TIPS^®  Taiwan Intellectual Property Special

Income from Damages for Patent Infringement Is Not Tax Exempted.

To solve disputes raised by multinational companies’ licensing projects on taxation problems and for consistency in application of the “Examination Principles of Tax Exemption for Foreign Profit-Seeking Enterprises Incomes from Royalties and Technology Service Charges,” the Industrial Development Bureau, the Ministry of Economic Affairs has reached three common conclusions as follows.

Common Conclusion 1:

Foreign companies are entitled to tax exemption for their royalties from Taiwanese Patents, if the patents are provided, by the way of technology cooperation, for manufactures or technology services to use in Taiwan during their patent duration.

Common Conclusion 2:

If the technology is not granted a patent or not mature as a patent, the Industrial Development Bureau will examine the specific technology license and determine whether the license can facilitate the purpose of upgrading the industry. Any foreign technology fits into this purpose is also entitled to tax exemption.

Common Conclusion 3

Where a foreign company requests royalties from the enterprises in Taiwan, by alleging the Taiwanese enterprises’ infringement of their patent rights, such royalties shall be considered as “damages for patent infringement,” which is not tax exempted. Therefore, in handling technology licensing or patent infringement matters, foreign companies should take into account this taxation factor.