The National Taxation Bureau of the Southern Area, Ministry of Finance, stated that pursuant to Article 4, Paragraph 1, Subparagraph 21 of the Income Tax Act, royalties paid to a foreign enterprise for the use of its patent rights, trademarks, and/or various kinds of special licensed rights in order to introduce new production technology or products, improve product quality, or reduce production cost under the approval of the competent authority as a special case, as well as remuneration paid to a foreign enterprise for the provision of technical services in construction of a factory for an important productive enterprise determined and approved as such by the competent authority, the income tax shall be exempted. Foreign profit-seeking enterprises seeking to benefit from this tax exemption should pay close attention to the applicable filing deadlines and eligibility requirements.

The Bureau further explained that pursuant to Point 12, Paragraphs 1 through 3 of the Directions Governing Reviews of Applications for Exemption From Income Tax on Royalty and Technical Service Fees collected by Foreign Profit-Seeking Enterprises From Manufacturing Industries, Technical Services Industries, and Power-Generating Industries (hereinafter referred to as the "Directions Governing Reviews") as amended and promulgated on May 13, 2026, foreign profit-seeking enterprises applying for income tax exemption must first obtain approval from the Industrial Development Administration or the Energy Administration of the Ministry of Economic Affairs after the signing of the contract but prior to its effective date, or within the effective period of the contract. Subsequently, within two months starting from the day after the approval letter is issued, the applicant must submit the letter along with relevant supporting documents to the competent tax authority to officially finalize the income tax exemption application. Each approved tax exemption period is capped at a maximum of three years, subject to the effective term of the contract, with the option to reapply as the expiration date approaches, but the contract still remains in effect in accordance with the related regulations.

To prevent a scenario where royalty or technical service remuneration received by a foreign profit-seeking enterprise for income tax exemption in Taiwan  also qualify for tax exemption or preferential low-tax treatment in its country of residence, thereby resulting in double non-taxation, based on Point 11, Paragraph 1 of the  revised Directions Governing Reviews, the tax exemption may not be claimed if the statutory income tax rate imposed on such royalty or technical service remuneration under the laws of the country or jurisdiction of the residence is below 15%. Nevertheless, under the principle of legitimate expectations, this statutory minimum tax-rate requirement does not apply if the foreign profit-seeking enterprise has submitted its application to the Industrial Development Administration or the Energy Administration, Ministry of Economic Affairs, prior to May 13, 2026.

The Bureau would like to remind that, following the amendment to the Directions Governing Reviews coming into force from May 13, 2026, all relevant applications are subject to the new regulations. Before filing an application, a foreign profit-seeking enterprise should verify that the applicable filing deadline has not expired, and should also provide an explanation and supporting information concerning the statutory income tax rate of its country of residence imposed on the royalty or technical service remuneration to facilitate the tax authority's review process.

Press Release Contact: Mr Tien 
Profit-seeking Enterprise Income Tax Division
TEL: 06-2223111 ext. 8050.