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Ministry of Digital Affairs Clarifies Electronic Signature Technology with Electronic Signature Effect via Explanatory Decree; Facilitates Practical Operation, Utilization, and Identification
  Application of the Electronic Signatures Act has, in practice, often been doubtful. This is primarily because the electronic signatures referred to in the Electronic Signatures Act (below, the “Act”) are only defined functionally, making them difficult to actually use or to identify what an “electronic signature” is in practice. In response to this issue, the Ministry of Digital Affairs, as the competent authority of the Act, held consultation meetings to come up with recommendations from experts, industry and relevant authorities.
  The Ministry also made reference to common international algorithm and information security technical standards, such as demonstrations of the public key infrastructure technology and structures, and signature formats and algorithms instituted by international organizations and major countries for practical use. In response to the European Chamber of Commerce's letter of inquiry about the application of the Electronic Signatures Act, delivered via the National Development Council, the Ministry of Digital Affairs issued its Electronic Signature Technology with Electronic Signature Effect Explanatory Decree (產經字No. 1114000229) on December 13, 2022. This provides concerned parties with details for identification and reference.
  As the Explanatory Decree states, Article 2, Subparagraph 2 of the Electronic Signatures Act defines an “electronic signature” as “data attached to and associated with an electronic record, and executed with the intention of identifying and verifying the identity or qualification of the signatory of the electronic record and authenticating the electronic record.” Hence, a legal electronic signature is constituted when algorithms and information security technology are adopted sufficient to authenticate that the signature meets these requirements. Digital signatures as defined in Article 2, Subparagraph 3 of the Act also include electronic signatures that meet the requirements of Subparagraph 2. To facilitate practical use, the information security technology algorithms and standards commonly seen internationally are given for reference:
  I.Public Key Infrastructure technologies and structures instituted by international organizations, such as the standards formulated by the Internet Engineering Task Force (IETF) and Public Key Infrastructure X.509 (PKIX).
  II.Signature formats and algorithms established by international organizations, such as:
   A.Signature formats developed by the European Telecommunications Standards Institute (ETSI), including the CMS Advanced Electronic Signatures (CAdES), XML Advanced Electronic Signatures (XAdES), PDF Advanced Electronic Signatures (PAdES), Associated Signature Containers (ASiC), JavaScript Advanced Electronic Signatures (JAdES), etc.
   B.Signature algorithms developed by the US National Institute of Standards and Technology (NIST) such as FIPS PUB 186-4, or the post-quantum cryptography signature algorithms CRYSTALS-Dilithium, FALCON, and SPHINCS+.
[1] 〈何種電子簽章技術具電子簽章效力?〉,數位發展部數位產業署, (最後瀏覽日︰2023/2/15)。
[2] 〈數位部函釋電子簽章技術促進數位經濟發展〉,數位發展部數位產業署,最後瀏覽日︰2023/2/15)。
Enhancement of Protection of Shareholders' Rights and Interests: Amendment to the Taiwan Business Mergers and Acquisitions Act Implemented
  The amendment to the Taiwan Business Mergers and Acquisitions Act (Official Decree Tzung-Tung-Hua-Tzung-I-Ching-Tzu No. 11100048761, the “Amendment”) has been implemented since December 15, 2022. This Amendment focuses on three major areas: protecting shareholders' rights and interests, increasing flexibility and efficiency in mergers and acquisitions, and providing tax incentives.
■ Protecting Shareholders' Rights and Interests
  To strengthen shareholders' rights and interests, the Amendment stipulates that companies shall disclose the directors' explanations of their interests in shareholders' meeting notices, and shall make such explanations available on the website designated by the securities authority or on the company’s own website so that shareholders can obtain the relevant information in a timely manner before a reasonable period of time prior to the shareholders’ meeting. In addition, prior to the Amendment, a dissenting shareholder who requested the company to purchase her shares was required to express her dissent in writing or orally before or during the shareholders' meeting, and to then abstain from voting; shareholders who voted against the proposal in the meeting were excluded from requesting that the company purchase her shares. In other words, a shareholder who wished to exercise a share purchase request was required to abstain from voting, which would result in a lack of bargaining power. Therefore, the Amendment also adds shareholders who vote against a merger or acquisition proposal in a meeting to the scope of shareholders who may exercise the right to request a share purchase.
■ Increasing the Efficiency in Mergers and Acquisitions
  In order to increase the flexibility and efficiency in mergers and acquisitions, the Amendment relaxes the scope of whale-minnow mergers. If the shares paid by the acquiring company do not exceed 20% of its issued shares, or if the total consideration paid by the acquiring company for the shares, cash and other assets do not exceed 20% of the net value of the acquiring company, the acquisition can be carried out via a resolution of the acquiring company's board of directors. No further shareholders' meeting is required.
■ Providing Tax Incentives
  In order to promote a corporate-friendly environment, the Amendment provides that, the consideration for the shares obtained by an individual shareholder of a merged startup company may be elected to defer all dividends received in accordance with the Taiwan Income Tax Act until the third year following the year in which the acquisition occurred and be taxed in equal installments over the following three years. The Amendment also explicitly lists the categories of intangible assets: business rights, copyrights, trademark rights, patents, integrated circuit layout rights, plant variety rights, fishing rights, mining rights, water rights, trade secrets, computer software, and other franchises. At the same time, the Amendment also relaxes the calculation of amortization of intangible assets acquired through mergers and acquisitions to be based on the statutory entitlement period or ten years. This makes it less complicated to estimate the tax cost of a merger or acquisition.
[1] Business Mergers and Acquisitions Act, (last visited Feb. 8, 2023).
[2] Executive Yuan of Taiwan press release, (last visited Feb. 8, 2023).
[3] Ministry of Economic Affairs, Executive Yuan of Taiwan amendment comparison table, (last visited Feb. 8, 2023).
Taiwan Passes Its Chips Act; Will Further Incentivize R&D in Pioneering Innovation
  Taiwan Legislative Yuan (立法院) passed its “Chips Act”, Article 10-2 of the Statute for Industrial Innovation (產業創新條例) on Jan. 7, 2023, allowing “critical companies” to enjoy tax credits if certain specific criteria are met. The article was promulgated by the President on Jan. 19, 2023.
■ Background
  Taiwan has long played an important role in the global semiconductor supply chain, acting as a strong backing for other companies around the world. However, the semiconductor shortages over the past few years have made quite a few countries realize that they have been over-dependent on a very limited number of actors in the semiconductor supply chain. They thus want to strengthen their independence in critical industries by offering incentives.
  For example, the U.S. passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act on Aug. 25, 2022, providing US$52.7 billion for American semiconductor research, development, manufacturing, and workforce development. It also provides a 25% investment tax credit for capital expenses in manufacturing of semiconductors and related equipment.
  The European Commission proposed a comprehensive set of measures (the “European Chips Act”) on Feb. 8, 2022. The European Chips Act is expected to mobilize more than €43 billion of public and private investment in the EU’s semiconductor industry, in hopes that the EU will double its global semiconductor market share from 10% to at least 20% by 2030. The “European Chips Act” would be later on negotiated by the European Council and the European Parliament before being passed.
  Given that these foreign policies may affect Taiwan’s position in the global supply chain, Taiwan thus introduced its own version of the Chips Act: Article 10-2 of the Statute for Industrial Innovation. This provides tax credits both in the R&D and equipment expenses for companies conducting the R&D in Taiwan and at the same time occupying a key position in the global supply chain.
■ Statute content
  According to Sub-article 1 of Article 10-2, companies meeting the criteria below may receive 25% of their expense in pioneering innovation R&D as tax credits against enterprise income tax for the year. However, this cannot exceed 30% of total enterprise income tax:
  1.Companies that conduct the R&D in Taiwan, and occupy a key position in the global supply chain.
   According to the authorities, companies that “occupy a key position in the global supply chain” are not limited to those in the semiconductor industry; the authority will make a thorough review of each company’s conditions when it makes its application.
  2.R&D expenses must reach “a certain scale”.
   The competent Central Government authority will prescribe exact requirements for this in consultation with the Ministry of Finance.
  3.R&D expenses must make up “a certain percentage of net revenue”.
   The competent Central Government authority will also prescribe the exact requirements for this.
  4.The company’s “effective tax rate” must reach a specific numerical value. In 2023, this figure will be 12%; starting from 2024, it will be 15%. The “effective tax rate” means the ratio between the company’s annual tax and its annual revenue; beside, taxes paid to a foreign government or to the PRC government, as well as tax credits provided by other mechanisms, must be deducted before this is calculated (see Sub-article 5 of Article 10-2). The “effective tax rate” mechanism takes reference to the OECD “minimum global corporate tax rate of 15%”, which aims at avoiding excessive tax incentives.
  5.The company must not have had any major environmental protection, labor, or food safety issues in the past three years.
  Thirdly, some technologies which have been developed for years, such as Traditional Biofuels, Hydroelectric Energy, Carbon Capture Utilization and Storage (CCUS), Natural Carbon Sinks (Agriculture), are on the right track and should be developed continuously.
  In addition, in accordance with Sub-article 2 of Article 10-2, companies meeting the criteria above can also enjoy tax credits for equipment expenses. If investment in new machines or equipment for “advanced manufacturing processes” reaches “a certain scale” (again, details to be prescribed by the competent Central Government authority), the company can reimburse 5% of that expense as tax credits against enterprise income tax for the year. This cannot, however, exceed 30% of total enterprise income tax.
  These incentives are in effect from Jan. 1, 2023 to Dec. 31, 2029 (see Sub-article 6 of Article 72 of Statute for Industrial Innovation). It is also worth noting that a company’s total tax credits cannot exceed 50% of its total enterprise income taxes for the year (see Sub-article 4 of Article 10-2). The authorities mentioned this January that more details for the statute will be formulated within the following six months. The Taiwanese government hopes that all these mechanisms will strengthen Taiwan’s edge in global industrial competition, and bolster Taiwan’s position in the global supply chain.
[1] “Ministry of Economic Affairs announcement: Article 10-2 of the Statute for Industrial Innovation would be formulated.” JOIN.GOV.TW, available at: (last visited Feb. 14, 2023).
[2] “Article 10-2 and Amendment to the Statute for Industrial Innovation passed by the Legislative Yuan.” Ministry of Economic Affairs, R.O.C., (last visited Feb. 14, 2023).
[3] “Promulgation for the Article 10-2 and Amendment to the Statute for Industrial Innovation.” Presidential Office Gazette, R.O.C., (last visited Feb. 14, 2023).