The Executive Yuan recently approved a draft amendment to the “Act for the Transformation, Upgrading and Development of Micro, Small and Medium Enterprises.” Through renaming the Act, restructuring its framework, and expanding incentives, the amendment comprehensively strengthens policy support for MSMEs in R&D and innovation, digital transformation, financing, and talent acquisition. 

Key amendments are as follows: 

1. Expanded R&D Tax Incentives (Articles 10–12)

The investment tax credit rate for R&D expenditures will be increased, and existing tax incentives, such as deferred taxation on shares acquired through the contribution of intellectual property rights, will be continued, in order to promote R&D innovation and intellectual property portfolio development by MSMEs. 

2. New Tax Credits for Transformation Investments (Articles 13–22)

New investment tax credits will be introduced for investments in hardware, software, technology, and servicerelated to digital and smart transformation as well as net-zero transition. 

3. Enhanced Financing Support (Articles 23–28)

Mechanisms such as project loans, credit guarantees, and financial guidance will be strengthened to help MSMEs obtain financing. Enterprises engaged in agriculture-related businesses may obtain guarantees from the Agricultural Credit Guarantee Fund. 

4. Strengthened Wage Increase Tax Incentives (Articles 29–31)

The additional deduction rate for salary expenses attributable to employee wage increases will be raised to 200%. The scope of eligibility for the additional deduction of salary expenses for newly hired employees will be expanded to cover Taiwanese entry-level employees aged 29 or under and 55 or above. 

5. Exclusion Provisions (Articles 37–38)

Enterprises with serious violations of environmental, labor, or food safety laws within the preceding three years will be ineligible for tax incentives, subsidies, or awards under this Act. 

The draft will be submitted to the Legislative Yuan for deliberation. Given its significance for tax planning and regulatory compliance, we recommend monitoring the legislative progress closely.