For the purpose of continuing to optimize Taiwan’s industrial investment environment and encouraging domestic industries to upgrade to smart technology, Article 10-1 governing tax credit for investment in smart machines or 5G mobile networks was added to the Statute for Industrial Innovation as promulgated on July 3, 2019, and some provisions in the Statute were amended and promulgated on July 24, 2019. These amendments provide for 10 year's extension of the time limit for application for tax credit, substantial investment of undistributed earnings, more encouragement for circulation and utilization of R&D results, multiple flexible tools for retaining domestic talents and recruiting foreign talents, deregulation of fundraising methods used by venture capital enterprises in form of limited partnerships, and application of pass-through taxation to those limited partnerships to help stabilize taxation and investment environments, encourage industries to make investments with confidence, and accelerate innovation planning.
Pursuing new economic growth momentum through innovation and structural reform measures has been a major direction for major nations in recent years; Taiwan is no exception. According to the World Economic Forum’s assessment, Taiwan has now entered the stage of innovation-driven economic growth. As such, the government targets “innovation, employment and equitable distribution” for Taiwan’s future development needs, and selected five plus two sectors, including smart machinery, IoT (the Asia Silicon Valley Plan), green energy, biotech pharmaceutical industry, defense industry, as well as circular economy and new agriculture as new economic models for sustainable development to create high-quality jobs, raise incomes, and truly realize equitable distribution of employment through innovation-driven economic growth.
The "five plus two" industry innovation plan is aimed at sparking innovation and spurring the trend of industry innovation by developing application services based on the foundation of existing ICT industry. The innovative industries under the plan are highly linked to one another, and their success will also spread benefits to a wide range of other industries.
The main points of the various plans under the "five plus two" are as follows:
- Smart machinery: Facilitate the introduction of smart technology into precision machinery in domestic sectors, and export turnkey plant solutions to establish a smart machinery industry ecosystem.
- IoT (the Asia Silicon Valley Plan): Relax regulations, cultivate talents and encourage local innovation to drive economic growth through innovation and entrepreneurship, and deepen domestic and international links to promote industrial transformation and upgrading through the Internet of Things (IoT) industry.
- Green energy: Develop wind power and PV (Photovoltaic) industries to attract large-scale foreign and domestic investments as well as increase high-quality job opportunities to upgrade Taiwan’s green energy industry and technology.
- Biotech pharmaceutical industry: Encourage manufacturers to invest in modified new drug development, integrate special formulation design and drug delivery technology and patent portfolios, and to seize opportunities to organize international teams to expand pharmaceutical sales to overseas markets, such as the United States, Japan, etc.
- Defense industry: Establish independent design, manufacturing, assembly and key technologies to construct an independent military aircraft and ship supply chain, and to expand application to the civilian market. At the same time, promote the optimization of information security industry structure to create an innovation and entrepreneurship ecosystem for the information security industry.
- Circular economy: Foster large-scale energy resource recycling centers, promote international cooperation, and establish cross-sector cooperation platforms (circular economy cooperation platform, industry resources linking and matching platform).
While the "five plus two" industry innovation plan aims at meeting the needs of Taiwan’s next generation, it also focuses on dealing with the needs of national security, energy independence, smart cities and a greying society. In the process of development, every effort will be made to achieve balanced regional development to provide industries with opportunities for development in northern, central and southern Taiwan while promoting industry clustering with the opportunities to connect with overseas industry clusters, introduce international talents and link with international markets.