Companies are encouraged to actively engage in R&D, and the principle should be the establishment of in-house R&D capacity. However, certain outsourced R&D expenses, if necessary and compliant with the regulations, may also qualify for the tax credit.
Taiwan’s Ministry of Finance has released guidance on eligibility for claiming investment tax credits on research and development (R&D) expenses on 18 September 2025.
The Northern District National Taxation Bureau of the Ministry of Finance stated that in order to encourage enterprises to enhance their independent R&D capabilities and to continue investing in innovative research activities, investment tax credits against business income tax are provided as an incentive.
Companies are encouraged to actively engage in R&D, and the principle should be the establishment of in-house R&D capacity. However, certain outsourced R&D expenses, if necessary and compliant with the regulations, may also qualify for the tax credit.
The Bureau further explained that, according to Article 8, Paragraph 1 of the Regulations Governing Investment Tax Credits for R&D Expenditures of Companies or Limited Partnerships, companies or limited partnerships conducting R&D must follow the principle of building their own R&D capacity for the expenditures to qualify.
However, if a specific R&D project requires outsourcing, the following outsourced R&D expenses are not subject to this restriction:
- Expenses for engaging domestic universities, colleges, or research institutions, or for hiring full-time faculty or research personnel from such institutions.
- Expenses for engaging foreign universities, colleges, or research institutions, or hiring full-time faculty or research personnel from such institutions, as specially approved by the central competent authority.
- Expenses for engaging domestic pharmaceutical R&D service providers recognised by the Industrial Development Administration of the Ministry of Economic Affairs.
For example, the Bureau noted that Company A applied for an R&D investment tax credit, and its research project was approved by the central competent authority. However, upon review, the tax authority found that one of the projects was entirely outsourced to a research institution, with Company A itself not participating in the project. In such cases, the related outsourced R&D expenses do not qualify for the tax credit.
The Bureau reminded businesses that eligibility for R&D investment tax credits must follow the principle of developing in-house R&D capabilities. If outsourcing is necessary, the expenditures must meet the aforementioned conditions, and businesses must also engage in R&D themselves to enjoy the tax credit benefit.
