Taiwan Investment Environment

June 2015

Department of Investment Services

Ministry of Economic Affairs

Index

I. Economic Development

II. Foreign Investment

III. Investment Environment

IV. Investment Incentives

V. Industrial Development and

Investment Opportunities

VI. Investment Services

1

Land 36,192 km2

Population 23,462,517 (2014/12)

GDP US$535.5 billion (2014)

Per-capita

IncomeUS$22,823 (2014)

Economic

Growth Rate

3.74% (2014);

3.78% (2015/est.)

Unemployment

Rate3.62% (2015/5)

Inflation 1.20% (2014)

Forex Reserves US$418.96 billion (2015/05)

I. Economic Development

Major Economic Indicators

2

II. Foreign Investment in TaiwanForeign Investment in the Past 10 Years

Source: Investment Commission, MOEA

3

3.58 3.95 4.23

13.97

15.36

8.23

4.80

3.81

4.96 5.56

4.93

5.77 1,078 1,149 1,131

1,846

2,267

1,845 1,711

2,042

2,283

2,738

3,206

3,577

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

2

4

6

8

10

12

14

16

18

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Amount (US$billion)

Cases

Foreign Investment by Country, 1952~2014

Country Amount

(US$100mil)

Ratio% Cases Ratio%

British Possessions in the

Caribbean

242.22 18.33 5,656 14.24

United States 234.99 17.78 5,586 14.07

Holland 207.03 15.67 565 1.42

Japan 182.69 13.82 8,616 21.70

Singapore 77.48 5.86 1,957 4.93

UK 72.12 5.46 791 1.99

Hong Kong 69.03 5.22 4,907 12.36

Samoa 35.61 2.69 1,792 4.51

Malaysia 27.64 2.09 1,456 3.67

Germany 26.02 1.97 686 1.73

Bermuda 21.41 1.62 114 0.29

Australia 17.19 1.30 403 1.01

4

Source: Investment Commission, MOEA

Industry

Approved

Amount

(US$100m

illion)

Percentage

of Total (%)

Finance and

insurance15.71 27.23

Electronic parts

and components8.27 14.33

Wholesale and

retail sales

7.85 13.60

Real estate 4.89 8.48

Support services 2.93 5.09

Industry

Approved

Amount

(US$100

million)

Percentage

of Total (%)

Finance and

insurance367.61 27.82

Electronic parts

and

Components188.53 14.27

Wholesale and

retail sales134.15 10.15

Computers,

electronic and

optical products 66.27 5.01

Information and

Communication62.44 4.73

Foreign Investment by Industry

5

Source: Investment Commission, MOEA

2014 1952~2014

Stock of FDI, 2001 ~ 2014

Unit: US$billion

Source: UNCTAD and Central Bank of the Republic of China (Taiwan)

6

34.75

30.07

37.26

38.28

43.18

50.21

48.64 45.46

55.76

64.2

56.15

59.36

65.79

68.64

0

10

20

30

40

50

60

70

80

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

III. Investment Environment

International Ranking

7

Competitiveness

IMD: 11 (2015)

WEF: 14 (2014)

Business

Environment

WB: 16 (2014)

EIU: 14 (2013-17)

Investment Environment

Risk

BERI: 5 (2015.I)

Economic Freedom

Heritage Foundation: 17 (2014)

Cato Institute: 18 (2014)

Country Credit Rating

S&P’s: AA- (2014)

Moody’s: Aa3 (2014)

Fitch: AA (2014)

6 Major

Emerging

Industries

Strategic

Position

Extensive

Infrastructure

Comprehensive

IP Protection

Investment

Environment

Advantages

Excellent

Talent

Investment Environment Advantages

R&D

Capacity

Industry

clusters

SME

Strength

Soft

Power

8

Supply

Chain

System

Tax

Incentives

Direct Cross-Strait

Air & Sea Transport:

■Direct Transportation Ports

67 ports

■Air Flights828 flights/week

■Cargo Charter Flights

68 flights/week

■Sea ShipmentTaiwan

13 ports, China 72ports

Average sailing time to 5 main

ports (HK, Manila, Shanghai, Tokyo, Singapore) in Asia is merely

53 hours

Average flying time to 4 main cities (Beijing, Seoul,

Tokyo, HK) in Asia is

2 hours & 55 minutes

Strategic Position ─

Critical Transportation Hub

9

Taiwan: An Asian Economic Hub

Direct Cross-Strait

Links

Cross-Strait

Tariff Reductions

Removal of

Non-Tariff Barriers

Full-Function Logistics Centers

Transshipment Trade Goods Distribution Final Processing

10

Excellent Talent and

Intellectual Property Protection

TalentIntellectual Property

Protection

45.4% of the work force is

college/university educated.

320,000 college/university

graduates are produced every

year.

Number of invention patents

per million population: Ranked

No. 1 in the world 2007-2014

(Statistics from Patent Office,

USA)

Intellectual Property Court

began operating in July

2008.

Intellectual Property

Rights Police Team

formed.

Mature trademark, patent,

and copyright laws.

11

Well-Developed Industry Clusters

Nankang Software Park

‧IC design

‧Digital content

‧Biotechnology

Hsinchu Science Parkand Nearby Industrial Zones

‧IC manufacturing

‧Optoelectronics

‧Biotechnology

Central Taiwan Science Park

and Nearby Industrial Zones

‧ Semiconductors,

optoelectronics

‧ Biotechnology

‧ Precision machinery

Changhua Coastal

Industrial Park

‧Metal products, metal

surface treatment

‧Recycling, green energy

Southern Taiwan Science Park

and Nearby Industrial Zones

‧ Optoelectronics

‧ Environmental technology

‧ Automobile parts

‧ Precision machinery

Industrial Zones

Around Kaohsiung

‧ Petrochemicals, iron and steel industry

‧ Metal processing, precision machinery

‧ IC, optoelectronics, communications,

environmental technology

12

Wafer Foundry, IC Packaging, IC Testing, Mask ROMs, IC

Design, DRAMsSemi-conductors

Glass Fabrics, Polyester Filament, PTA, PU Leather, Nylon

Fiber, Functional Textiles, Carbon Fiber

Electrolytic Copper Foil, CD-ROMs, Motherboards, TFT-LCD

Panels, ABS, WLANs, IC Substrates, LEDs, PCBs

Electronic Components

Textiles

Lamps, Bumpers, Sheet Metal, Rearview Mirrors,

Rubber/Plastic Parts, Molds and Dies

Automotive Components

Screws, Nuts, Tin Bars, Electric Scooters, Electric

Wheelchairs, Machine Tools, Plastic Machinery, Blood-

glucose Meters, Contact Lenses, Bicycles

Metalworking Machinery,

Medical Products

Global Supply Chain Center

13

TFT-LCD Panels, OLED Panels, Portable Navigation

Devices, PNDsMonitors

14

Abundant Innovation and R&D Capacity (1)

DCB

TTRI

ITRI

ARTC

CPC

PIDC

16 R&D Institutes

Provide Diversified R&D

Capacity

MIRDC

III

Diversified Industrial Consulting Organizations

208domestic R&D

centers 65 international R&D centers

North: 137

Center: 33

South: 38

Abundant Innovation and R&D Capacity (2)

15

Sources: USPTO, Calculated by TIER, 2015

(Based on USPTO patents - the largest technology market in the world)

All Patents-2014 Invention Patents-2014 Design Patents-2014Invention Patents Per

Mil. People-2014

Rank Nation Cases Rank Nation Cases Rank Nation Cases Rank Nation Cases

1 USA 159,085 1 USA 144,975 1 USA 13,403 1 Taiwan 484

2 Japan 56,401 2 Japan 54,245 2 Japan 1,974 2 USA 455

3 S. Korea 18,224 3 Germany 16,580 3 S. Korea 1,628 3 Israel 432

4 Germany 17,626 4 S. Korea 16,533 4 Germany 931 4 Japan 427

5 Taiwan 12,261 5 Taiwan 11,339 5 Taiwan 908 5 S. Korea 328

6 China 7,973 6 China 7,288 6 China 676 - China 5.3

Number of

Invention Patents

2000-2006, 4th

2007-2014, 5th

Total Number

of Patents

1999-2007, 4th

2008-2014, 5th

Number of

Design Patents

2010-2011, 3rd

2012-2013, 4th

2014, 5th

Number of

Invention Patents/Mil. People

2000-2006, 3rd

2007-2014, 1st

Patent Performance Shows

International Competitiveness

16

Abundant Innovation and R&D Capacity (3)

Management Characteristics of

Agility, Flexibility, and Tenacity

Adaption to Competitive

Challenges of Globalization

Strength of

SME

Strength of SME

17

Plentiful and Mobilized Creative

Capability

Continuously Involving in

Innovative Activities

MIT products have

20% greater value.

「State of cluster

development」ranked

2nd in WEF’s “Global

Competitiveness

Index 2014”.

Able to facilitate

product R&D and

marketing, supports

Just-in-Time

production and lower

production cost.

Taiwan companies

located throughout

the Asia Pacific are

the best resource

integrators.

Taiwan companies

with HQs in Taiwan

closely cooperate

with RHQs of foreign

companies.

Taiwan has developed

electronics industries

for many years and

accumulated intangible

strengths of

manufacturing process

and product

commercialization.

People with legal

concepts and business

habits are accustomed

to international norms.

“Business Efficiency of

SME” ranked 6th in IMD

World Competitiveness

Yearbook 2014.

MIT ValueTaiwan

Companies

Meet

International

Standards

Soft Power

18

Extensive

Infrastructure

Highly-developed sea, air,

and land transportation

Well-developed ICT facilities

Comprehensive

industrial land zoning

Convenient freight

and logistics

■ Fully integrated transportation

network.

■ High-speed rail enables same-day

travel between Taipei and

Kaohsiung.

■ Over 10,000 domestic/overseas

sea/air/land freight and

warehousing companies form a

comprehensive and efficient

transportation network.

■ Taiwan has a well-developed

ICT infrastructure with

97.56% penetration for fixed

line, 84.53% penetration for

household Internet use, and

92.5% penetration for mobile

phones.

■ There are currently 181

industrial zones, 3

science parks, 10

export processing

zones, and 7 free trade

zones.

■ International logistics

companies based in of key

Taiwanese and foreign cities

effectively reduce

import/export/transshipment

times for cargo, enabling the

rapid flow of goods and

information.

Plentiful and low-cost

water/electricity supply

■ Water

Water prices are relatively cheap

compared to many other countries.

■ Electricity

Electricity prices are relatively low

compared to the rest of the world.

Extensive Infrastructure

19

Business Income Tax

• Revised Income Tax Act passed

on May 28, 2010.

• Business income tax reduced

from 25% to 17%.

• The reduced rate is more

favorable than China (25%) and

Korea (22%).

Individual Income Tax

• Reduction effective in 2010.

• Three lowest individual

income tax brackets were

each reduced by 1% in 2010,

and the minimum tax bracket

was increased to NT$520,000.

Inheritance and

Gift Tax

• Reduction effective on

January 23, 2009.

• Highest marginal rate

reduced from 50% to 10%;

inheritance tax credit

increased to NT$12,000,000

and gift tax credit increased

to NT$2,200,000.

Source: MOEA Department of Investment Services

50%

10%

25%

17%

BracketUnder

410,000

Over 410,000,

under

1,090,000

Over

1,090,000

under

2,180,000

Tax

Rate6% 13% 21%

BracketUnder

520,000

Over 520,000,

under

1,170,000

Over

1,170,000,

under

2,350,000

Tax

Rate5% 12% 20%

Competitive Low-Tax Environment

20

Tax Competitiveness: A Comparison with Neighboring Countries

Item Taiwan ChinaHong

KongSingapore South Korea

Corporate

Income Tax17% 25% 16.5% 17% 22%

Personal

Income Tax5%~40 % 3%~45% 15% 2%-20% 8%~35%

Gift and

Inheritance Tax 10% 0% 0% 0% 6%~33%

Value-added

Business Tax5% 17% 0% 7% 10%

Tax Incentive

Policy

R&D

investment

R&D

investment,

high & new

technology

- R&D

investment,

emerging

industries,

operations

headquarters

R&D

Investment,

foreign

investment

21

MOEA

Page 22

IV. Investment Incentives

Tax Incentives

◎Business Income Tax Rate Cut to 17%

◎Biotech Industry Investment Deduction

◎R&D Investment Deduction

◎Private Participation in Public Projects

Special Zone Incentives

◎FTZs

◎Science Industrial Parks

◎Agriculture Technology Parks

◎EPZs

◎Free Economic Pilot Zones

R&D Guidance and Subsidies

◎Advanced Technology Research Plan

◎Integrated R&D Plan

◎Encouragement of Domestic

Enterprises to set up R&D Centers

◎Global Innovation and R&D

Partnership Plan

◎Innovative R&D Program for Small

Enterprises

Financing and Investment

◎Loans for Promoting Industrial Innovation or R&D

◎Preferential Loans for Distribution Services and

Catering Industries

◎Preferential Loans for the Revitalization of

Traditional Industries

◎National Development Fund (NT$150billion in loans,

or direct or indirect investment)

Facilitate

Foreign

Investment

22

1. Tax Incentives

Article 10 of the “Statute for Upgrading Industries” stipulates that up to 15% of expenditures on R&D can be deducted from the amount of business income tax due for the current year, up to 30% of the business income tax due.

To realize the “Light Taxation, Simplified Administration” tax reform policy, as well as to create a fair, efficient, simplified, and internationally competitive tax environment, the business income tax rate has been cut to 17%.

Biotech Industry: A company may, for five years beginning with the year in which it

becomes subject to the corporate income tax, deduct up to 35% of its investment in research and development and personnel training from its corporate income tax due each year;

A profit-seeking enterprises that subscribes to the stock issued by a biotech or new pharmaceuticals company at the time of the latter’s establishment or subsequent expansion, and that has been a registered shareholder of such company for three years or more, may, over five years beginning with the year in which it becomes subject to the corporate income tax, deduct up to 20% of the total amount paid for such subscription.

23

Imported machinery that is not manufactured

domestically may enjoy duty-free treatment.Import Tariff

Exemption

Royalty payments to foreign companies for imported

new production technologies or products that use

patents, copyrights, or other special rights owned by

foreign companies is, with the approval of the

Ministry of Economic Affairs, exempt from the

business income tax.

Income Tax

Exemption

on Foreign

Royalty

Payments

Participants are eligible for a five-year business-

income-tax holiday, investment tax credits, duty-free

import of construction machinery, and reduced house

tax, land-value tax, and deed tax. Profit-seeking

enterprises that invest in private enterprises

participating in major infrastructure projects are

eligible for offsets against the business income tax.

Private

Participation

in Major

Infrastructure

Projects

1. Tax Incentives (cont.)

24

The following incentives are offered for Export

Processing Zones, Science Parks, Free Trade Zones,

and Agricultural Biotechnology Parks:

1. Exemption from import duty, commodity tax, and

sales tax on imported raw materials, fuel,

materials, semi-processed goods, and machinery.

2. Zero business tax on goods and services shipped

abroad and on raw materials, fuel, materials, semi-

processed goods, and machinery procured from a

tax zone.

General Tax

Incentives

Exempt from alcohol tax, tobacco health and welfare

surcharge, trade promotion service fee, and harbor

service fee.

Free Trade

Zones

2. Incentives for Special Zones

25

Subsides are available to defray up to 50% of total

R&D costs, up to maximum of NT$1 million.

Firms that directly supply agricultural goods and

are not engaged in any processing or

manufacturing may apply for reductions or

waivers of basic agricultural electrical fees and

business income tax deductions for electricity

fees.

Agricultural

Biotechnology

Parks

2. Incentives for Special Zones (cont.)

26

Subsidies of up to NT$10 million are available for

approved R&D projects, not to exceed, however, 50%

of total project cost. Science Parks

Subsidies are available for 40% to 50% of total project

cost for the integration of key and cross-sector

technologies.

Integrated R&D Plan

Subsidies are available for 40% to 50%, of total

development funding for new technologies that are not

yet mature in Taiwan and that will, in the future, generate

strategic products, services, or industries.

Advanced

Technology

Research Plan

Subsidies are available for up to NT$2million or 50% of

total spending by domestic enterprises on the

establishment of R&D centers in Taiwan.

Encouragement of

Domestic

Enterprises to Set

Up R&D Centers

Subsidies are available to cover up to 50% of the total

cost of R&D for innovative technologies and services.Innovative R&D

program

for Small Enterprises

Subsidies are available for up to 50% of total spending by

foreign enterprises on the establishment of R&D centers

in Taiwan.

Global Innovation

and R&D

Partnership Plan

3. R&D Guidance and Subsidies

27

Loans for

Industrial

Ｒ＆ＤPromotion

■ Eligible industries: Telecommunications, manufacturing, technical services, culture/creation, and distribution services.

■ Maximum loan: The total amount of a loan may not exceed 80% of the cost of a project, or NT$650 million.

■ Interest rate: Not to exceed the interest on 2-year postal time deposits plus 2.25 percentage points.

Loans for

Distribution

Services

and Food and

Beverage

Industries

■ Eligible Industries: Wholesale and retail sales, food and beverage, and logistics (excepting passenger transportation, shipping, and warehousing services).

■ Total amount of funds available for loans: NT$2billion.

■ Interest rate: Floating rate; the interest rate on for the utilization of long-term funds plus a percentage, not to exceed 1.75 percentage points, added by the lending bank.

Loans for the

Revitalization

of

Traditional

Enterprises

■ Eligible industries: Traditional industries other than emerging, important, and strategic industries.

■ Maximum loan: Up to 80% of the cost of the project, not to exceed NT$600 million.

■ Interest rate: Not to exceed the interest rate on 2-year postal time deposits, plus 2.25 percentage points.

4. Loans and Investment

---Low-interest Loans

28

Scope of investment:

－IT, communications technology, aerospace,

and digital content industries.

－Investment projects of domestic SMEs.

Investment ceiling: Government-held shares

may not exceed 49% of the total.

National Development Fund

4. Loans and Investment (cont.)

---Government Participation

29

2. Cross-sector

Integration

1. Service and

System

Integration

Service and system integration to replace hardware

manufacturing.

V. Industrial Development Trends

and Investment Opportunities

30

Change of

Population

Structure

Technology

Integration

Climate Change

Energy Saving

Environment Protection

Diversified

Lifestyle

Intellectuali-

zation

Research

Innovation

Int’l Development

Trends

Green

Opportunities

Enviroment

protection

Technology

Business

Model

Innovation

Value-added

Software and

Services

Innovative

Talent

Integrated

Technology

Application

Digital Tech

Innovation

Living

Technology

Intelligent

Living

Intelligent Green Culture/ Creative

Energy Saving

Technology

Elements of agriculture, industry, services, etc. to integrate

and become main power for developing innovative and new

industries.

GoalsStrategiesThemes

Forward-looking

Trends, Upgrading of

Industrial Quality

Development Goals(20132020)

Total production value of manufacturing sector

NT$13.93T 19.46T

GDP of service sector administered by MOEA*

(2011→2020)NT$3.03T→4.75T

Nurturing new

creation – facilitate

establishment of new

industries

Expanding systems -

build systematic

problem-solving

capability

Providing key

components - establish

comprehensive supply

chain system

Increasing value/

quality – upgrade

product quality level

and value

Assist Mittelstand – stimulate more

Mittelstand development

Nurture

Emerging

Industries

Strengthen

Major

Industries

Renew

Traditional

Industries

Industrial Upgrading and Transforming Action Plan

31

*Service sector administered by MOEA includes wholesale & retail sales, catering, logistics, consulting, information services,

design, advertising, exhibitions, digital content, wireless broadband applications, health promotion, automation engineering

technology, cloud computing, e-commerce, energy, and technical services: 15 industries in total.

Renew Traditional Industries

- Increasing value/quality

Strengthen Major Industries

- Providing key component

Strengthen Major Industries

- Expanding systems

Nurture Emerging Industries

- Nurturing new creation

High-value petrochemical products

High-value metal products

High-value textile products

Safe and secure food system

Aerospace materials/components

Deep sea applications

Intelligent energy-saving electric

/home appliances

Internationalized generic drugs

Machine tool controllers

Flat panel display materials

Semiconductor materials

High-end process equipment

Adv’d electronic components

Bike electronic actuators

Key silicon IP and chip

systems

Wireless broadband application

Energy technology services

Information services

Intelligent automatic

production solutions

Cloud data center solutions

Green energy systems

integration and operations

Turnkey exportation

Lifestyle innovation services

Energy ICT services

Wholesale and retail sales

Catering

Logistics

E-commerce

Health promotion

B4G/5G communication systems

New drugs and medical materials

3D-Print manufacturing

Next-generation electronic devices

Electric vehicles

Smart city and wisdom networking

Cloud industry and big data analysis

Digital content

Strategic services

Design industry

Intelligent automation engring tech

Key Industries for Short- and Medium-term Development

32

Manufacturing sector

Service sector

Major Industries for Foreign Investment

Offshore Wind Power

Turbine

International Logistics-

related Services

Electric Vehicles Information Services

Mobile Broadband

ServicesDigital Content

Semiconductor EquipmentBiotech and

Pharmaceuticals

Electronic Materials

33

Item Investment Opportunities

Offshore wind

power

machinery

industry

1. The target for installed wind power capacity by 2020 is 0.32GW.

2. At least 64 offshore wind turbines required.

3. Maritime engineering: Need to establish construction technology and provide

working ships.

Electric

vehicle

industry

1. Passenger buses: A total of 10,000 passenger buses will be needed by 2023,

providing market opportunities projected at 65 billion NT dollars.

2. Trucks: Around 3,000 garbage trucks will be replaced and about 5,000 short-range

freight trucks will be required, providing business opportunities worth approximately

15 billion NT dollars.

Mobile

broadband

services

industry

1. Licenses for 1.4G LTE spectrum released in 2013 are expected to offer business

opportunities involving more than 70,000 macro base stations and over 1 million small

cells.

2. Business opportunities will arise from the 10 billion NT dollars that the government

expects to invest in promoting innovative mobile broadband application services.

International

logistics-

related

services(4G)

1. Installation of intelligent logistics software needed for the deployment of ICT and

other technologies necessitated by the operation of free economic pilot zones.

2. Software investment opportunities include cloud service platforms for logistics,

information management systems for supply chain collaboration, goods-tracing

management platforms, shipment-tracking management platforms, inventory-

financing service platforms, and value-added warehousing, shipping, and transit

platforms.

Semiconduct-

or factory

expansion

Semiconductor companies will spend more than 10 billion US dollars on capacity

expansion, and this will give rise to potential opportunities for the supply of whole-plant

semiconductor equipment along with consumable parts and components for

semiconductor equipment.34

Industrial Investment Opportunities

Agencies of

MOEA

1.IDB2.DoIT

3.EPZA

4.DoC

5.BoE

6.SMEA

35

VI. Investment Services

Department of

Investment

Services

Investment Promotion Offices

1.TUSA

2.TJPO

3.Industrial Development and

Promotion Committees

Ministry of

Economic Affairs

Local

Governmental

Investment

Services

InvesTaiwan

Service Center

Central Government

1.Min. of The Interior

2.Min. of Trans. & Com.

3.Min. of Finance

4.Min. of Culture

5.EPA

6.Min. of Health and

Welfare

7.Council of Agriculture

…..Investment

Commission,

MOEA

(Investment

review)(Investment

Promotion)

(Investment Assistance)

1. Promotion of domestic and foreign investment and technical

cooperation

2. Assistance for and promotion of investment by returning

Taiwanese businesses

3. Pinpointing and collation of investment opportunities

4. Promotion of investment projects, follow-up, and removal of

obstacles

5. Publication of investment guides and investment-related laws

and regulations

6. Promotion of the recruitment of overseas technology personnel

7. Promotion and liaison in regard to bilateral and multilateral

investment affairs

Please make full use of DOIS services

Department of Investment Services, MOEA8F., No. 71, Guanqian Rd., Taipei, Taiwan

Tel: 02-23892111

E-mail: dois@moea.gov.tw

Website: http://www.dois.moea.gov.tw

36

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38