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1. General Description
 
For an individual, only domestic source income is subject to personal income tax, all foreign source income is exempted , whereas, an enterprise is subject to tax on its worldwide income. All income tax paid by any of the branches or agents of an enterprise abroad will be allowed as a credit against its total profit-seeking enterprise income tax liability, to the extent of the tax payable that would have resulted if such income were included and computed at the applicable tax rate. With respect to non-resident individuals and foreign enterprises, only domestic souce income is subject to income tax.
2. Tax Incentives
 
Enterprises which are incorporated according to the Corporate Law in the ROC are entitled to tax incentives provided by the Statue for Upgrading Industries. Major tax incentives, offered in the Statue for Upgrading Industries, which encourage investment and upgrade industries are as follows:
 
2.1 Tax Holiday
 
Where a business enterprise or an individual invest in a company designated as a newly emerging, important and strategic industry are allowed to apply for a shareholders investment tax credit against profit-seeking enterprise income tax or personal income tax, if the registered stocks have been held for a period exceeding three years, or may select a five-year exemption from profit-seeking enterprise income tax.

2.2 Investment Tax Credit
 
2.2.1
For the purposes of upgrading industries, an investment tax credit of 5% to 20% against profit-seeking enterprise income tax is available for investments made in equipments or technologies used for automation, reclamation of resources, pollution control, etc. ; and up to 35% for R&D and personnel training expenses are also allowed as investment tax credit.
2.2.2 For the purposes of balancing the distribution of industries in various geographical areas, an investment tax credit of 20% is available for corporations.

2.3 Accelerated Depreciation
 
The serviceable life of instruments and equipment purchased by a company for exclusive use for R&D purposes, experiments, and/or inspection of quality, or machinery and equipment purchased by a company and used for energy saving purposes or employing new and clear energy, may be accelerated by two years; however, if there is any post-depreciation residual value during the accelerated serviceable life, asset depreciation may continue over one year or several years within the serviceable life of such assets as specified in the Income Tax Law, until permissible depreciation is fully made.

2.4 Encouragement of Investment by Overseas Chinese or Foreign Nationals
 
A non-resident individual who or a non-resident enterprise which has been approved to make investment in the ROC under the Statute for Investment by Overseas Chinese or the Statute for Investment by Foreign Nationals receives dividends from an ROC enterprise or profits from an ROC partnership, the income tax payable by such an individual or enterprise is reduced to 20%, and shall be withheld at the time of payment.

2.5 Encouragement of Enterprises Outward Investment
  A company which invests abroad with the approval of the competent authority may deduct an allowance of up to 20% of its total outward investments as reserves to cover actual investment losses.

2.6 Other Tax Benefits
  The appreciation of enterprise assets resulting from revaluation shall not be treated as taxable income for tax purposes.
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