Taiwan’s Northern Tax Bureau stated that only traceable R&D consumable expenditures qualified for investment tax credits, while routine testing costs were disallowed.
Taiwan’s Northern Taiwan National Taxation Bureau of the Ministry of Finance has stated that research and development (R&D) expenditures eligible for investment tax credits must be traceable, while routine testing costs are excluded from the scope of deductions.
This announcement was made on 19 December 2025.
The Bureau explained that under Article 10 of the Industrial Innovation Act, enterprises are encouraged to channel funds into R&D activities to foster industrial innovation. To qualify for tax incentives, R&D activities must demonstrate a high degree of innovation, and reported R&D consumable expenditures claimed for investment tax credits must be supported by verifiable records. Routine testing expenditures are explicitly excluded.
According to Article 5, Paragraph 1, Subparagraph 2 of the Regulations Governing the Application of Investment Tax Credits for R&D Expenditures by Companies or Limited Partnerships, consumable equipment, raw materials, supplies, and samples used exclusively by R&D units must be backed by complete acquisition and usage records and cross‑referenced with research plans, records, or reports. Furthermore, Article 6 of the same regulations stipulates that “routine testing expenditures” are not eligible for R&D investment tax credits. The Bureau noted that in practice, companies often mistakenly include such costs, which are later disallowed.
As an example, the Bureau cited Company A, which reported R&D investment tax credit expenditures of NT$38 million in its 2023 corporate income tax return. Of this, TWD 12 million was listed for consumable equipment, raw materials, supplies, and samples used exclusively by R&D units. Upon review, the Bureau found that TWD 7.5 million in routine testing expenses, including safety certification fees, had been included. In accordance with Article 6, Subparagraph 3, such costs are not recognised as R&D expenditures or eligible items and were therefore disallowed.
The Bureau reminded enterprises that before applying for R&D investment tax credits, they should conduct self‑checks in line with relevant regulations to ensure the legality and appropriateness of expenditure items. This helps avoid losing tax credit entitlements due to incomplete documentation or ineligible expenditures.
