Taiwan tech firms brace for ending “tax holiday”

February 16, 2007 – Taiwan’s top high-tech businesses are slowly ramping up their tax payments ahead of the expiration of a five-year tax holiday, noted the Taiwan Economic News.

In 2006, the island’s top 100 high-tech enterprises paid about US $606 million and were exempted from roughly $2 billion, vs. 2005 payments of $409 million and $2.3 billion in exemptions. TSMC alone paid nearly 15% of that 2006 total ($90.6 million), far above its $2.4 million payment the year before, representing 3% and 0.09% of the company’s total pretax earnings, respectively.

Each of TSMC’s new facilities are eligible for a five-year tax holiday, and a number of them expired in 2006, leading to the higher tax payments, the paper noted. The government also has cut the rate of tax offset on equipment investments to just 7%, from 15% or greater.

UMC paid $2.3 million in taxes last year, after a rebate in 2005 of about $0.8 million. Also hit hard was Hon Hai Precision Industry Co. (including affiliates), which paid $177 million in 2006, vs. $82 million in 2005.

When the current five-year tax holiday period ends in 2011, companies including the foundries will be slotted under a new system mandating a 10% minimum alternative tax, which would leave them with a best tax-break rate of 15%, the paper noted.


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