Industrial Innovation Statute Article 12-2

Where a domestic academic or research institution assigns the intellectual property rights resulting from its R&D achievements and vested in it to a company or licenses the company to use such rights in accordance with Paragraph 1, Article 6 of the Fundamental Science and Technology Act, and acquires shares in the company in return, and distributes such shares to the domestic creator of such intellectual property rights in accordance with Paragraph 3, Article 6 of the Fundamental Science and Technology Act, such domestic creator may opt to exclude the new shares so acquired from his/her income taxable in the year such shares are acquired. Once such option is chosen, it cannot be reversed. However, after the creator has opted to exclude such new shares from his/her income taxable in the year such shares are acquired, if the shares are transferred or are delivered by book-entry transfer to an account with a securities depository enterprise, the entire transfer price, the market price of the shares at the time of transfer as a gift or distribution as estate, or the market price of the shares on the date of book-entry transfer shall be included as the creator’s salary for the year of transfer or book-entry transfer and be declared for assessment of income tax in accordance with the Income Tax Act.Where a domestic creator has opted to exclude the acquired new shares from his/her taxable income in the year such shares are acquired in accordance with the preceding paragraph, and has held such shares and worked and carried out research and development at an industry or an academic or research institution within the territory of the R.O.C. accumulatively for two years, if the shares are transferred or are delivered by book-entry transfer to an account with a securities depository enterprise, and the entire transfer price, the market price of the shares at the time of transfer as a gift or distribution as estate, or the market price of the shares on the date of book-entry transfer is higher than the market price of the shares at the time they are acquired by the creator, the market price of the shares at the time they are acquired by the creator shall be included as the creator’s revenue for the year of transfer or book-entry transfer, and be declared for assessment of income tax. The aforesaid provision shall not apply if the domestic creator has not declared the price of the shares for assessment of income tax or has declared the price for assessment of income tax but cannot provide any supporting documentation to prove the market price of the shares at the time they are acquired by the creator, and the taxation authority cannot verify the price, either.The transfer under the preceding two paragraphs refers to purchase and sale, transfer as a gift, distribution as estate, cancellation of shares as a result of capital reduction, corporate liquidation, or change in ownership due to any other causes.Where a domestic academic or research institution distributes shares to a domestic creator in accordance with Paragraph 1 of this article and desires to apply for the incentive under that paragraph, it shall submit duly formatted documents to the competent authority specified in Paragraph 3, Article 6 of the Fundamental Science and Technology Act for approval. A copy of the decision of the competent authority shall be served on the company issuing the shares and the taxation authority at the place where the company is located.The regulations governing the scope of the intellectual property rights derived from an academic or research institution’s R&D results in accordance with Paragraph 1 and vested in the institution in accordance with Paragraph 1, Article 6 of the Fundamental Science and Technology Act, the recognition of the shares distributed to domestic creators in accordance with Paragraph 3, Article 6 of the Fundamental Science and Technology Act, the recognition of working in and carrying out research and development at an industry or an academic or research institution within the territory of the R.O.C. under Paragraph 2, the formats of the documents, the application procedure and the required documents under the preceding paragraph, and other related matters shall be prescribed by the Ministry of Science and Technology.The regulations governing the procedure for declaring deferral of the income tax payable for the shares acquired by the domestic creators under Paragraphs 1 and 2, the documents to be submitted, and other related matters shall be prescribed by the Ministry of Finance.