Global Daily Tax News, Taiwan Warns Companies On R And D Tax Break Claims, (Oct 6, 2025)

Taiwan's National Tax Bureau has issued a statement highlighting the conditions for corporate groups to claim tax reliefs for spending on research and development.

The statement notes that businesses may deduct investments in research and development from income liable to corporate tax. However, the statement underscores that the measure is intended to encourage companies to establish independent research and development capabilities, and only part of the research and development activities may be outsourced.

The tax agency underscored, under Article 8, Paragraph 1 of the Regulations governing research and development tax deductions, "research and development conducted by companies or limited partnerships must be based on the principle of establishing independent R&D capabilities before it can be recognized as R&D expenses. However, if a portion of an individual R&D project requires outsourcing, the following outsourced R&D expenses are exempt from this restriction:

• Expenses for commissioning research from domestic colleges and universities or research institutions, or for hiring full-time faculty from domestic colleges and universities or researchers from research institutions;

• Expenses for commissioning research from foreign colleges and universities or research institutions, or for hiring full-time faculty from foreign colleges and universities or researchers from research institutions, as specifically approved by the central government's competent authority for the relevant industry; and

• Expenses for commissioning R&D from domestic pharmaceutical R&D service providers approved by the Ministry of Economic Affairs' Industrial Development Agency."

Nevertheless, the tax agency said: "[...] For-profit enterprises applying for the investment deduction for research and development expenses should focus on developing independent R&D capabilities. If a research project requires outsourcing, in addition to meeting the aforementioned requirements, the for-profit enterprise must also invest in R&D to qualify for the investment deduction."

It noted an example where a tax deduction claim was denied. In the case, the company's research plan was reviewed and approved by the central competent authority of the relevant industry. However, the National Tax Bureau denied the deduction on the basis that all expenses for one of the research projects were commissioned to a research institution, and the company did not invest in the research project. Therefore, the relevant outsourced research expenses were not eligible for investment deduction, the tax agency ruled.