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The Legislative Yuan passed the partial amendments to the Statute for Industrial Innovation (hereinafter referred to as the “Statute”) on April 18, 2025, and the amendments were announced by the President on May 7, 2025. The amendments cover three main aspects: “Including Artificial Intelligence and Energy Conservation/Carbon Reduction within the Scope of Investment Tax Credits,” “Enhancing Investment Incentives for Start-ups,” and “Preventing the Outflow of Key Technologies.” The amendments are summarized as follows:
1. Including Artificial Intelligence and Energy Conservation/Carbon Reduction within the Scope of Investment Tax Credits
Article 10-1 of the Statute: In addition to retaining current tax credits for companies or limited partnerships investing in smart machinery, 5G systems, and cybersecurity, new qualifying items for tax credits now include “artificial intelligence products or services” and “energy conservation/carbon reduction.” The maximum eligible expenditure has been raised from NT$1 billion to NT$2 billion, and the implementation period has been extended until December 31, 2029.
2. Enhancing Investment Incentives for Start-ups
(1)Article 23-1 of the Statute: To attract investment in start-ups, the minimum paid-in capital requirement for limited partnership venture capital enterprises qualifying for the pass-through tax regime will drop from NT$300 million to NT$150 million. This change is intended to encourage more venture capital investment in start-ups. In addition, from the third year following their establishment, such enterprises are required to increase either the amount or the proportion of their investments in start-ups, thereby facilitating the earlier injection of capital into start-ups.
(2)Article 23-2 of the Statute: Tax incentives that allow individual investors to deduct personal income tax for cash investments in high-risk start-ups have been updated. The permissible establishment period for qualifying high-risk start-ups is extended from under two years to under five years. The minimum investment is lowered from NT$1 million to NT$500,000. For high-risk start-ups in key national development industries, the maximum deductible amount from individual income increases from NT$3 million to NT$5 million.
3. Preventing the Outflow of Key Technologies
(1)Article 22 of the Statute: To protect key technologies and maintain industrial competitiveness, companies and limited partnerships engaging in overseas investment in “specific countries or regions,” “involving specific industries or technologies,” or “reaching a certain threshold amount” shall obtain prior approval from the central competent authority. Where the central competent authority determines that such investment would affect national security, have an adverse impact on national economic development, or where there exist unresolved major labor disputes, it may decide to deny approval in whole or in part, or to grant approval subject to conditions.
(2)Article 67-3 of the Statute: A newly added provision provides that any company or limited partnership that fails to apply for the required approval prior to making an overseas investment, fails to fulfill the conditions imposed by the central competent authority, or fails to comply with corrective or withdrawal measures ordered by the central competent authority after the investment is made due to grounds for disapproval, may be subject to an administrative fine ranging from NT$50,000 to NT$1 million, or from NT$500,000 to NT$10 million, as the case may be.
The effective dates for Articles 22 and 67-3 of the Statute will be determined by the Executive Yuan after the relevant sub-regulations are promulgated.
In addition to having a significant impact on limited partnership venture capital enterprises and start-ups, this amendment also strengthens the competent authorities’ oversight of future outbound M&A and investment activities by Taiwanese companies or limited partnership funds. It is worth paying close attention to the relevant sub-regulations regarding the scope of the so-called specific countries or regions, industries or technologies, and investment amounts.
