In order to establish a competitive, fair, and reasonable income tax environment complying with the trend of international taxation, encourage investing in Taiwan first, and be able to attract professionals to stay in Taiwan, we amended the Income Tax Act promulgated on February 7, 2018. The main amended contents are as follows:

1.

Enhance the willingness to invest and create employment opportunities

1.1

We adopted a new dividend tax system in place of the partial imputation tax system on      dividends. Such regime allows individual taxpayers to choose either to incorporate dividend income into their consolidated income to calculate their tax based on progressive income tax rates, with a tax credit of 8.5% of the total dividend amount, with the credit ceiling set at NT$80 thousand per household; or to opt for a single tax rate of 28% on dividend income computed separately from their consolidated income. As a result, by combining the profit-seeking enterprise income tax with the individual income tax, the top aggregate tax burden (including profit-seeking enterprise income tax and individual income tax) on their dividend income will be reduced from 49.68% to 42.4%.

1.2

We raised the profit-seeking enterprise income tax rate from 17% to 20%. In addition, we have provided proper tax incentives resulting in an effective tax rate of profit-seeking enterprise income tax of approximately 11%~12%. The aforesaid 3% raise in the profit-seeking enterprise income tax resulted in an effective tax rate of approximately 13%~14%. However, profit-seeking enterprises with a taxable income of not more than NT$500 thousand are subject to annual adjustments with a tax rate of 18% for the year 2018, a tax rate of 19% for the year 2019 and a 20% rate for the year 2020 and after.

1.3

We reduced the surtax rate on undistributed earnings of companies from 10% to 5%. The total tax burden on an enterprise’s retained earnings was reduced from 25.3% to 24%, which will promote large enterprises to make good use of their capital to expand investment, increase the accumulation of the capital of small-and medium-size enterprises and start-up companies which cannot easily acquire outside financing, and in the end meet the demands of innovation and upgrading in the future.

1.4

We raised the withholding tax rate on dividends derived by non-residents from 20% to 21% in our tax reform. This will reduce the difference of the tax burden between domestic and foreign investors. If foreign investors are residents of our treaty partners and entitled to the application of the Avoidance of Double Taxation Agreements (ADTAs), they may apply for a more favorable tax rate under the ADTAs notwithstanding the domestic laws.

1.5

A profit-seeking enterprise organized as a sole proprietorship or a partnership is not required to calculate and pay the profit-seeking enterprise income tax, and the profit arising from the above business shall be included in the partners’ or the sole proprietor’s individual consolidated income.

2.

The highest marginal tax rate of individual income tax was reduced from 45% to 40%, and the amount of four deduction items of individual income tax were adjusted to relieve the tax burden on salary earners, middle-and low-income earners, taxpayers who have children, and to retain good-quality workers in Taiwan. These adjustments are：

2.1

The amount of the standard deduction of individual income tax for single taxpayers will was raised from NT$90 thousand to NT$120 thousand; the amount for married taxpayers was raised from NT$180 thousand to NT$240 thousand.

2.2

The amount of the special deduction for wage income of individual income tax was raised from NT$128 thousand to NT$200 thousand.

2.3

The amount of the special deduction for the disabled of the individual income tax was raised from NT$128 thousand to NT$200 thousand.

2.4

The amount of the special deduction for pre-school children of individual income tax was raised per child per year from NT$25 thousand to NT$120 thousand.

In doing so, we expect that the tax reform could increase individuals’ disposable income, which directly stimulates consumption and indirectly induces investment. We will continue to assist enterprises to transform and attract professionals to stay in Taiwan, enhance the willingness to invest, increase substantial investment, create employment opportunities, and boost economic development by establishing a competitive investment tax environment. This will create a positive effect on tax revenue.