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Amendments to the Industrial Innovation Statute: Ongoing Support for Startup Investment and Enhanced Talent Retention
Amendments to the Industrial Innovation Statute: Ongoing Support for Startup Investment and Enhanced Talent Retention
On August 27, 2026, the Legislative Yuan passed, in third reading, amendments to certain provisions of the Industrial Innovation Statute (the “Statute”). These amendments continue the policy direction adopted in the 2025 amendment, namely, to utilize tax incentives to encourage limited partnership venture capital (“LPVC”) to invest in startups, while further refining the scope and qualification criteria applicable to investee startups in response to practical market needs. In addition, in light of intensifying global competition for talent, the amendments also adjust the tax deferral limit applicable to employee incentive stock, with a view to enhancing enterprises’ flexibility in retaining, recruiting, and developing talent.
I. Enhancing Flexibility for LPVCs Investing in Startups (Effective as of the date of promulgation)
Under the 2025 amendments to Article 23-1 of the Statute, the threshold of contributed capital required for LPVCs to qualify for tax incentives was reduced from NT$300 million to NT$150 million. The present amendments further revise the applicable annual cumulative investment-in-startups ratio requirement, taking into account the operational characteristics of enterprises of different scales and allowing a more sufficient period for investment assessment and planning. The relevant thresholds before and after the amendments are summarized below:
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Year of Establishment of LPVC
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Pre-Amendment Threshold
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Post-Amendment Threshold
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First and Second Years of Amendment
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Total capital contribution as committed in the limited partnership agreement reaches NT$150 million
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Same as pre-amendment threshold
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Third Year of Establishment
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Total contributed capital reaches NT$50 million, and cumulative investment in startups reaches 50% of the contributed capital;
or
Total contributed capital reaches NT$200 million, and cumulative investments in startups are no less than 20% of the contributed capital
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Total contributed capital reaches NT$50 million, and cumulative investments in startups reach 10% of the contributed capital
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Fourth Year of Establishment
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Total contributed capital reaches NT$100 million, and cumulative investments in startups reach 50% of the contributed capital;
or
Total contributed capital reaches NT$300 million, and cumulative investments in startups are no less than 30% of the total contributed capital
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Total contributed capital reaches NT$100 million, and cumulative investments in startups reach 20% of the total contributed capital
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Fifth Year of Establishment
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Total contributed capital reaches NT$150 million, and cumulative investments in startups reach 50% of the total contributed capital;
or
Total contributed capital reaches NT$400 million, and cumulative investments in startups are no less than 40% of the contributed capital
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Total contributed capital reaches NT$150 million, and cumulative investments in startups reach 30% of the contributed capital
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Sixth Year of Establishment
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None
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Total contributed capital reaches NT$150 million, and cumulative investments in startups reach 40% of the contributed capital
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In addition, the amendments extend the period during which an enterprise may qualify as a “startup” from less than five years after establishment to less than eight years after establishment. This adjustment is intended to better accommodate innovative enterprises in sectors characterized by longer research and development cycles, or those that have not yet entered the growth stage, and to align the Statute criteria more closely with the Ministry of Economic Affairs’ Directions of Recognition for Startups with Innovation Capability. Further, the definition of “startups operated by foreign companies with actual business operations within the territory of the Republic of China (Taiwan)” has been broadened. The scope is no longer limited to direct subsidiaries or branches established in Taiwan by foreign companies, as it now also encompasses indirectly held entities, reflecting holding structures in practice.
II. Increase in the Tax Deferral Limit for Employee Incentive Stock (Effective January 1, 2027)
Finally, these amendments also increase the threshold under the Statute for excluding employee incentive stock from an individual’s taxable income for the relevant year, raising the amount from NT$5 million to NT$10 million. This revision is intended to expand enterprises’ flexibility in using employee incentive mechanisms and to strengthen the competitiveness of Taiwanese businesses in the global talent market, thereby furthering the policy objectives of talent retention and attraction.
In sum, these amendments continue the government’s efforts to optimize the investment environment by encouraging venture capital to flow into startups, while also addressing talent competition through enhanced employee incentive arrangements. They accordingly advance both industry development and talent cultivation.
Should you wish to discuss the foregoing developments in further detail, please feel free to contact our professionals in the Corporate and Investment practice group.