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6.6. Excluded and Segregated Income

When an enterprise has both taxable and tax-exempt income, the costs, expenses, or losses related to the income must be apportioned. The costs, expenses, or losses attributable to tax-exempt income are not deductible in computing taxable income.

Tax Exemptions include:

  • Profits from the sale of land subject to land value increment tax (covered in Sec 8.1.)
  • Royalty income paid to non-resident enterprises for intellectual property rights used to produce new technology or products, improve product quality, or reduce production costs (subject to government approval)
  • Income from technical services provided by non-resident enterprises for factory construction for an emerging strategic important enterprise in Taiwan (subject to government approval)
  • Royalty income for the licensing of know-how to an emerging strategic important enterprise in Taiwan paid to a non-resident enterprise (subject to government approval)
  • Interest received by non-resident financial institution for offering financing facilities to its Taiwan branch or other financial institutions in Taiwan
  • Interest received by non-resident financial institution for offering financing for certain qualified economic construction projects (subject to government approval)
  • Gains from securities and futures transactions (subject to separate transactions taxes covered in Sec 8.1)
  • Dividends received by Taiwan resident enterprises from another resident enterprise
  • Income derived by non-resident enterprises from international transportation business in Taiwan is exempt if the home country of the non-resident has entered into an international transportation tax agreement with Taiwan and provides reciprocal treatment