministry of Interior, and the Ministry shall in this case check from time to time the progress of such investment projects.
ARTICLE 42:
If the land to be purchased or leased by investors in productive enterprises conforming to the encouragement criteria referred to in Article 3 for the purpose of establishing self-operated farms, ranches, or forests according to investment projects approved by the authority-in-charge is public land not yet sold or leased or is agricultural and forest marginal land not yet utilized in accordance with law, priority shall be given to such investors for the purchase or lease of such land.
ARTICLE 43:
Public waste land which is not utilized but has been designated by the Government or chosen by public or private enterprise and thereafter designated by the Government as land suitable for agricultural, fishery or animal husbandry use may be developed or reclaimed with investments furnished by governments of various levels or by public or private enterprises by filing application for such purposes. Following completion of the development or reclamation projects, the governmental agencies or public or private enterprises undertaking such development or reclamation shall acquire, free of charge, the right to the use of the developed or reclaimed land. If the use of land is continued for five years, the user shall acquire, free of charge, ownership of the land. In case the land is used for agricultural operation, it shall be dealt with by the Government in accordance with the Land-to-the-Tiller Statute if and when the enterprise which undertook the development or reclamation of the land is dissolved.
Regulations governing the development or reclamation of the public waste land referred to in the preceding paragraph shall be prescribed by the Executive Yuan.
ARTICLE 44:
If the entrepreneur who has purchased or held the land under a lease or caused the original contract for lease thereof terminated for industrial use under this Statute fails to start making use of the land within one year from the date of purchase, lease or termination, or fails to complete the project within the time limit set forth in the plan approved by the Ministry of Economic Affairs, he shall be liable to imposition by the hsien or municipal government concerned of a fine equivalent to the original purchase price or four times the rent of the land held by him under a lease or originally in leasing-holding, as the case may be, and the land shall be disposed of as follows:
1. In the case of land acquired through purchase of government requisitioned land under Article 36 of this Statute, it shall be bought back by the government at the original price for appropriate disposal.
2. In the case of land whereof the contract for lease was terminated under Article 38 of this Statute for use or purchase by or lease to the investor, it shall be purchased by the Government at the statutory price for disposal.
3. In the case of land purchased under Article 39 through 42 of this Statute, it may be bought back by the Government at the original price for disposal.
4. In the case of land leased under Article 39 through 42 of this Statute the contract for lease thereof shall be cancelled and the land shall be re-leased as farmland, with first priority for the re-lease given to the original leasee of the farmland; provided that, where the land was originally owned by a tiller and no collaboration has been found between the lesser and the lessee for the purpose of changing the category of the land, the owner of such land is permitted to continue tilling of the land.
For good cause shown, applications may be filed with the Ministry of Economic Affairs for an extension of the time limit for commencement of making use of the land and for completion of the project, as referred to in the preceding paragraph; provided that only one such extension may be granted for commencement of making use of the land and the extension shall not exceed six months.
Chapter IV Co-ordination of Public Enterprise with Private Enterprise
ARTICLE 45:
In order to improve the productive know-how of public enterprises to renovate or expand their equipment and to establish modern industries, the government may enter into joint enterprises by co-ordinating investments with land, plant buildings, machinery, equipment and services of public enterprises and with import duties collectible on machinery and equipment imported for such purposes.
For the undertaking of such joint enterprises as referred to in the preceding paragraph, the Executive Yuan shall first submit individual plans to the Legislative Yuan.
ARTICLE 46:
Public-operated enterprises which may be transferred to private ownership may be so transferred, after the plan proposed by the Executive Yuan to effect the transfer has been approved by the Legislative Yuan, through listing of their stocks on the stock market, in which case Article 4 and Article 5 of the Statute for the Transfer of Public-operated Enterprises to Private Ownership shall not apply.
All gains realized from the sale of the stocks referred to in the preceding paragraph above the cost shall be excludible from the taxable income. Income tax, stamp tax, deed tax, or other taxes resulting from the reorganization and liquidation of such public-operated enterprises shall likewise be exempt.
ARTICLE 47:
The Executive Yuan shall, starting from the date of amendment and promulgation of this Statute, establish a development fund and shall assume the responsibility of using proceeds derived from the transfer of public operated enterprise to private ownership for the following purposes, and shall transmit, in accordance with the procedures for special budget, an outline of the project to the Legislative Yuan for the latter's deliberation and review.
1. For sole investments in industries, other than those for public reconstruction as included in the economic development plans, which are beyond the capability of private investors or of no interest to private investors.
2. For joint investments in industries, other than those for public reconstruction as included in the economic development plans, which are promoted by private investors but with insufficient capital.
All industries invested out of the development fund mentioned in the preceding paragraph shall be organized as companies limited by shares and shall be operated as independent enterprises. Where such enterprises are running at profit, they shall be transferred in accordance with the preceding Article to private ownership or the stocks owned by the development fund shall be sold to private investors. Proceeds from the transfer of ownership or sale of stocks of such enterprises shall be turned over, after the income tax thereon being duly paid off, to the development fund for use as revolving funds. All profits distributable to the development fund through business operation conducted prior to the transfer shall be treated in the same manner.
In the event that the nature of an enterprise invested out of the development fund is that of a public-operated enterprise, the law and regulations applicable to civil servants shall not apply to the directors and employees of such an enterprise, except where criminal responsibilities are involved, in which case they shall be the persons exercising public duties under law and orders; provided that this shall not apply to those directors who are taking current positions as such and are originally of civil servant status.
Detailed regulations governing the management and use of the development fund shall be prescribed by the Executive Yuan.
ARTICLE 48:
For the purpose of raising the required funds, the Government may issue long-term, low-interest development bonds by designating the revenue that shall be pooled into the development fund as a source to finance the payment of capital of and interest on, the development bonds and upon guarantee furnished by the national Treasury.
For the purpose of promoting the issuance and circulation of the development bonds, they may have the following legal effects:
1. The bonds shall be transferable and may be pledged and used as collaterals in connection with transactions of an official character. Income tax shall be exempt for the income of interest to be derived from the bonds.
2. The non-registered bonds as well as the interest coupons attached thereto shall be cashed against presentation of the bonds or the coupons. No claims of loss and request for suspension of payment of both the principal and interest of the bonds shall be made on ground of loss, theft or destruction of the bonds. The proviso to Article 720, Paragraph 1 of the Civil Code and Article 725 and Article 727 of same shall likewise be not applicable to the loss, theft or destruction of the bonds.
3. Where stocks are sold by an industry in which investments out of the development fund has been made, the holders of development bonds may have preferential right to purchase that portion of such stocks as may be owned by the development fund, at their par value, subject to the limitation of fifty per cent of the total amount of par value of the bonds held by them, if it is stated in the bonds that the holders thereof shall have priority for the purchase of stocks to be issued by public-operated enterprises of a specifically designated category in which the foregoing industry falls.
The agency for the management and employment of the development fund shall make joint proposals with the Ministry of Finance for approval by the Executive Yuan concerning the total amount of each individual issue of the development bond, the par value, rate of interest, term for payment of principal and interest, privilege of bond holders to make priority purchase of stocks of enterprises invested out of the development fund, if any, and the banks to be designated for the administration of the bonds.
Chapter V Supplemental Provisions
ARTICLE 49:
If an enterprise entitled to benefits under this Statute has suspended its operation for a continuous period of six months or more, it shall not be entitled to such benefits; provided, however, that this provision shall not apply if approval for such suspension has been obtained from the Ministry of Economic Affairs for good cause shown.
ARTICLE 50:
In order to attain the objective of encouraging investment, the Government shall make its best effort to achieve administrative coordination through the following measures:
1. When a law or regulation may be construed differently, the one most favorable to the investor shall apply.
2. The authorities-in-charge concerned shall make their best efforts to handle cases concerning private investments and export trade expeditiously and free from doubts and with due consideration to the convenience of the investors. Appropriate articles and provisions shall be inserted in the Enforcement Rules of this Statute to simplify administrative procedures and to remove administrative obstacles.
ARTICLE 51:
The Enforcement Rules of this Statute shall be prescribed by the Executive Yuan.
ARTICLE 52:
Except for such provisions as to which there are specific dates of effectiveness prescribed herein, this Statute shall come into force on the date of its promulgation and shall remain in force until December 31, 1970.