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Local companies are mainly facing stiffening global competition for business and gaining the talents. The government has made the top priority to craft appropriate policies, and amended the Act for Industrial Innovation, in order to spur greater innovation and to recruit more professionals. Some industries have expressed dissatisfaction with the existing policies, such as the R&D expenditure tax credits provided does not really benefit those nonprofitable companies. Some businesses even bemoan the huge loss of talents to overseas which offering higher salaries. In order to assist businesses to retain the talents and encourage them to introduce new and competitive advantage in technology, the amendment will allow the deferral of income tax payments (under certain conditions) for employees that are rewarded with stocks, or owners of technology patent that form partnerships with companies as stakeholders.
The summary as follows:
1. Companies will have two options for applying R&D expenditure tax credits. They may either credit up to 15% of total R&D expenditures against their business income tax payable for that year (as under the existing legislation ), or credit up to 10% of the expenditures against taxes for the next three years. This credit, however, shall not exceed 30% of the business income tax payable by the company for that year.
2. Individuals or companies that transfer patents and exclusive technologies or authorize its use of technologies to companies, in exchange for stock ownership may choose to defer income tax payment on the shares gained for five years.
3. Employees granted stock-related rewards (including employee stock bonus, stock purchase, treasury stocks redistributed to employees, employee stock option certificates and restricted stocks) may choose to defer income tax payments for five years.
4. Notification of this mechanism will be issued and penalties will be imposed for those who fail to report taxes correctly or within prescribed deadlines.
