Corporations Filing Research & Development Expenditures as Tax Credits Shall Comply with the Relevant Regulations
The National Taxation Bureau of the Northern Area (NTBNA), MOF, stated that, in order to encourage companies to invest in R&D and achieve industry upgrade, corporations that have not violated the regulations of environment protection, labor or security & hygiene of food in a severe way for three years, may file research & development expenditures (hereinafter called R&D expenditures) as tax credits. In particular, the R&D expenditures shall be approved for advanced innovation by central competent authorities (e.g.: Bureau of Industry, Ministry of Economic Affairs) and in accordance with the relevant regulations. Nevertheless, not all expenditures resulted from research & development departments can be declared as tax credits.
The Bureau stated further that “expenditures of consumptive equipment, materials, supplies and samples exclusive for the research & development departments” the corporations declare as tax credits must be connected to the research projects, records or reports by complete purchasing order and requisitions, and be exclusive for the research & development departments. The fees not relative to above-mentioned expenditures, such as routine inspective expenditures, market testing expenditures, advertising fees, travel expenses, insurance premiums and meal expenses are not allowed to be declared as R&D expenditures.
In an example given by the Bureau, Corporation A filed routine inspective expenditures, travel expenses, insurance premiums and meal expenses as “expenditures of consumptive equipment, materials, supplies and samples exclusive for the research & development departments” on the profit-seeking enterprise annual income tax return for tax year of 2018. Although the research projects were approved for advanced innovation by competent authorities, the above-mentioned expenses are beyond the scope of the research & development expenditures. The Bureau levied a tax bill of almost NT$1 million resulting from the above-mentioned expenses being rejected in the auditing period.
The Bureau would like to remind profit-seeking enterprises to be aware of the above-mentioned regulations when filing R&D expenditures as tax credits, and file correctly in accordance with the relevant regulations to avoid paying additional tax bills on account of the error on the tax returns. If you have any questions, please visit the website of NTBNA (https://www.ntbna.gov.tw) to inquire the relevant laws or call the toll-free service number 0800-000321 for dedicated consultation services.
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=4fc531f0dc1d46bf877f17a515f9200f