Research and development (R&D) tax credit in Taiwan

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Companies investing in research and development (R&D) expenditures may, in accordance with Article 35 of the Small and Medium Enterprise Development Act(中小企業發展條例), apply a tax credit against up to 30% of the business income tax payable. The credit may be taken in one of the following two ways:.​​​

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• Up to 15% of the R&D expenditures may be credited against the business income tax payable for the current year; or

• Up to 10% of the R&D expenditures may be credited against the business income tax payable for each of the three years beginning from the current year.

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Only one method may be chosen, and once elected, it cannot be changed.

According to Regulations Governing Application of Investment Tax Credits for R&D Expenditures of Companies or Limited Partnerships(中小企業研究發展支出適用投資抵減辦法), an company intending to apply for the above R&D investment tax credit must, within the period starting three months before the filing deadline and ending on the last day of the filing period for the annual business income tax return, submit relevant documents to the competent central authority for recognition of eligibility and confirmation that the R&D activities of the current year meet the applicable requirements.

For R&D expenditures incurred in fiscal year 2025, applications for recognition of R&D activities must be filed between February and the end of May 2026. The filing date is determined by the date on which the application documents are received by the Industrial Development Administration (IDA) 經濟部產業發展署. Late applications will not be accepted.

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Authority responsible for recognition of R&D investment tax credits

The recognition and review of R&D investment tax credits require prior approval from Industrial Development Administration 經濟部產業發展署, which confirms that the enterprise’s R&D plan falls within the scope of activities prescribed under the Industrial Innovation Act.  Please refer to the  link below.

 

https://www.ida.gov.tw/ctlr?PRO=application.rwdApplicationView&id=1373

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Authority responsible for tax determination

While the content of the R&D plan is reviewed by the IDA (or other relevant authorities), the final applicability of the tax credit is subject to review by the National Taxation Bureau with jurisdiction over the company’s business income tax filing. In other words, the Taxation Bureau ultimately decides whether the claimed tax credit may be applied.

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Application procedure

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1. The company submits its R&D plan to the IDA for review and obtains an approval/recognition letter.

2. The company files its annual business income tax return, attaching the recognition letter and other relevant documents, and submits them to the National Taxation Bureau.

3. The National Taxation Bureau reviews the submission and determines whether the R&D investment tax credit may be granted.

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Qualified R&D expenses for tax credit

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According to Regulations Governing Application of Investment Tax Credits for R&D Expenditures of Companies or Limited Partnerships, the term “research and development” referred to the following types of activities carried out by the R&D unit of a company or limited partnership:

1. R&D activities conducted for the development or design of new products, new services, or new production processes, service procedures, systems, and their prototypes.

2. R&D activities conducted for the development of new raw materials, new materials, or components.

The activities described in the preceding paragraph do not include activities for improving existing products or services, production processes, service procedures, systems, or existing raw materials, materials, or components.

 

In article 5, the term “R&D expenditures” refers to the following expenses incurred by the R&D unit of a company or limited partnership while engaging in the R&D activities described in the preceding three articles:

1. Salaries of full-time personnel exclusively engaged in R&D work.

2. Expenses for consumable equipment, raw materials, materials, and samples exclusively used for R&D purposes by the R&D unit, provided that complete requisition and usage records are maintained and such expenses can be reconciled with research project records or reports.

3. Amortization or payment of fees in the current year for patents, proprietary technologies, and copyrights purchased or used exclusively for R&D.

4. Expenses for professional or specialized databases, software programs, and systems purchased exclusively for R&D use.

5. Education and training expenses for full-time R&D personnel to acquire R&D-related professional knowledge.

If no dedicated R&D unit exists but full-time R&D staff are assigned to other units, expenses may still qualify if clearly separable from non-R&D costs. In such cases, companies must provide:

1. Records proving staff are full-time R&D employees (work content and hours).

2. Evidence that related acquisitions were for R&D purposes.

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Although the Industrial Development Administration (IDA) has already approved, the National Taxation Bureau may still re-examine the R&D expenditures. According to a press release issued by the National Taxation Bureau:

In its 2022 company income tax return, Company A declared 50 million of R&D expenditures under Article 10 of the Industrial Innovation Act and claimed a tax credit of 7.5 million (50 million × 15%). However, after reviewing the list of R&D personnel, job descriptions, and R&D reports, the Bureau found that some employees were engaged in testing, market research, and statistical work, which do not qualify as full-time R&D activities. Consequently, the Bureau reduced the amount of R&D salary expenditures by 7 million and determined that the allowable R&D investment tax credit for Company A in 2022 was 6.45 million [(50 million – 7 million) × 15%].
 

Companies should note that, based on the Tax Bureau’s press release, personnel engaged in testing, inspection, market research, or statistical analysis—whether within R&D units or other departments—are not regarded as performing qualified R&D work. Accordingly, related expenses may not be eligible for the R&D tax credit.

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