Amendments to the Industrial Innovation Regulations (the so-called "Taiwan Chip Law") passed by Taiwan's Legislative Yuan on January 7, 2023. The purpose of the amendment is to consolidate and strengthen the competitive advantages of Taiwan's key industries in response to the new competitive pressure brought about by the restructuring of the global supply chain.

The key points of this amendment are as follows:

1. Applicable Entities: For companies with technological innovation and a key position in the international supply chain, their R&D expenses and R&D reach a certain scale, and the effective tax rate reaches a certain rate, regardless of industry category.

2. Tax incentives: 25% of the research and development expenses of the applicable entities and 5% of the expenditures for purchasing new machines with advanced manufacturing processes can be deducted from the current year's profit-making enterprise income tax, and there is no upper limit for the expenditure on such machines or equipment, and single investment. The credit shall not exceed 30% of the profit- making enterprise income tax payable in the current year, and the total amount of investment credits shall not exceed 50% of the profit-seeking enterprise income tax payable in the current year when the investment credits are combined and applied.

3. Implementation period: From January 1, 2012 to December 31, 2018

The amount of the deduction provided by this amendment is the highest in history. The Taiwan government also pointed out that in addition to adding relevant tax incentives, it will continue to optimize the basic investment environment, improve administrative efficiency, and ensure a safe supply of talents, so as to promote the continued development of key industries and technologies for the next generation and allow Taiwan to continue to lead.