Suggestions for MOEA Trial Program of Voluntary Base Green Electricity Framework
On March 6, 2014, The Energy Bureau of Ministry of Economic Affairs has published a pre-announcement on a Trial Program of Voluntary Base Green Electricity Framework （hereafter the Trial Program） and consulted on public opinion. In light of the content of the Trial Program, STLI provide the following suggestions for future planning of related policy structure.
The institution of green electricity as established by the Trial Program is one of the policies for promoting renewable energy. Despite its nature of a trial, it is suggested that a policy design with a more options will be beneficial to the promotion of renewable energy, in light of various measures that have been undertaken by different countries.
According to the Trial Program, the planned price rate of the green electricity is set on the basis of the total sum that the electricity subsidy to be paid by the Renewable Energy Development Fund divided by the total sum of electricity generated reported by Tai Power Company. The Ministry of Economic Affairs will adjust the price rate of the green electricity on the base of both how many users subscribe to the green electricity and the price rate of international green electricity market rate and, then announce the price rate in October of each year if not otherwise designated.
In addition, according to the planned Trial Program, the unit for the subscription of green electricity is 100 kW·h. It is further reported that the current planned price rate for green electricity is 1.06 NTD/ kW·h. And it shall be 3.95 NTD/ kW·h if adding up with the original price rate, with an 37% increase in price per kW·h. In terms of the existing content of the Trial Program, only single price rate will be offered during the trial period.
In this regard, we take the view that it would be beneficial to take into account similar approaches that have been taken by other countries. In Germany, for instance, the furtherance of renewable energy is achieved by the obligatory charge（EEG Umlage）together with the voluntary green electricity program provided by the private electricity retail sectors.
According to German Ministry of Economics and Energy （BMWi）, the electricity price that the German public pays includes three parts: （1）the cost of the purchase and distribution of the electricity, including the margin of the electricity provider（2）regulated network fees, including those for the operation as well as for the measurement works of the meters（3）charges imposed by the government, including tax and the abovementioned obligatory charge for renewable energy（EEG Umlage）, as prescribed by the Act on Renewable Energy （Gesetz für den Vorrang Erneuerbarer Energien, also known as Erneuerbare-Energien-Gesetz - EEG）.
In terms of how it is implemented on the ground, an example of the green electricity price menu program from the German electricity retail company, Vattenfall, is given in the following. In all price menu programs provided by Vattenfall in Berlin, for instance, 29.4% of the electricity comes from renewable energy as a result of the implementation of the Act on Renewable Energy.
Asides from the abovementioned percentage as facilitated by the existing obligatory measures, the electricity retail companies in Germany further provide the price menus that are “greener”. For example, among the options provided by Vattenfall（Chart I）, in terms of the 12-month program, one can choose the menu which consist of 39.4% of renewable energy, with the price of 0.2642 Euro/ kW·h（about 10.96 NTD/ kW·h）. One can also opt for a menu of which the energy supply comes from 100% of renewable energy, with the price of 0.281 Euro/ kW·h（about 11.66 NTD/ kW·h）
Chart I : Green Electricity Price Menus provided by Vattenfall in Berlin, Germany
| Percentage of Renewable Energy Supply |
Percentage of Renewable Energy Supply |
|
|---|---|---|
|
12-month program |
39.4% |
0.2642 Euro/ kW·h（about 10.96 NTD/ kW·h） |
|
All renewable energy program |
100% |
0.281 Euro/ kW·h（about 11.66 NTD/ kW·h） |
Source：Vattenfall website, translated and reorganized by STLI, April 214.
In addition, Australia also has similar programs on green electricity that is voluntary-base and with the goal of promoting renewable energy, reducing carbon emission, and transforming energy economy. Since 1997, the GreenPower in Australia is in charge of audition and certification of the retail companies and power plants on green electricity. The Australian model uses the certification mechanism conducted by independent third party, to ensure the green electricity purchased by end users in compliance with specific standards.
As for the options for the price menu, take the programs of green electricity offered by the Australian retail company Origin Energy for example, user can choose 6 kinds of different programs, which are composed by renewable energy supply of respectively 10%, 20%, 25%, 50%, 75%, and 100%, at various price rates （shown in Chart II）.
Chart II Australian Green Electricity Programs provided by Origin Energy
| Percentage of renewable Energy | Electricity Price per kW·h |
|---|---|
|
0 |
0.268 AUD（About 7.52 NTD） |
|
10% |
0.274868 AUD（About 7.69 NTD） |
|
20% |
0.28006 AUD（About 7.84 NTD） |
|
25% |
0.28292 AUD（About 7.92 NTD） |
|
50% |
0.2838 AUD（About 7.95 NTD） |
|
100% |
0.2992 AUD（About 8.37 NTD） |
Source：Origin Energy website, translated and reorganized by STLI, April 214.
Given the information above, it can thus be inferred that the international mechanism for the promotion of green electricity often include a variety of price menus, providing the user more options. Such as two difference programs offered by Vattenfall in Germany and six various rates for green electricity offered by Origin Energy in Australia.
It is the suggestion of present brief that the Trial Program can reference these international examples and try to offer the users a greater flexibility in choosing the most suitable programs for themselves.
Post Brexit – An Update on the United Kingdom Privacy Regime 2021/9/10 After lengthy talks, on 31 January 2020, the United Kingdom (‘UK’) finally exited the European Union (‘EU’). Then, the UK shifted into a transition period. The UK government was bombarded with questions from all stakeholders. In particular, the data and privacy industry yelled out the loudest – what am I going to do with data flowing from the EU to the UK? Privacy professionals queried – would the UK have a new privacy regime that significantly departs from the General Data Protection Regulation (‘GDPR’)? Eventually, the UK made a compromise with all stakeholders – the British, the Europeans and the rest of the world – by bridging its privacy laws with the GDPR. On 28 June 2021, the UK obtained an adequacy decision from the EU.[1] This was widely anticipated but also widely known to be delayed, as it was heavily impacted by the aftermaths of the invalidation of the US- EU Privacy Shield.[2] While the rest of the world seems to silently observe the transition undertaken by the UK, post-Brexit changes to the UK’s privacy regime is not only a domestic or regional matter, it is an international matter. Global supply chains and cross border data flows will be affected, shuffling the global economy into a new order. Therefore, it is crucial as citizens of a digital economy to unpack and understand the current UK privacy regime. This paper intends to give the reader a brief introduction to the current privacy regime of the UK. The author proposes to set out the structure of the UK privacy legislation, and to discuss important privacy topics. This paper only focuses on the general processing regime, which is the regime that is most relevant to general stakeholders. UK Privacy Legislation There are two main privacy legislation in the UK – the Data Protection Act 2018 (‘DPA’) and the United Kingdom General Data Protection Act (‘UK GDPR’). These two acts must be read together in order to form a coherent understanding of the current UK privacy regime. The UK GDPR is the creature of Brexit. The UK government wanted a smooth transition out of the EU and acknowledged that they needed to preserve the GDPR in their domestic privacy regime to an extent that would allow them to secure an adequacy decision. The UK government also wanted to create less impact on private companies. Thus, the UK GDPR was born. Largely it aligns closely with the GDPR, supplemented by the DPA. ICO The Information Commissioner’s Office (‘ICO’) is the independent authority supervising the compliance of privacy laws in the UK. Prior to Brexit, the ICO was the UK’s supervisory authority under the GDPR. A unique feature of the ICO’s powers and functions is that it adopts a notice system. The ICO has power to issue four types of notices: information notices, assessment notices, enforcement notices and penalty notices.[3] The information notice requires controllers or processors to provide information. The ICO must issue an assessment notice before conducting data protection audits. Enforcement is only exercisable by giving an enforcement notice. Administrative fines are only exercisable by giving a penalty notice. Territorial Application Section 207(1A) of the DPA states that the DPA applies to any controller or processor established in the UK, regardless where the processing of personal data takes place. Like the GDPR, the DPA and the UK GDPR have an extraterritorial reach to overseas controllers or processors. The DPA and the UK GDPR apply to overseas controllers or processors who process personal data relating to data subjects in the UK, and the processing activities are related to the offering of goods or services, or the monitoring of data subjects’ behavior.[4] Transfers of Personal Data to Third Countries On 28 June 2021, the UK received an adequacy decision from the EU.[5] This means that until 27 June 2025, data can continue to flow freely between the UK and the European Economic Area (‘EEA’). As for transferring personal data to third countries other than the EU, the UK has similar laws to the GDPR. Both the DPA and the UK GDPR restrict controllers or processors from transferring personal data to third countries. A transfer of personal data to a third country is permitted if it is based on adequacy regulations.[6] An EU adequacy decision is known as ‘adequacy regulations’ under the UK regime. If there is no adequacy regulations, then a transfer of personal data to a third country will only be permitted if it is covered by appropriate safeguards, including standard data protection clauses, binding corporate rules, codes of conduct, and certifications.[7] The ICO intends to publish UK standard data protection clauses in 2021.[8] In the meantime, the EU has published a new set of standard data protection clauses (‘SCCs’).[9] However, it must be noted that the EU SCCs are not accepted to be valid in the UK, and may only be used for reference purposes. It is also worth noting that the UK has approved three certification schemes to assist organizations in demonstrating compliance to data protection laws.[10] Lawful Bases for Processing Basically, the lawful bases for processing in the UK regime are the same as the GDPR. Six lawful bases are set out in article 6 of the UK GDPR. To process personal data, at least one of the following lawful bases must be satisfied:[11] The data subject has given consent to the processing; The processing is necessary for the performance of a contract; The processing is necessary for compliance with a legal obligation; The processing is necessary to protect vital interests of an individual – that is, protecting an individual’s life; The processing is necessary for the performance of a public task; The processing is necessary for the purpose of legitimate interests, unless other interests or fundamental rights and freedoms override those legitimate interests. Rights & Exemptions The UK privacy regime, like the GDPR, gives data subjects certain rights. Most of the rights granted under the UK privacy regime is akin to the GDPR and can be found under the UK GDPR. Individual rights under the UK privacy regime is closely linked with its exemptions, this may be said to be a unique feature of the UK privacy regime which sets it apart from the GDPR. Under the DPA and the UK GDPR, there are certain exemptions, meaning organizations are exempted from certain obligations, most of them are associated with individual rights. For example, if data is processed for scientific or historical research purposes, or statistical purposes, organizations are exempted from provisions on the right of access, the right to rectification, the right to restrict processing and the right to object in certain circumstances.[12] Penalties The penalty for infringement of the UK GDPR is the amount specified in article 83 of the UK GDPR.[13] If an amount is not specified, the penalty is the standard maximum amount.[14] The standard maximum amount, at the time of writing, is £8,700,000 (around 10 million Euros) or 2% of the undertaking’s total annual worldwide turnover in the preceding financial year.[15] In any other case, the standard maximum amount is £8,700,000 (around 10 million Euros).[16] Conclusion The UK privacy regime closely aligns with the GDPR. However it would be too simple of a statement to say that the UK privacy regime is almost identical to the GDPR. The ICO’s unique enforcement powers exercised through a notice system is a distinct feature of the UK privacy regime. Recent legal trends show that the UK while trying to preserve its ties with the EU is gradually developing an independent privacy persona. The best example is that in regards to transfers to third countries, the UK has developed its first certification scheme and is attempting to develop its own standard data protection clauses. The UK’s transition out of the EU has certainly been interesting; however, the UK’s transformation from the EU is certainly awaited with awe. [1] Commission Implementing Decision of 28.6.2021, pursuant to Regulation (EU) 2016/679 of the European Parliament and of the Council on the adequate protection of personal data by the United Kingdom, C(2021) 4800 final,https://ec.europa.eu/info/sites/default/files/decision_on_the_adequate_protection_of_personal_data_by_the_united_kingdom_-_general_data_protection_regulation_en.pdf.. [2] Judgment of 16 July 2020, Data Protection Commissioner v. Facebook Ireland Limited, Maximillian Schrems, C-311/18, EU:C:2020:559, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62018CJ0311. [3] Data Protection Act 2018, §115. [4] Data Protection Act 2018, §207(1A); REGULATION (EU) 2016/679 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation), art 3. [5] supra note 1. [6] Data Protection Act 2018, §17A-18; REGULATION (EU) 2016/679 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation), art 44-50. [7] Data Protection Act 2018, §17A-18; REGULATION (EU) 2016/679 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation), art 46-47. [8]International transfers after the UK exit from the EU Implementation Period, ICO, https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/international-transfers-after-uk-exit/ (last visited Sep. 10, 2021). [9] Standard contractual clauses for international transfers, European Commission, https://ec.europa.eu/info/law/law-topic/data-protection/international-dimension-data-protection/standard-contractual-clauses-scc/standard-contractual-clauses-international-transfers_en (last visited Sep. 10, 2021). [10] ICO, New certification schemes will “raise the bar” of data protection in children’s privacy, age assurance and asset disposal, ICO, Aug. 19, 2021, https://ico.org.uk/about-the-ico/news-and-events/news-and-blogs/2021/08/ico-approves-the-first-uk-gdpr-certification-scheme-criteria/ (last visited Sep. 10, 2021). [11] REGULATION (EU) 2016/679 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation), art 6(1)-(2); Lawful basis for processing, ICO, https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/lawful-basis-for-processing/ (last visited Sep. 10, 2021). [12] Data Protection Act 2018, sch 2, part 6, para 27. [13] id. at §157. [14] id. [15] id. [16] id.
Draft of AI Product and System Evaluation Guidelines Released by the Administration for Digital Industries to Enhance AI GovernanceDraft of AI Product and System Evaluation Guidelines Released by the Administration for Digital Industries to Enhance AI Governance 2024/08/15 I. AI Taiwan Action Plan 2.0 In 2018, the Executive Yuan launched the “AI Taiwan Action Plan” to ensure that the country keeps pace with AI developments. This strategic initiative focuses on attracting top talent, advancing research and development, and integrating AI into critical sectors such as smart manufacturing and healthcare. The action plan has sparked growing discussion on AI regulation. Through these efforts, Taiwan aims to position itself as a frontrunner in the global smart technology landscape. Later in 2023, the Executive Yuan updated the action plan, releasing “AI Taiwan Action Plan 2.0” to further strengthen AI development. “AI Taiwan Action Plan 2.0” outlines five main pillars: 1. Talent Development: Enhancing the quality and quantity of AI expertise, while improving public AI literacy through targeted education and training initiatives. 2. Technological and Industrial Advancement: Focusing on critical AI technologies and applications to foster industrial growth; and creating the Trustworthy AI Dialogue Engine (TAIDE) that communicates in Traditional Chinese. 3. Enhancing work environments: Establishing robust AI governance infrastructure to facilitate industry and governmental regulation, and to foster compliance with international standards. 4. International Collaboration: Expanding Taiwan's role in international AI forums, such as the Global Partnership on AI, to collaborate on developing trustworthy AI practices. 5. Societal and Humanitarian Engagement: Utilizing AI to tackle pressing societal challenges such as labor shortages, an aging population, and environmental sustainability. II. AI Product and System Evaluation Guidelines: A Risk-based Approach to AI Governance To support infrastructure, in March 2024, the Administration for Digital Industries issued the draft AI Product and System Evaluation Guidelines. The Guidelines are intended to serve as a reference for industry when developing and using AI products and systems, thus laying a crucial foundation for advancing AI-related policies in Taiwan. The Guidelines outline several potential risks associated with AI: 1. Third-Party Software and Hardware: While third-party software, hardware, and datasets can accelerate development, they may also introduce risks into AI products and systems. Therefore, effective risk management policies are crucial. 2. System Transparency: The lack of transparency in AI products and systems makes risk assessment relatively challenging. Inadequate transparency in AI models and datasets also pose risks for development and deployment. 3. Differences in Risk Perception: Developers of AI products and systems may overlook risks specific to different application scenarios. Moreover, risks may gradually emerge as the product or system is used and trained over time. 4. Application Domain Risks: Variations between testing results and actual operational performance can lead to differing risk assessments for evaluated products and systems. 5. Deviation from Human Behavioral Norms: If AI products and systems behave unexpectedly compared to human operations, this can indicate a drift in the product, system, or model, thereby introducing risks. The Guidelines also specify that businesses have to categorize risks when developing or using AI products and systems, and manage them in accordance with these classifications. In alignment with the EU AI Act, risks are classified into four levels: unacceptable, high, limited, and minimal. 1. Unacceptable Risk: If AI systems used by public or private entities provide social scoring of individuals, this could lead to discriminatory outcomes and the exclusion of certain groups. Furthermore, if AI systems are employed to manipulate the cognitive behavior of individuals or vulnerable populations, causing physical or psychological harm, such systems are deemed unacceptable and prohibited. 2. High risk: AI systems are classified as high-risk in several situations. These include applications used in critical infrastructure, such as transportation, where there is potential risk to citizens' safety and health. These situations also encompass AI systems involved in educational or vocational training (such as exam scoring), which can determine access to education or professional paths. AI used as safety-critical product components, such as robot-assisted surgery, also falls into this category. In the employment sector, AI systems used for managing recruitment processes, including CV-sorting software, are considered high-risk. Essential private and public services, such as credit scoring systems that impact loan eligibility, also fall under high-risk. AI used in law enforcement in ways that it may affect fundamental rights, such as evaluating the reliability of evidence, is also included. AI systems involved in migration, asylum, and border control, such as automated visa application examinations, are categorized as high-risk. Finally, AI solutions used in the administration of justice and democratic processes, such as court ruling searches, are also classified as high-risk. If an AI system is classified as high risk, it must be evaluated across ten criteria—Safety, Explainability, Resilience, Fairness, Accuracy, Transparency, Accountability, Reliability, Privacy, and Security—to ensure the AI system’s quality. 3. Limited risk: When an AI product or system is classified as having limited risk, it is up to the enterprise to determine whether an evaluation is required. The Guidelines also introduce specific transparency obligations to ensure that humans are informed when necessary, thus fostering trust. For instance, when using AI systems such as chatbots or systems for generating deepfake content, humans must be made aware that they are interacting with a machine so they can take an informed decision to continue or step back. 4. Minimal or no risk: The Guidelines allow the free use of minimal-risk AI. This includes applications such as AI-enabled video games and spam filters. Ⅲ. Conclusion The AI Product and System Evaluation Guidelines represent a significant step forward in establishing a robust, risk-based framework for AI governance in Taiwan. By aligning with international standards like the EU AI Act, these Guidelines ensure that AI products and systems are rigorously assessed and categorized into four distinct risk levels: unacceptable, high, limited, and minimal. This structured approach allows businesses to manage AI-related risks more effectively, ensuring that systems are safe, transparent, and accountable. The emphasis on evaluating AI systems across ten critical criteria—including safety, explainability, and fairness—reflects a comprehensive strategy to mitigate potential risks. This proactive approach not only safeguards the public but also fosters trust in AI technologies. By setting clear expectations and responsibilities for businesses, the Guidelines promote responsible development and deployment of AI, ultimately contributing to Taiwan's goal of becoming a leader in the global AI landscape.
A Before and After Impact Comparison of Applying Statute for Industrial Innovation Article 23-1 Draft on Venture Capital Limited PartnershipsA Before and After Impact Comparison of Applying Statute for Industrial Innovation Article 23-1 Draft on Venture Capital Limited Partnerships I. Background Because the business models adopted by Industries, such as venture capital, film, stage performance and others, are intended to be temporary entities, and the existing business laws are not applicable for such industries,[1] the Legislature Yuan passed the “Limited Partnership Act” in June 2015,[2] for the purpose of encouraging capital injection into these industries. However, since the Act was passed, there are currently only nine limited partnerships listed on the Ministry of Economic Affairs' limited partnership information website. Among them, “Da-Zuo Limited Partnership (Germany) Taiwan Branch” and “Stober Antriebstechnik Limited Partnership (Germany) Taiwan Branch”, are branch companies established by foreign businesses, the remaining seven companies are audio video production and information service businesses. It is a pity that no venture capital company is adopting this format.[3] In fact, several foreign countries have set up supporting measures for their taxation systems targeting those business structures, such as limited partnerships. For example, the pass-through taxation method (or referred to as single entity taxation) is adopted by the United States, while Transparenzprinzip is used by Germany. These two taxation methods may have different names, but their core ideas are to pass the profits of a limited partnership to the earnings of partners.[4] However, following the adoption of the Limited Partnership Act in Taiwan, the Ministry of Finance issued an interpretation letter stating that because the current legal system confers an independent legal entity status to the business structure of a limited partnership, it should be treated as a profit-seeking business and taxed with Profit-Seeking Enterprise Income Tax.[5] Therefore, to actualize the legislative objective of encouraging innovative businesses organized under tenets of the Limited Partnership Act, the Executive Yuan presented a draft amendment for Article 23-1 of the Statute for Industrial Innovation (hereinafter referred to as the Draft), introducing the "Pass Through Taxation Principle" as adopted by several foreign countries. That is, a Limited Partnership will not be levied with the Profit-Seeking Enterprise Income Tax, but each partner will file income tax reports based on after-profit-gains from the partnership that are passed through to each partner. It is expected that the venture capital industry will now be encouraged to adopt the limited partnership structure, and thus increase investment capital in new ventures. II. The Pass Through Taxation Method is Applicable to Newly Established Venture Capital Limited Partnerships 1. The Requirements and Effects (1) The Requirements According to the provisions of Article 23-1 Paragraph 3 of the Draft, to be eligible for Pass Through Taxation, newly established venture capital limited partnerships must meet the following requirements: 1. The venture capital limited partnerships are established between January 1, 2017 and December 31, 2019. 2. Investment threshold of the total agreed capital contribution, total received capital contribution, and accumulated total capital contribution, within five years of the establishment of venture capital limited partnerships: Total Agreed Capital Contribution in the Limited Partnership Agreement Total Received Capital Contribution Accumulated Investment Amount for Start-up Companies The Year of Establishment 3 hundred million ✕ ✕ The Second Year ✕ ✕ The Third Year 1 hundred million ✕ The Fourth Year 2 hundred million Reaching 30 percent of the total received capital contribution of the year or 3 hundred million NT dollars. The Fifth Year 3 hundred million 3. The total amount, that an overseas company applies in capital and investments in actual business operations in Taiwan, reaches 50% of its total received capital contribution of that year. 4. In compliance with government policies. 5. Reviewed and approved by the central competent authority each year. (2) The Effects The effects of applying the provisions of Article 23-1 Paragraph 3 of the Draft are as follows: 1. Venture capital limited partnerships are exempt from the Profit-Seeking Enterprise Income Tax. 2. Taxation method for partners in a limited partnership after obtaining profit gains: (1) Pursuant to the Income Tax Act, Individual partners and for-profit business partners are taxed on their proportionally-calculated, distributed earnings. (2) Individual partners and foreign for-profit business partners are exempt from income tax on the stock earnings distributed by a limited partnership. 2. Benefit Analysis Before and After Applying Pass Through Taxation Method A domestic individual A, a domestic profit-making business B, and a foreign profit-making business C jointly form a venture capital limited partnership, One. The earnings distribution of the company One is 10%, 80% and 10% for A, B, and C partners, respectively. The calculated earnings of company One are one million (where eight hundred thousand are stock earnings, and two hundred thousand are non-stock earnings). How much income tax should be paid by the company One, and partners A, B, and C? (1) Pursuant to the Income Tax Act, before the amended draft: 1. One Venture Capital Limited Partnership Should pay Profit-Seeking Enterprise Income Tax = (NT$1,000,000 (earning) - NT$500,000[6])x12% (tax rate[7])=NT$60,000 2. Domestic Individual A Should file a comprehensive income report with business profit income =(NT$1,000,000-NT$60,000) x 10% (company One draft a voucher for net amount for A) + NT$60,000÷2×10% (deductible tax rate)= NT$97,000 Tax payable on profit earnings＝NT$91,500×5%(tax rate)＝NT$4,850 Actual income tax paid＝NT$4,850 - NT$60,000÷2×10% (deductible tax rate) ＝NT$1,485 3. Domestic For-Profit Business B Pursuant to the provisions of Article 42 of the Income Tax Act, the net dividend or net income received by a profit-seeking company is not included in the income tax calculation. 4. Foreign For-Profit Business C Tax paid at its earning source＝(NT$1,000,000 - NT$60,000) ×10% (earning distribution rate) ×20% (tax rate at earning source)＝NT$18,800 (2) Applying Pass Through Taxation Method After Enacting the Amendment 1. One Venture Capital Limited Partnership No income tax. 2. Domestic Individual A Should pay tax＝NT$800,000 (non-stock distributed earnings)×10% (earning distribution rate)×5% (comprehensive income tax rate)＝NT$1,000 3. Domestic For-Profit Business B Pursuant to the provisions of Article 42 of the Income Tax Act, the net dividend or net income received by a profit-seeking company is not included in the income tax calculation. 4. Foreign For-Profit Business C Tax paid at its earning source＝NT$800,000 (non-stock distributed earnings)×10%(earning distribution rate)×20% (tax rate at earning source)＝NT$4,000 The aforementioned example shows that under the situation, where the earning distribution is the same and tax rate for the same taxation subject is the same, the newly-established venture capital limited partnerships and their shareholders enjoy a more favorable tax benefit with the adoption of pass through taxation method: Before the Amendment After the Amendment Venture Capital Limited Partnership NT$60,000 Excluded in calculation Shareholders Domestic Individual NT$1,850 NT$1,000 Domestic For-Profit Business Excluded in calculation Excluded in calculation Foreign For-Profit Business NT$18,800 NT$4,000 Sub-total NT$80,650 NT$5,000 III. Conclusion Compared to the corporate taxation, the application of the pass through taxation method allows for a significant reduction in tax burden. While developing Taiwan’s pass through tax scheme, the government referenced corporate taxation under the U.S. Internal Revenue Code (IRC), where companies that meet the conditions of Chapter S can adopt the “pass through” method, that is, pass the earnings to the owner, with the income of shareholders being the objects of taxation;[8] and studied the "Transparenzprinzip" adopted by the German taxation board for partnership style for-profit businesses. Following these legislative examples, where profits are identified as belonging to organization members,[9] the government legislation includes the adoption of the pass through taxation scheme for venture capital limited partnerships in the amended draft of Article 23-1 of the Statute for Industrial Innovation, so that the legislation is up to international standards and norms, while making an important breakthrough in the current income tax system. This is truly worthy of praise. [1] The Legislative Yuan Gazette, Vol. 104, No. 51, page 325. URL:http://misq.ly.gov.tw/MISQ//IQuery/misq5000Action.action [2] A View on the Limited Partnership in Taiwan, Cross-Strait Law Review, No. 54, Liao, Da-Ying, Page 42. [3] Ministry of Economic Affairs - Limited Partnership Registration Information URL: http://gcis.nat.gov.tw/lmpub/lms/dir.jsp?showgcislocation=true&agencycode=allbf [4] Same as annotate 2, pages 51-52. [5] Reference Letter of Interpretation dated December 18, 2015, Tai-Cai-Shui Zi No. 10400636640, the Ministry of Finance [6] First half of Paragraph 1 of Article 8 of the Income Basic Tax Act [7] Second half of Paragraph 1 of Article 8 of the Income Basic Tax Act [8] A Study on the Limited Partnership Act, Master’s degree thesis, College of Law, Soochow University, Wu, Tsung-Yeh, pages 95-96. [9] Reference annotate 2, pages 52.
Research on Taiwan’s Policies of Innovative Industry Development in Recent Years (2015-2016)Research on Taiwan’s Policies of Innovative Industry Development in Recent Years (2015-2016) 1. “Five plus Two” Innovative Industries Policy On June 15, 2016, Premier Lin Chuan met with a group of prominent business leaders to talk about a government project on five innovative industries, which aim to drive the next generation of businesses in R.O.C.. Subsequently the program was expanded to include “new agriculture” and the “circular economy” as the “+2.” The program was then broadened even further to include the Digital Economy and Cultural Innovation, with even Semiconductors and IC Design included, although the name of the policy remains 5+2. Speaking at the Third Wednesday Club in Taipei, Premier Lin said the industries require more investment to drive the next generation of industry growth momentum in R.O.C., create high-quality jobs, and upgrade the industrial competitiveness. Executive Yuan has selected the five innovative industries of Asia Silicon Valley, smart machinery, green energy, biotech & pharmaceutical industry, and national defense, which will be the core for pushing forward the next-generation industrial growth and improve overall environment by creating a cluster effect that links local and global industries, while simultaneously raising wages and stimulating employment. Premier Lin said, regarding industrial competitiveness and investment issues the lackluster economy has stifled investment opportunities, and with limited government budgets, the private sector must play the larger role in investments. Regarding the “Five major Innovative Industries” project, Premier Lin said the National Development Council is currently drafting long-term plan to attract talent, create a thriving working environment, and infuse companies with more innovation, entrepreneurship and young workers. In addition, R.O.C. must also cultivate a strong software industry, without which it would be difficult to build a highly intelligent infrastructure. The National Development Council said the program possess both the capacity of domestic demand and local characteristics, as the core for pushing forward the next-generation industrial growth. The government aims to promote a seamless synergy of investment, technology, and the talent, in order to develop innovative industrial clusters for furthering global linkage and nurturing international enterprises. In the meantime, the government also aims at achieving the enhancement of technology levels, balanced regional development, as well as realizing the benefits of job creation. 2. The Asia Silicon Valley Development Plan In September 2016 the government approved the Asia Silicon Valley Development Plan, which connect Taiwan to global tech clusters and create new industries for the next generation. By harnessing advanced technological research and development results from around the world, the plan hopes to promote innovation and R&D for devices and applications of the internet of things (IoT), and upgrade Taiwan’s startup and entrepreneurship ecosystem. The four implementation strategies are as follows: (1) Building a comprehensive ecosystem to support innovation and entrepreneurship (2) Connect with international research and development capabilities (3) Create an IoT value chain (4) Construct diversified test beds for smart products and services by establishing a quality internet environment Taiwan’s first wave of industrial development was driven by continuous technological innovation, and the wave that followed saw the information industry become a major source of economic growth. 3. Global Hub for Smart Machinery On July 21, 2016, Premier Lin Chuan said at a Cabinet meeting, the government aims to forge Taiwan into a global manufacturing hub for intelligent machinery and high-end equipment parts. Upgrading from precision machinery to intelligent machinery is the main goal of putting intelligent machinery industry into focal execution area expecting to create jobs and to maximize the production of production line as well as to forge central Taiwan into a global manufacturing hub for smart machinery. The Ministry of Economic draws up the Intelligent Machinery Promotion Program to establish the applications of the technology and capacity of services that fit the demand of the market. The program embodies two parts. The first is to accelerate the industrialization of intelligent machinery for building an ecosystem. The second is to improve intelligentization by means of introducing the intelligent machinery into the industries. The execution policy of the Intelligent Machinery Promotion Program is to integrate the intelligent functions such as malfunctions predictions, accuracy compensation, and automatic parameter setting into the machinery industry so as to have the ability to render the whole solutions to the problem. Simultaneously, the program employs three strategies, which are connecting with the local industries, connecting with the future, and connecting with the world, to develop the mentioned vision and objectives. Especially, the way to execute the strategy of connecting with the local industries consists of integrating the capabilities of industry, research organization and the government. At the meantime, the government will encourage the applications of smart vehicles and unmanned aerial vehicles and train the talents as well. The thinking of connecting with the future lies in the goal of deepening the technologies, establishing systematic solutions, and providing a testing areas, which focus on the related applications such as aerospace, advanced semiconductor, smart transportation, green vehicles, energy industry, whole solutions between factories, intelligent man-machine coordination, and robots of machine vision combined with intelligent machinery applications. The government would strengthen the cross-cutting cooperation to develop machines for aerospace and integrate the system of industrial division to form a cluster in order to create Taiwanese IoT technology. Eventually, Taiwan will be able to connect with the world, enhance international cooperation, expand export trade and push industry moving toward the age of information and digital economy and break the edge of industry technology to make the industry feel the goodwill of the government. 4. Green energy innovations The government’s “five plus two” innovative industries program includes a green energy industrial innovation plan passed October 27, 2016 that will focus on Taiwan’s green needs, spur extensive investments from within and outside the country, and increase quality employment opportunities while supporting the growth of green energy technologies and businesses. The government is developing the Shalun Green Energy Science City. The hub’s core in Shalun will house a green energy technology research center as well as a demo site, providing facilities to develop research and development (R&D) capabilities and conduct the requisite certification and demonstration procedures. The joint research center for green energy technologies will integrate the efforts of domestic academic institutions, research institutes, state-run enterprises and industry to develop green energy technologies, focusing on four major functions: creating, conserving and storing energy, as well as system integration. Development strategies include systems integration and finding better ways to conserve, generate and store energy by promoting green energy infrastructure, expanding renewable energy capabilities and cooperating with large international firms. The emergence of the green economy has prompted the government to build infrastructure that will lay the foundation for Taiwan’s green energy sector, transform the nation into a nuclear-free society, and spur industrial innovation. For innovative technology industries, green energy industries can drive domestic economic development by attracting more venture capital and creating more employment opportunities. 5. Biomedical Industry Innovation Program To facilitate development of Taiwan’s biomedical industry, the government proposed a “biomedical industrial innovation promotion program” on November 10, 2016 to serve as the nation’s new blueprint for innovative biomedical research and development (R&D). To facilitate development of the biomedical industry, the government proposed a “biomedical industrial innovation promotion program”. The program centered on the theme of “local, global and future links,” “the biomedical industrial innovation promotion program” includes four action plans: (1) Build a comprehensive ecosystem To address a rapidly ageing global population, Taiwan will enhance the biomedical industry’s capacity for innovation by focusing on talent, capital, topic selection, intellectual property, laws and regulations, and resources. (2) Integrate innovative business clusters Established by the Ministry of Science and Technology and based in Hsinchu Biomedical Science Park, the center will serve as a government think tank on related issues. It is also tasked with initiating and advancing exchanges among local and foreign experts, overseeing project implementation, promoting investment and recruiting talents. Equally important, it will play a central role in integrating resources from other biomedical industry clusters around the country, including Nangang Software Park in Taipei City, Central Taiwan Science Park in Taichung City and Southern Science Park in Tainan City. (3) Connect global market resources Building on Taiwan’s advantages, promote M&A and strategic alliances, and employ buyout funds and syndicated loans to purchase high-potential small and medium-sized international pharmaceutical companies, medical supply companies, distributors and service providers. Use modern mosquito-borne disease control strategies as the foundation of diplomatic cooperation, and promote the development of Taiwan’s public health care and medical services in Southeast Asian countries. (4) Promote specialized key industries Promote niche precision medical services, foster clusters of world-class specialty clinics, and develop industries in the health and wellness sectors. 6. DIGITAL NATION AND INNOVATIVE ECONOMIC DEVELOPMENT PLAN On November 24, 2016, the Executive Yuan promote the Digital Nation and Innovative Economic Development Plan (2017-2025) (DIGI+ program), the plan’s main goals for 2025 are to grow R.O.C.’s digital economy to NT $ 6.5 trillion (US$205.9 billion), increase the digital lifestyle services penetration rate to 80 percent, speed up broadband connections to 2 Gbps, ensure citizens’ basic rights to have 25 Mbps broadband access, and put R.O.C. among the top 10 information technology nations worldwide. In addition to the industrial economy, the program can jump off bottlenecks in the past industrial development, and promote the current Internet of things, intelligent machinery, green energy, medical care and other key national industries, but also attaches great importance to strengthening the digital infrastructure construction, the development of equal active, as well as the creation of a service-oriented digital government. It is also hoped that through the construction of a sustainable and intelligent urban and rural area, the quality of life will be improved and the people will enjoy a wealthy and healthy life. Over the next 8 years, the government will spend more than NT $ 150 billion. The plan contains several important development strategies: DIGI+Infrastructure: Build infrastructure conducive to digital innovation. DIGI+Talent: Cultivate digital innovation talent. DIGI+Industry: Support cross-industry transformation through digital innovation. DIGI+Rights: Make R.O.C. an advanced society that respects digital rights and supports open online communities. DIGI+Cities: Build smart cities through cooperation among central and local governments and the industrial, academic and research sectors. DIGI+Globalization: Boost R.O.C.’s standing in the global digital service economy. The program aims to build a favorable environment for digital innovation and to create a friendly legal environment to complete the draft amendments to the Digital Communications Law and the Telecommunications Act as soon as possible, foster cross-domain digital talents and develop advanced digital technologies, To create a digital economy, digital government, network society, smart urban and rural and other national innovation ecological environment in order to achieve "the development of active network society, promote high value innovation economy, open up rich countries of the policy vision. In order to achieve the overall effectiveness of the DIGI + program, interdisciplinary, inter-ministerial, inter-departmental and inter-departmental efforts will be required to collaborate with the newly launched Digital National Innovation Economy (DIGI +) Promotion Team. 7. “NEW AGRICULTURE” PROMOTION PROJECT At a Cabinet meeting On December 08, 2016, Premier Lin Chuan underscored the importance of a new agricultural paradigm for Taiwan’s economic development, adding that new agriculture is an integral part of the “five plus two” industrial innovation projects proposed by President Tsai Ing-wen. The “new agriculture” promotion project uses innovation technology to bring value to agricultural, and build new agricultural paradigm, agricultural safety systems and promote agricultural marketing. This project also takes resources recycling and environmental sustainability into consideration to promote agricultural transformation, and build a robust new agricultural system. This agricultural project is expected to increase food self-sufficiency rate to 40%, level up agricultural industry value by NT$43.4 billion, create 370,000 jobs and increase portion of total agricultural exports to new overseas markets to 57% by 2020. This project contains three aspects: First is “building new agricultural paradigm”: to protect farmers, agricultural development and ensure sustainability of the environment. Second is “building agricultural safety systems”: Ensuring product safety and quality, and building a certification system which can be trust by the consumers and is consistent with international standards. Last but not least is “leveling up agricultural marketing and promotions”: enhancing promotion, making the agricultural industry become profitable and sustainable. Council of Agriculture’s initiatives also proposed 10 policies to leverage agricultural industry, not only just use the passive subsidies measure of the past. These policies including promoting environmentally friendly farming practices; giving farmers that are beneficial(green) to the land payments; stabilizing farmers’ incomes; increasing the competitiveness of the livestock and poultry industries; using agricultural resources sustainably; ensuring the safety of agricultural products; developing technological innovation; leveling up food security; increasing diversification of domestic and external marketing channels; and increasing agriculture industry added value. In this statutes report, Council of Agriculture said this project will accelerate reforms, create new agricultural models and safety systems, but also build a new sustainable paradigm of agricultural. Premier Lin Chuan also backed this “five plus two innovative industries” program and “new agriculture” project, and asked Council of Agriculture to reviewing the possible legal changes or amendment that may help to enhance the transformation of agricultural sector.
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