BUSINESS MERGERS AND ACQUISITIONS ACT Article 42

In case of a merger/consolidation, division or acquisition provided in Articles 27 and 28 of this Act by a company, the surviving company or the newly incorporated company after the merger/consolidation, the surviving company or the newly incorporated company after the division or the company of acquisition may respectively continue to assume any tax incentives entitled to the dissolved company, the company divided or the company acquired that is not yet deducted or not expired for the assets or business already acquired before that current acquisition; provided, however, that any company qualified for the incentive of exemption of business income tax shall continue to produce the product or labor service enjoying the incentives by the dissolved company, the company divided or the acquired company before the merger/consolidation and acquisition; such incentives shall be limited to the income accounted for the product independently manufactured or the labor service provided and otherwise enjoyed by the dissolved company, the company divided or the company acquired as of the surviving company or the newly incorporated company after the merger/consolidation, or the surviving company or the newly incorporated company after the division or the acquisition company. In case of being qualified for the incentives of investment offset, such shall be limited to the tax payable accounted for the part of the dissolved company, the company divided or the company acquired as of the surviving company or the newly incorporated company after the merger/consolidation, or the surviving company or the newly incorporated company after the division or the acquisition company.If any tax incentives continue to be enjoyed by the company pursuant to the requirements set forth in the preceding paragraph is required to comply with the conditions and standards as specified in applicable laws and ordinances, the company shall meet the same incentive conditions and standards after the assumption of the tax incentives.To facilitate readjustment of the structure of the industry, a company with surplus is encouraged to merge/consolidate and acquire any other company in loss to repay the debts due to banks transferred at the time the merger/consolidation and acquisition take place, the Executive Yuan may prescribe a procedure to exempt the business income tax for the income created from the assets or business so merged/ consolidated and acquired within a given period of time.The preceding paragraph may be applicable, mutatis mutandis, to the merger/consolidation between two companies in loss.The Executive Yuan shall specify the given period of time, applicable conditions and procedure for the exemption of business income tax as described in Paragraphs 3 and 4 of this Article.