Brief Introduction to Taiwan Social Innovation Policies
2021/09/13
1. Introduction
The Millennium Development Goals (MDGs)[1] set forth by the United Nations in 2000 are carried out primarily by nations and international organizations. Subsequently, the Sustainable Development Goals (SDGs) set forth by the United Nations in 2015 started to delegate the functions to organizations of all levels. Presently, there is a global awareness of the importance of balancing “economic growth”, “social progress”, and “environmental protection” simultaneously during development. In the above context, many similar concepts have arisen worldwide, including social/solidarity economy, social entrepreneurship and social enterprise, and social innovation.
Generally, social innovation aims to alter the interactions between various groups in society through innovative applications of technology or business models, and to find new ways to solve social problems through such alterations. In other words, the goal is to use innovative methods to solve social problems. The difference between social innovation and social enterprise is that social enterprise combines commercial power to achieve its social mission under a specific perspective, while social innovation creates social value through cooperation with and coordination among technology, resources, and communities under a diversified nature.
2. Overview of Taiwan Social Enterprise Policy
To integrate into the global community and assist in the development of domestic social innovation, Taiwan’s Executive Yuan launched the “Social Enterprise Action Plan” in 2014, which is the first policy initiative to support social enterprises (from 2014 to 2016). Under this policy initiative, through consulting with various ministries and applying methods such as “amending regulations”, “building platforms”, and “raising funds”, the initiative set to create an environment with favorable conditions for social innovation and start-ups. At this stage, the initiative was adopted under the principle of “administrative guidance before legislation” in order to encourage private enterprise development without excessive burden, and avoid regulations restricting the development of social enterprises, such as excessive definition of social enterprises. Moreover, for preserving the original types of these enterprises, this Action Plan did not limit the types of social enterprises to companies, non-profit organizations, or other specific types of organizations.
To sustain the purpose of the Social Enterprise Action Plan and to echo and reflect the 17 sustainable development goals proposed in SDGs by the United Nations, the Executive Yuan launched the “Social Innovation Action Plan” (effective from 2018 to 2022) in 2018 to establish a friendly development environment for social innovation and to develop diversified social innovation models through the concept of “openness, gathering, practicality, and sustainability”. In this Action Plan, “social innovation” referred to “social innovation organizations” that solve social problems through technology or innovative business models. The balancing of the three managerial goals of society, environment value, and profitability is the best demonstration of the concept of social innovation.
3. Government’s Relevant Social Enterprise Policy and Resources
The ministries of the Taiwan Government have been promoting relevant policies in accordance with the Social Innovation Action Plan issued by the Executive Yuan in 2018, such as the “Registration System for Social Innovation Enterprises” (counseling of social enterprises), the “Buying Power - Social Innovation Products and Services Procurement”, the “Social Innovation Platform” established by the Ministry of Economic Affairs, the “Social Innovation Manager Training Courses”, the “Promoting Social Innovation and Employment Opportunities” administered by the Ministry of Labor, and the “University Social Responsibility Program” published by the Ministry of Education. Among the above policies stands out the measures adopted by the Ministry of Economic Affairs, and a brief introduction of those policies are as follows:
i. Social Innovation Platform
To connect all resources involved in social issues to promote social innovation development in Taiwan, the Ministry of Economic Affairs established the “Social Innovation Platform”.[2] With visibility through the Social Innovation Platform, it has become more efficient to search for targets in a public and transparent way and to assist with the input of resources originally belonging to different fields in order to expand social influence.
As a digital platform gathering “social innovation issues in Taiwan,” the Social Innovation Platform covers multiple and complete social innovation resources, which include the “SDGs Map” constructed on the Social Innovation Platform, by which we can better understand how county and city governments in Taiwan implement SDGs and Voluntary Local Review Reports, and which allow us to search the Social Innovation Database[3] and the registered organizations, by which citizens, enterprises, organizations, and even local governments concerned with local development can find their partners expediently as possible, establish service lines to proactively assist public or private entities with their needs/resources, and continue to enable the regional revitalization organizations, ministries, and enterprises to identify and put forward their needs for social innovation through the function of “Social Innovation Proposals”, which assist social innovation organizations with visibility while advancing cooperation and expanding social influence.
In addition, the “Event Page” was established on the Social Innovation Platform and offers functions, such as the publishing, searching, and sorting of events in four major dimensions with respect to social innovation organization, governments, enterprises, and citizens; and encourages citizens, social innovation organizations, enterprises, and governments to devote themselves via open participation to continuously expande the influence of the (Civic Technology) Social Innovation Platform. The “Corporate Social Responsibility Report” collects the corporate social responsibility reports, observes the distribution of resources for sustainable development by corporations in Taiwan, offers filtering functions by regions, keyword, popular rankings, and or SDGs types, and provides contact information and a download function for previous years’ reports, in order to effectively assist social innovation organizations to obtain a more precise understanding of the status quo, needs, and trends with respect to their development of respective products and services.
Figure 1: SDGs Map
Reference: Social Innovation Platform (https://si.taiwan.gov.tw/)
Figure 2: Social Innovation Database
Reference: Social Innovation Platform (https://si.taiwan.gov.tw/)
Figure 3: Social Innovation Proposals
Reference: Social Innovation Platform (https://si.taiwan.gov.tw/)
Figure 4: Event Page
Reference: Social Innovation Platform (https://si.taiwan.gov.tw/)
Figure 5: Corporate Social Responsibility Report
Reference: Social Innovation Platform (https://si.taiwan.gov.tw/)
ii. Social Innovation Database
To encourage social innovation organizations to disclose their social missions, products and services, and to guide society to understand the content of social innovation, and to assist the administrative ministries to be able to utilize such information, the Ministry of Economic Affairs issued the “Principles of Registration of Social Innovation Organizations” to establish the “Social Innovation Database”.
Once a social innovation organization discloses the items, such as its social missions, business model, or social influence, it may obtain the relevant promotional assistance resources, including becoming a trade partner with Buying Power (Social Innovation Products and Services Procurement), receiving exclusive consultation and assistance from professionals for social innovation organizations, and becoming qualified to apply to entering into the Social Innovation Lab. Moreover, the Ministry of Economic Affairs is simultaneously consolidating, identifying, and designating the awards and grants offered by the various ministries, policies and measures in respect of investment, and financing and assistance, as resources made available to registered entities.
As of 25 May 2021, there were 658 registered social innovation organizations and 96 Social Innovation Partners (enterprises with CSR or ESG resources that recognize the cooperation with social innovation under the social innovation thinking model may be registered as a “Social Innovation Partner”). The public and enterprises can search for organizations registered in the Social Innovation Database through the above-said Social Innovation Platform, the search ability of which advances the exposure of and the opportunities for cooperation with social innovation organizations.
Figure 6: Numbers of registered social innovation organizations and accumulated value of purchases under Buying Power
Reference: Social Innovation Platform(https://si.taiwan.gov.tw/)
iii. Buying Power - Social Innovation Products and Services Procurement
In order to continue increasing the awareness on social innovation organizations and related issues and promote responsible consumption and production in Taiwan, as well as to raise the attention of the commercial sector to the sustainability-driven procurement models, the Ministry of Economic Affairs held the first “Buying Power - Social Innovation Products and Services Procurement” event in 2017. Through the award system under the Buying Power, it continues to encourage the governments, state-owned enterprises, private enterprises, and organizations to take the lead in purchasing products or services from social innovation organizations, to provide the relevant resources so as to assist social innovation organizations to obtain resources and to explore business opportunities in the markets, to practice responsible consumption and production, and to promote innovative cooperation between all industries and commerce and social innovation organizations.
The aim of the implementation of the Buying Power is to encourage the central and local governments, state-owned enterprises, private enterprises, and non-governmental organizations to purchase products or services from organizations registered in the Social Innovation Database, while prizes will be awarded based on the purchase amounts accumulated during the calculation period. The winners can obtain priority in applying for membership in the Social Innovation Partner Group, with corresponding member services, in the future.
Under the Social Innovation Platform, both the amount of purchase awards and the number of applicants for special awards continue to increase. So far, purchases have accumulated to a value of more than NT$1.1 billion (see Figure 6), and more than 300 organizations have proactively participated.
iv. Social Innovation Mark
In order to promote public awareness of social innovation, the Ministry of Economic Affairs has been charged with the commissioned task of promoting the Social Innovation Mark, and issued “ The Small and Medium Enterprise Administration of the Ministry of Economic Affairs Directions for Authorization of the Social Innovation Mark” as the standard for the authorization of the Social Innovation Mark. Social innovation organizations can use the Mark, through obtaining authorization, to hold Social Innovation Summits or other social innovation activities for promoting social innovation concepts.
In order to build the Mark as a conceptual symbol of social innovation, the Ministry of Economic Affairs has been using the Social Innovation Mark in connection with various social innovation activities, such as the Social Innovation Platform, the Buying Power, and the annual Social Innovation Summit. Taking the selection of sponsors of the Social Innovation Summit in 2022 as an example[4], only organizations that have obtained authorization of the Social Innovation Mark can use the Mark to hold the Social Innovation Summit.
Figure 7: The Social Innovation Mark of the Small and Medium Enterprise Administration, Ministry of Economic Affairs
IV. Conclusion
The “Organization for Economic Cooperation and Development” (OECD) regards social innovation as a new strategy for solving future social problems and as an important method for youth entrepreneurship and social enterprise development. Taiwan’s social innovation energy has entered a stage of expansion and development. Through the promotion of the “Social Innovation Action Plan,” the resources from the central and local governments are integrated to establish the Social Innovation Platform, the Social Innovation Database, the Social Innovation Lab, and the Social Innovation Mark. In addition, incentives such as the Buying Power have been created, manifesting the positive influence of Taiwan’s social innovation.
[1] MDGs are put forward by the United Nations in 2000, and are also the goals requiring all the 191 member states and at least 22 international organizations of the United Nations to be committed to on their best endeavors, including: 1. eradicating extreme poverty and hunger, 2. applying universal primary education, 3. promoting gender equality and empowering women, 4. reducing child mortality rates, 5. improving maternal health, 6. combatting HIV/AIDS, malaria, and other diseases, 7. ensuring environmental sustainability, and 8. establishing a global partnership for development.
[2] Please refer to the Social Innovation Platform: https://si.taiwan.gov.tw/.
[3] Please refer to the Social Innovation Database: https://si.taiwan.gov.tw/Home/Org_list.
[4] Please refer to the guidelines for the selection of sponsors of the 2022 Social Innovation Summit: https://www.moeasmea.gov.tw/files/6221/4753E497-B422-4303-A8D4-35AE0B4043A9
Preface In actual practice, the research and development of biotech medicine, food, and environmental products cannot be done by in-lab researches. This is a unique character of the biotechnology industry. To get the research going, the researchers need to search for and exploit new biological materials and, samples outside the lab. Therefore, the access to and management of biological resources have significant impact on the stimulation and development of national biotech industry. Ever since the enforcement of Convention on Biological Diversity (CBD) in 1992 by 172 countries, a general principal about conserving biological diversity and using biological resources has been set. According to CBD, States have sovereign rights over their own biological resources. CBD also encourages each State to access to and manage the biological resources conformed with the principals of conservation, sustainability, NOEL environment friendly, and adequate sharing of benefit arising from biological resources. Therefore, issues such as environmental protection and sustainability have become political issues internationally. If the ABS system for the access to biological resources is designed too strictly, the establishment of the system will make the research and development staffs and related institutions hang back with hesitation both domestically and internationally. Their intention of bioprospecting in the designated country will then be reduced. On the other hand, if the system is designed too loosely, it will not be able to protect the rights of the owner of the resources. As a result, currently, every country holds a cautious attitude in setting up the regulations of managing the access to biological resources. Currently, many countries and regional international organizations already set up ABS system, such as Andean Community, African Union, Association of Southeast Asia Nations (ASEAN), Australia, South Africa, and India, all are enthusiastic with the establishment of the regulations regarding the access management of biological resources and genetic resources. On the other hand, there are still many countries only use traditional and existing conservation-related regulations to manage the access of biological resources. Since it has been more than 10 years that the regulation of access to biological resources and benefit sharing has been developed in some countries, how is Taiwan's current situation regarding this issue? Taiwan's Existing Regulations on the Access to Bioloical Resources In terms of regulations, Taiwan's existing management style of the access to biological resources is similar to that of the US and the EU. It refers to the existing regulations on environmental protection and conservation, and evaluates from the perspective of environmental protection to control and manage the exploitation and application of the related biological resources. These regulations include the Wildlife Conservation Act, theNational Park Law, the Forestry Act, the Cultural Heritage Preservation Act, and the Aboriginal Basic Act. The paragraphs below describe the contents of the acts mentioned that are related to the access to biological resources. 1 、 Wildlife Conservation Act According to the Wildlife Conservation Act, the Protected Species and the products made of cannot be hunted, traded, owned, imported, exported, raised, bred, and processed unless the number of protected wildlife has exceeded the amount the environment permits, or carry the objectives of academic research and education with the permits of central or regional authorities. As for the hunting of General Wildlife, pre-application and approval is needed with the exception of projects based on the objectives of academic research or education. In addition, the import and export of the living wildlife and the products of Protected Wildlife are restricted to the condition of being permitted by management authority. With respect to the import and export of living Protected Wildlife, Academic research institutions and colleagues are the only person who can seek for the approval of management authority before they proceed. 2 、 National Park Law The design and management of Taiwan's national parks are based on the regulations listed in the National Park Law with the purpose of protecting our country's exclusive natural scenery, wildlife and historical spots. Based on the properties and the nature of resources, the national park management structures the preserved area into general control area, playground and resting area, spot of historical interest, special landmark area, and ecological protection area. Ecological protection area refers to the areas where the natural surroundings, creatures, the society they live and propagate are strictly protected only for the research of ecology. According to the regulation of National Park Law, inside the national park area, it is prohibited to hunt animals, fish, take off flowers or trees, not to mention the behaviours that are prohibited by the management authority. Exceptions are made based on the conditions of preserved areas and for the research purposes. In the general control area or resting area, the national park authority allows fishing or other activities agreed by the authority. However, these activities are prohibited in the preserved area of historical interest, special landmark area, and ecological protection area. To suit special purposes, in the special landmark area or ecological protection area, collection of specimens is allowed subject to the approval of authority. Under the purpose of academic research, better management of public safety, and special management of national park, the Ministry of the Interior will permit the collection of specimen. However, to enter the ecological protection area, one must obtain the permission of authority. 3 、 Forestry Act To protect the forest resources and to maximize the public welfare and economic effectiveness, some of the properties are classified as forestry land and being managed by authority. Based on the Forestry Act, management authority has to restrict the area of cutting timber and to identify the area or period of restricted digging of greensward, tree roots, and grass roots, based on the condition of the forest. In addition, to maintain the current ecological environment in the forest, and to preserve the diversity of species, identification of natural preserved area is needed inside the forestland. The entrance and exit of human and vehicles are controlled based on the nature of the resources inside the preserve area. Unless obtaining the approval from the management authority, not a single activity of damaging, logging or digging soil, stones, greensward and roots is allowed. Furthermore, any unauthorized activity of collecting specimen inside the forest recreation area and natural reserve will be fined. Collecting flowers and plants in these areas, or trespassing the natural reserve will also be fined. Only the activities taken by the aborigines to sustain their living or accommodate their customs are not restricted. 4 、 Cultural Heritage Preservation Act The objectives of setting up the Cultural Heritage Preservation Act are to preserve and apply the cultural resources, to enrich the spiritual lives of citizens, and to add glory to the existing diverse cultures. The Cultural Heritage Preservation Act classifies the natural landscape and scenery as cultural assets. Vistas of Natural Culture refer to the natural areas, landforms, plants and mineral which contain the values of preservation. It can be further grouped into natural preserved area and natural monuments. Since the natural monuments include the unusual plants and mineral, it is connected to the management of biological resources. According to the Cultural Heritage Preservation Act, unless approved by the management authority, it is prohibited to collect, log, destroy the plants or bio resources classified as natural monuments or trespass into the area of natural preserve. For the purposes of academic research, or for the memorial ceremony of aboriginal custom, research institute and the aborigines can collect the natural monuments without the approval of authority. 5 、 Aboriginal Basic Act To protect the basic rights of the aborigines, and to sustain and develop the aboriginal society, the Aboriginal Basic Act was designed and enacted. The government not only admits the aborigine's rights in lands and natural resources, but also permits the non-profit behaviour such as hunting of wildlife, colleting of wild plants and fungi for the objective of complying with traditional culture, ceremony or private uses. In addition, the Aboriginal Basic Act provides the requirement of Prior Informed Consent (PIC) to require government or private individual to inform the aborigines before they proceed with land development, resource exploitation, ecological preservation, and academic research in the land where the aborigines live. They need to consult and obtain the aborigines' agreement or participation, and to share the related interests derived from this project. In the case of restricting the aborigine's right of the use of land or natural resources by law, the government,shall consult with the aborigines or the tribe and reach the agreement. When the government wish to design and establish national park, national scenic area, forestry area, ecological protection area, recreational area, or other resource management authorities, the government should obtain the agreement from the local aborigines and to build up the co-management mechanism.
Observing Recent Foreign Developments upon Bio-medicine、 Marketing Medical Devices、Technology Development Project and the Newest Litigation Trend Concerning the Joint Infringement of Method/Process Patents1、Chinese REACH has put into shape, how about Taiwan REACH? - A Perspective of Chinese Measures on Environmental Management of New Chemical Substances Taiwan food industry has been struck by the government agency's disclosure that certain unfaithful manufacturers have mixed toxic chemicals into the food additives for the past 30 years, and the chemicals may seriously threaten public health. This event has not only shocked the confidence of the customers to the industry, but also drew public attention on the well-management and the safe use of chemicals. In order to manage the fast advancing and widely applicable chemical substance appropriately, the laws and regulations among the international jurisprudences in recent years tend to regulate unfamiliar chemicals as “new chemical substances” and leverage registration systems to follow their use and import. REACH is one the most successful models which has been implemented by European Union since 2006. China, one of our most important business partners, has also learned from the EU experience and implemented its amended " Measures on Environmental Management of New Chemical Substances" (also known as "Chinese REACH") last year. It is not only a necessity for our industry which has invested or is running a business in China to realize how this new regulation may influence their business as differently , but also for our authority concerned to observe how can our domestic law and regulation may connect to this international trend. Therefore, except for briefing the content of Chinese REACH, this article may also review those existing law and regulations in Taiwan and observe the law making movement taken by our authority. We expect that the comparison and observation in this article may be a reference for our authorities concerned to map out a better environment for new chemical management. 2、The study on Taiwanese businessmen Join the Bid Invitation and Bidding of Science and Technology Project China government invests great funds in their Science and Technology Project management system, containing most of innovated technology. It also creates the great business opportunity for domestic industry. China government builds up a Bid Invitation and Bidding Procedure in the original Science and Technology Project Regime recent years, in order to make the regime become more open and full of transparency. It also improves Regime to become more fairness and efficiency. Taiwan industry may try to apply for those Science and Technology Project, due to this attractive opportunity, but they should understand china's legal system before they really do that. This Article will introduce the "Bid Invitation and Bidding Law of the Peoples Republic of China", and the "Provisional Regulation on Bid Invitation and Bidding of Science and Technology Project", then clarify applied relationship between the "Bid Invitation and Bidding Law of the Peoples Republic of China", and "Government Procurement Law of the Peoples Republic of China". It also analyzes "Bid Invitation and Bidding Procedure", "Administration of Contract Performance Procedure", "Inspection and Acceptance Procedure", and "Protest and Complaint Procedure, providing complete legal observation and opinion for Taiwan industry finally. Keyword Bid Invitation and Bidding Law of the Peoples Republic of China; Government Procurement Law of the Peoples Republic of China; Provisional Regulation on Bid Invitation and Bidding of Science and Technology Project; Applying for Science and Technology Project Regime; Bid Invitation and Bidding Procedure; Administration of Contract Performance Procedure; Inspection and Acceptance Procedure; Protest and Complaint Procedure. 3、Comparing the Decisions of the United States Supreme Court regarding Preempting Marketing Medical Devices and Drugs from State Tort Litigations with the Decision of a Hypothetical Case in Taiwan The investment costs of complying with pertinent laws and regulations for manufacturing, marketing, and profiting from drugs and medical devices (abbreviated as MD) are far higher than the costs necessary for securing a market permit. The usage of MD products contains the risk of harming their users or the patients, who might sue the manufacturer for damages in the court based on tort law. To help reduce the risk of such litigation, the industry should be aware of the laws governing the state tort litigations and the preemption doctrine of the federal laws of the United States. This article collected four critical decisions by the United States Supreme Court to analyze the requirements of federal preemption from the state tort litigations in these cases. The article also analyzed the issues of preemption in our law system in a hypothetical case. These issues include the competing regulatory requirements of the laws and regulations on the drugs and MDs and the Drug Injury Relief Act versus the Civil Code and the Consumer Protection Law. The article concluded: 1. The pre-market-approval of MD in the United States is exempted from the state tort litigations; 2. Brand-name-drug manufacturers must proactively update the drug label regarding severe risks evidenced by the latest findings; 3. Generic-drug manufacturers are exempted from the product liability litigations and not required to comply with the aforementioned brand-name-drug manufacturers' obligation; 4. No preemption issues are involved in these kinds of product liability litigations in our country; 5. The judge of general court is not bound by the approval of marketing of drug and MD; 6. The judge of general court is not bound by the determination and verdict of the Drug Injury Relief Act. 4、Through Computer-Aided Detection Software, Comparing by Discussing and Analyzing the Regulatory Requirements for Marketing Medical Devices in the United States and in Taiwan Computer-Aided Detection (CADe) software systematically assists medical doctors to detect suspicious diseased site(s) inside patients' bodies, and it would help patients receive proper medical treatments as soon as possible. Only few of this type of medical device (MD) have been legally marketed either in the United States of America (USA) or in Taiwan. This is a novel MD, and the rules regulating it are still under development. Thus, it is valuable to investigate and discuss its regulations. To clarify the requirements of legally marketing the MD, this article not only collects and summarizes the latest draft guidance announced by the USA, but also compares and analyzes the similarities and differences between USA and Taiwan, and further explains the logics that USA applies to clarify and qualify CADe for marketing, so that the Department of Health (DOH) in Taiwan could use them as references. Meanwhile, the article collects the related requirements by the Administrative Procedure Act and by the Freedom of Government Information Law of our nation, and makes the following suggestions on MD regulations to the DOH: creating product code in the system of categorization, providing clearer definition of classification, and actively announcing the (abbreviated) marketing route that secures legal permission for each individual product. 5、A Discussion on the Recent Cases Concerning the Joint Infringement of Method/Process Patents in the U.S. and Japan In the era of internet and mobile communication, practices of a method patent concerning innovative service might often involve several entities, and sometimes the method patent can only be infringed jointly. Joint infringement of method/process patents is an issue needed to be addressed by patent law, since it is assumed that a method patent can only be directly infringed by one entity to perform all the steps disclosed in the patent. In the U.S., CAFC has established the "control or direction" standard to address the issue, but the standard has been criticized and it is under revision now. In Japan, there is no clearly-established standard to address the issue of joint infringement, but it seems that the entity that controls and benefits from the joint infringement might be held liable. Based on its discussion about the recent development in the U.S. and Japan, this article attempts to provide some suggestions for inventors of innovative service models to use patents to protect their inventions properly: they should try to avoid describing their inventions in the way of being practiced by multi-entities, they should try to claim both method and system/apparatus inventions, and they should try to predict the potential infringement of their patents in order to address the problem of how to prove the infringement.
The EU's New Legal Framework for European Research InfrastructureRecognized that Research infrastructures (RIs) are at the centre of the knowledge triangle of research, education and innovation and play an increasingly important role in the advancement of knowledge and technology, the EU began to finance for the establishments of RIs by its Framework Programmes (FPs) since the start of FP2 of 1987. On the other hand, the EU also assigned the European Strategy Forum on Research Infrastructures (ESFRI) to develop a coherent and strategy-led approach to policy-making on RIs between Member States and to facilitate the better use and development of RIs at EU and international level. Based on those efforts, the European Commission understood that a major difficulty in setting up RIs between EU countries is the lack of an adequate legal framework allowing the creation of appropriate partnerships and proposed a legal framework for a European research infrastructure adapted to the needs of such facilities. The new legal framework for a European Research Infrastructure Consortium (ERIC) entered into force on 28 August 2009. An successfully-set-up ERIC will have the legal personality based on EU law, and can benefit from exemptions from VAT and excise duty in all EU Member States and may adopt its own procurement procedures to get rid of the EU's public procurement procedures. It is predicted that the Biobanking and Biomolecular Resources Research Infrastructure (BBMRI) will apply to become a BBMRI-ERIC in the near future. The EU also seeks to lead in Energy, Food and Biology through the reforms of ERICs to assist the high quality of activities of European scientists and attract the best researchers from around the world. Besides, in order to connect the knowledge triangle effectively, the European Commission also established the European Institute of Innovation and Technology (EIT) on March 2008. It hopes through the research development partnership network to gather all the advantages from the science and technology chains of multiple areas, and make an effort for the strategy of EU innovation development jointly;Meanwhile, extends its roadmap to the objectives and practices of the Knowledge and Innovation Communities (KICs) of the EIT. Contrast with the EU's advance, it is necessary to our government to concentrate and contemplate whether it is the time to reconsider if our existing legal instruments available to domestic research facilities and infrastructures are sufficient enough to reach our science and technology development goals.
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.