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Chapter Ⅰ General Principles
Article 1
This Act is enacted for the furtherance of sound development of small and medium enterprises by
helping them improve their operation environments, promoting mutual cooperation, and assisting
them in their efforts for self-reliant growth and upgrade transformation. With regard to matters not
provided for in this Act, the provisions of other relevant acts and regulations shall apply.
Article 2
The term "small and medium enterprises" used in this Act shall refer to the enterprises which have
completed the company, limited partnership or business registrations by law and have conformed
to the standards for identifying small and medium enterprises.
The standards referred to in the preceding paragraph shall be prescribed by the central competent
authority according to the amounts of capitals and the numbers of regular employees, etc.
Other government authorities, which administer small and medium enterprise assistance and
guidance may, in accordance with their respective operational requirements, prescribe separate
standards with loose requirements for objects of assistance and guidance.
Article 3
The term "competent authority" used in this Act shall be the Ministry of Economic Affairs at the
central government level, the provincial (municipal) government at the province (municipality)
level, and the county (city) government at the county (city) level.
Where any of the matters set forth in this Act involves the functional duties of an authority in
charge of a particular enterprise, the competent authority referred to in this Act shall handle such
matters in coordination with the said authority in charge of such enterprise.
For enforcement of this Act, government at various levels shall set up or designate a government
agency to provide assistance and guidance.
Article 4
For achieving the objectives of this Act, the competent authority concerned shall take appropriate
assisting or encouraging measures in respect of the following:
1.Market research and development,
2.Furtherance of rationalization of business operations,
3.Promotion of mutual cooperation,
4.Acquisition and securing of production factors and technology,
5.Education and training of competent personnel, and
6.Other matters relating to the establishment or sound development of small and medium
enterprises.
In formulating the policy, acts and regulations, and measures in the preceding paragraph, the
competent authority concerned shall aim the contents at the furtherance of improvement and
development of the business operations of small-scaled enterprises without unfair treatment in
respect of financial and taxation systems and other related matters.
The central competent authority shall publish a white paper, at the end of each fiscal year, on small
and medium enterprises given the enforcement status, the review results and the prospective
development of the provisions of the preceding two paragraphs.
Article 5
For furthering small and medium enterprises to conduct market research and development
activities, the assistance and guidance provided by the competent authority to small and medium
enterprises shall be emphasized on the provision of information services, the creation of exclusive
brands for their own products, arrangement of marketing channels and/or development of potential
market.
Article 6
For furthering small and medium enterprises to rationalize their business operations, the assistance
and guidance provided by the competent authority shall be emphasized on the following:
1.Research and development and development of new products,
2.Modernization and renovation of production facilities and improvement of production
technology,
3.Improvement of the methods of operational management,
4.Expansion of market and acquisition of necessary information,
5.Conversion and adjustment of the field of business, and
6.Acquisition of resources and technical know-how for business operation.
Article 7
For encouraging mutual cooperation between small and medium enterprises, the assistance and
guidance to be provided by the competent authority shall be emphasized on the following:
1.Verticle amalgamation of businesses of the trade and establishment and promotion of the
satellite-factory system,
2.Horizontal amalgamation of businesses of the trade and establishment and promotion of joint
production and marketing system,
3.Mutual fund or cooperative enterprise,
4.Technical cooperation and development of common technology,
5.Procurement of common equipment, and
6.Establishmant of strategic marketing points.
Article 8
For assisting small and medium enterprises to acquire and secure production resources and
technology, the assistance and guidance to be provided by the competent authority shall be
emphasized on the following:
1.Formation and accumulation of capital,
2.Capital accommodation,
3.Acquisition of land, plant building, equipment, business site and business information,
4.Personnel training and upgrading of labor productivity,
5.Securing the sources of agricultural and industrial raw materials and technical know-how,
6.Assisting small and medium enterprises to obtain fund from capital market, and
7.Upgrading of the level of services and technical skill.
Article 9
The central competent authority shall set up small and medium enterprise development fund, with
the use thereof to be confined to the following:
1.To finance the operating expenses required for carrying out assistance plans,
2.To take part in investment and development projects or provide financing assistance and
guaranty jointly with financial institutions under the condition that such financial institutions or
credit guarantee institutions can not provide financing or guaranty under normal terms and
conditions,
3.To make investment in small and medium enterprise development companies, or to take part in
investment in small and medium enterprise with small and medium enterprises development
companies, financial institutions and identified investment institutions.
4.To provide financial support to the juridical persons institutions that are incorporated to conduct
the activities specified in Article 4 , and
5.Other purposes relating to the furtherance of sound development of small and medium
enterprises and as specified in this Act .
For the income-expenditures, safeguarding and utilization of the small and medium enterprise
development fund, a small and medium enterprise development fund management committee shall
be formed, with its organization structure and the regulations for income and expenditure,
safeguarding and utilization of the fund to be stipulated by the Executive Yuan.
Article 10
The small and medium enterprise development fund shall be derived from the following sources:
1.Appropriation from the annual budget programmed by the central government,
2.Appropriation from other special-case funds,
3.Donation from individuals or public and private business organizations or groups,
4.Interests accrued on the fund, and
5.Other associated income.
The donation referred to in item 3 the preceding paragraph may, when certified by the competent
authority, be deductible from the total income of the current year, free from any restriction on the
amount, in accordance with the Income Tax Act.
Article 11
The provincial (municipal) and the county (city) competent authority (henceforth referred to as
“local competent authority) may, taking into account of the specific development requirements of
small and medium enterprises, under its jurisdiction, draw up assistance plan and formulate
budget,
and shall be responsible for the execution.
To carry out the assistance plan referred to in the preceding paragraph, the local competent
authority may apply to the small and medium enterprise development fund for subsidy or assist the
small and medium enterprises to obtain capital accommodation under special projects.
Article 12
The competent authority may, taking into account of actual requirements, cooperate with or
consign to public and/or private research and service institutions, financial institutions, credit
guarantee institutions, trade promotion institutions, industrial and/ or commercial organizations or
other agencies for execution of the assistance activities under this Act ; and shall set up separate
assistance systems in connection with respectively the operations including financial
accommodation, operational management, production technology, research and development
information management, industrial safety, pollution control, marketing, mutual cooperation, and
quality reinforcement, etc.
The regulations governing establishment up and supervision of the assistance systems shall be
drawn up by the central competent authority and submitted to the Executive Yuan for approval.
Article 12-1
In enacting or adjusting acts related to small and medium enterprises, governments at various
levels shall review the operation scales or characteristics of small and medium enterprises to
facilitate observance by small and medium enterprises.
The central competent authority shall periodically review the acts related to small and medium
enterprises on term, and judge the adapt ability of small and medium enterprises, and the influence
to small and medium enterprises, and take a review report to the Legislative Yuan yearly.
Chapter Ⅱ Financing Facilities and Guaranty
Article 13
In order to meet the capital requirements for small and medium enterprises, the central competent
authority shall coordinate with financial institutions and credit guarantee institutions to enhance
their respective functions of providing financing and guaranty to small and medium enterprises.
In order to meet the capital requirements for small and medium credit guarantee institutions, the
central competent authority shall allocate budget for donation to such credit guarantee institutions
for the maintenance of their guarantee capacity. Financial institutions which contract with such
credit guarantee institutions shall also cooperate with the donation whereas and the central
competent authority may also solicit donation from private businesses.
The total amount of donation from various financial institutions mentioned in the preceding
paragraph, taking into account the actual requirements, may be adjusted upward annually until
reaching 35% of the total donation amount and be determined by the central competent authority
according to the safekeeping amount, overdue ratio, substitute pay off amount, credit remainder,
net value, profit and loss status, and the donated amount.
The central competent authority shall actively help small and medium enterprises get the loan from
banks, and report the review results of each fiscal year to the Legislative Yuan.
Article 14
All banks throughout the Republic of China shall, within the scope of their respective business,
elevate the ratio of financing facilities provided to small and medium enterprises and shall set up
small and medium enterprises assistance center in order to enhance the provision of relevant
services.
Article 15
The competent authority shall coordinate various agencies to make ample budget available for
providing special loans to small and medium enterprises, and instruc sponsoring banks to provide
special or emergency financing facilities or to extend loans to meet with the requirements of
enterprises implementing business converting projects or adapting to the change of economic
situation; and to elevate, when necessary, the ceiling of such financing, loans and guaranty.
Article 16
The term "special financing" used in the preceding Article shall refer to the financing provided to
small and medium enterprises carrying out any of the following projects:
1.Operational project for reinforcement of competiveness;
2.Research and development, pollution control or market expansion project:;
3.Project for creation of new product(s) or upgrading the quality of product(s);
4.Factory relocation project which must be carried out so as to meet with the requirements of
environment protection , urban planning, or road construction or other infrastructural projects
sponsored by the government;
5.Any other special projects as approved by the competent authority
Article 17
The term "emergency financing facilities " as used in Article 15 shall refer to the following
financing provided to small and medium enterprises:
1.Loan provided as revolving fund in support of production and sales during the period of
significant economic crisis;
2.Loan required for recovery of significant natural disaster; or
3.Other loan as required to cope with emergency events.
Article 18
The term "loans to meet with the requirements of enterprises implementing business converting
projects or adapting to the change economic situation " used in Article 15 shall refer to any of the
following loans extended to small and medium enterprises:
1.Loan provided as revolving fund in support of production and sales during the period of
economic recession;
2.Loan required for procurement of replacement or additional machinery and equipment in the
course of business conversion; or
3.Loan required for procurement of automation equipment for improvement of productivity.
Article 19
Funds appropriated from the small and medium enterprise development fund for participate in the
loans or guaranties sponsored by financial institutions or credit guarantee institutions in
accordance with the preceding three Articles; the ratio of such appropriations may be determined
by the competent authority in accordance with the actual requirements.
With regard to the bad debts resulted from causes which are not attributable to the intentional act,
gross negligence or malpractice of the personnel handing the relevant matters set forth in the
preceding paragraph, they shall be fully indemnified from damage liabilities and exmpt from
disciplinary measures, according to the provisions of item 1,Article 77 of the Audit Act.
Article 20
The competent authority concerned may coordinate the financial institutions and/or credit
guarantee enterprises to give priority to small and medium enterprises, which have sound
management, financial and accounting systems and have paid up all taxes due, in providing
financing facilities and guaranties.
Article 21
Where the operation of a small or medium enterprise is affected or it has to move to another place
in order to meet with the requirements of environmental protection, urban planning, or road
construction or other projects sponsored by the government, the competent authority shall assist it
to apply for operating revolving loan or relocation loan from financial institution, and assist it to
acquire the land required for factory relocation, when it is deemed necessary.
Article 22
Where a small or medium enterprise suffers great damages caused by natural disaster, the
competent authority shall coordinate the financial authority for tax exemption or reduction or other
remedies.
Article 23
In order to prevent small and medium enterprises from involvement in domino effect resulted from
the close-down of their respective related enterprises, the competent authority may coordinate and
assist industrial associations to establish, either separately or jointly, mutual guaranty fund(s) for
prevention of chain close-down of small and medium enterprises so as to provide credit guarantee
in respect of special financing facilities for the small and medium enterprises having financial or
operational difficulties in such cases.
The small and medium enterprise development fund may, when necessary, contribute to such
mutual guaranty fund(s) at the initial stage upon its (their) establishment.
Chapter Ⅲ Operation Management, Market and Product Development
Article 24
The competent authority may establish or assist the private sector to establish a small and medium
enterprise guidance and service center, and may cooperate with relevant public and private
institutions to provide small and medium enterprises with the following guidance and services:
1.Business operation diagnosis;
2.Improvement of the marketing and production technology, operation management and financial
structure of small and medium enterprises;
3.Training of management or technical personnel of small and medium enterprises;
4.Production and market information and consultation services; and
5.Other relevant businesses activities.
Article 24-1
The competent authority may set up funds to assist in the development of local culture industries
for local economic prosperity.
Article 25
For improvement of the operating efficiency and reinforcement of the competitiveness of small
and medium enterprises, the competent authority may assist small and medium enterprises to
jointly engage in activities such as production, marketing, procurement, transportation, cooperation
in technology development, and research and development.
Article 26
The central competent authority may work jointly with relevant institutions, universities and
colleges in the training of professionals in the fields of operation diagnosis and business
administration so as to provide small and medium enterprises with guidance and services.
Article 27
The competent authorities may provide necessary assistance to various industrial associations or
industrial and commercial organizations which have a dedicated service unit responsible for
providing services to small and medium enterprises.
Article 28
For encouraging small and medium enterprises to manufacture quality and/or high value-added
products or service, and to expand export market, the competent authority shall provide, in
conjunction with institutions concerned, technical and marketing guidance and assist medium and
small enterprises to participate in overseas exhibition, acquire market information, make joint
advertizing activities, trademark registration, patent application, or establish joint distribution
warehouses abroad.
Where the plan of a small or medium enterprise for manufacturing quality and/or high value-added
products or service planning has been evaluated and approved by the competent authority in
conjunction with authorities concerned, the said small or medium enterprise may apply to the small
and medium enterprise development fund to subsidize the expenses incurred in product and market
developments.
Article 29
For upgrading the level of production skill of small and medium enterprises, the competent
authority may entrust technical service institutions or retain technical experts to make research and
development for new products or to acquire advanced technology for providing relevant guidance
and services to various industries.
For transfer of new products or advanced technology, the competent authority may collect
reasonable charges for amortization of costs incurred; If necessary, these charges may also be
partly subsidized by the small and medium enterprise development fund.
Article 30
In order to assist small and medium enterprises for research and development, the competent
authority may cooperate with appropriate technology research institutes in the establishment of
institutes or places for exclusive use by small and medium enterprise conducting research , testing
and development of technical skill and/or new products.
Small and medium enterprises may apply for use, by paying necessary charges, the equipment and
facilities of the institutes or places set forth in the preceding to conduct experiment and research
activities.
Article 31
The competent authority may, when it deems necessary, negotiate with public or private enterprises
for appointment of their respective technical personnel, and support and assistance system to
provide guidance in the fields of production skill or service know-how as required by small and
medium enterprises.
Article 32
The central competent authority may establish or assist in the establishment of small and medium
enterprise development companies to invest directly or indirectly in the small and medium
enterprises having development potential and to provide consulting services and other relevant
services in connection with domestic and/or overseas technical cooperation, market and product
development or investment.
The central competent authority shall provide assistance to the institutes and juridical persons
established for carrying out the activities specified in Article 4 of this Act.
The central competent authority may coordinate with the competent authority in charge of banking
business under the Banking Act for approval of the participation of banks in the said small and
medium enterprise development company so as to enable them to directly provide services referred
to in the preceding paragraph.
The small and medium enterprise development fund may take part in the investment for capital
formation of small and medium enterprise development companies.
The regulations governing the establishment and operation of the small and medium enterprise
development companies and the standard and proportion of investment made by the small and
medium enterprise development fund shall be stipulated by the Executive Yuan.
Chapter Ⅳ Tax Remittance
Article 33
Where an investor provides a parcel of land in an industrial zone as his capital investment in a
small or medium enterprise, and the said medium or small enterprise agrees to allow the investor to
furnish the stock(s) of the said small or medium enterprise acquired by the said investor as the
security for his payment of taxes, then the land value increment tax payable by the said investor
may be paid in five equal installments in five consecutive years from the year in which the said
parcel of land is committed to the investment.
The land to be invested under the preceding paragraph shall be used only by the said small or
medium enterprise for its own. If the land is not used by the said small or medium enterprise for its
own or is transferred to any other person, the outstanding land value increment tax shall be paid, in
a lump sum, by the investor.
Article 34
Where a small or medium enterprise has moved, on account of any of the following causes, its
factory or plant into an industrial zone, an industrial zone under an urban plan, or an industrial land
designated in accordance with the act for Encouragement of Investment prior to the enforcement of
this Act, the land value increment Tax payable on the sale or transfer of its original factory or plant
site (land) shall be levied at the lowest tax rate:
1.Where the original factory land does not meet with the zoning requirements upon
implementation of the urban planning or zoning plan;
2.Where the relocation of factory or plant is applied by the said small or medium enterprise and is
approved by the competent authority due to the difficulties in making necessary improvement to
meet with the requirements for pollution control, public safety or maintenance of natural
landscape;
and
3.Where the relocation of factory or plant implemented under the initiative assistance of the
government.
Where the new factory land of a small or medium enterprise is transferred to anther party (or other
partied) within three years after the factory relocation made under the preceding paragraph, the
reduced portion of land value increment tax reduced while assessing such tax on the original
factory land sold or transferred prior to the factory relocation shall be assessed supplementarily in
accordance with the act.
Article 35
To promote innovation and research and development of small and medium enterprises, a small
and medium enterprise, by investing in research and development, may select to get the amount of
tax credit up to 30% of the current year profit-seeking enterprise income tax payable by such
company or limited partnership between the following two methods. No change of the method is
allowed once the choice is made.
1.Tax credit up to 15% of the research and development expenses, applied to the current year
profit-seeking enterprise income tax payable.
2.Tax credit up to 10% of the research and development expenses, applied to the annual
profit-seeking enterprise income tax payable for three years, starting from the current year.
For any instrument and equipment used for research and development, experiment or quality
inspection purposes, if its service life is more than two years, the depreciation thereof may be
accelerated by one half (1/2) of the number of years applicable as listed in the table of service life
of fixed assets annexed to the Income Tax Act. Balance of service life in a length of less than one
year after the depreciation acceleration shall not be taken into account.
The standards referred to the tax credit from investment in paragraph 1 of this Article, regarding
scope, application deadline, application procedure, approving authority, applicable period, tax
credit rate and other related matters shall be prescribed by the central competent authority in
consultation with the Ministry of Finance.
Article 35-1
To promote circulation and application of innovation and R&D results, new shares of stock issued
to a small and medium enterprise in exchange of its intellectual property rights, by an enterprise
that is not listed in the Taiwan Stock Exchange, OTC, or the Emerging Stock Board, shall be
excluded from the current year profit-seeking enterprise taxable income of the said small and
medium enterprise.
New shares of stock issued to an individual in exchange of her (his) intellectual property rights, by
an enterprise that is not listed in the Taiwan Stock Exchange, OTC, or the Emerging Stock Board,
shall be excluded from the current year taxable consolidated income of the said individual.
When shares of stock mentioned in preceding Paragraph 1 and 2 are transferred through an actual
transaction, stock gift, or inheritance, the total stock value shall be included in the current year
taxable income of the recipient(s), calculated based on the actual transaction price or the fair
market value of the stock at the time of the transfer, minus the related expenses or cost, incurred
but not recognized yet, in obtaining the stock.
The above mentioned enterprise that issues new shares of stock to obtain intellectual property
rights should report to the local tax authority within 30 days from the day after the date of the stock
transfer. The said enterprise is subject to a 20% fine based on the actual transfer amount and
required to resubmit the report with voucher(s) in required format if it fails to meet the reporting
deadline, to report the fact, or to report with voucher(s) in required format.
In case the said small and medium enterprise or the individual who receive the shares of stock
through intellectual property transfer is unable to provide the cost basis of the transfer for income
calculation, a default 30% of the transaction price shall be applied to the cost basis of obtaining the
stock.
Article 36
A small and medium-sized enterprise may retain and withhold from distributing a surplus earning
in an amount not exceeding double the amount of its paid-in capital. In case the retained and
undistributed earnings exceed the aforesaid limit, any additional surplus earning retained in each
year thereafter shall be free from the restriction stipulated in the Income Tax Act after as profit
seeking enterprise income tax at the rate of 10% has been surcharged.
The retain and withhold from distributing a surplus earning after 1998 until then, shall obey the
Income Tax Acts, and not apply to the preceding paragraph.
Article 36-1
Small and medium enterprises development companies may raise the preparation to investment
loss, under 20% of the investment amount, so as to compensate for actual loss. If there is no actual
loss situation within 5 years, they shall turn the raising preparation to be the benefit of the 5th year.
When corporations calculate the clearing accounts income due to cancellation, rescission,
revocation, mergence, or transference with Article 75, of the Income Tax Act, the accumulate
remaining amount from the investment loss preparation within the preceding paragraph, shall turn
to be the benefit of the same year.
Article 36-2
If a small and medium enterprise additionally hires certain number of domestic junior employees
under the age of 24 or over the age of 65 and increases its aggregate gross salary payments, the
small and medium enterprise can deduct up to 200% of the annual gross salary payments to such
additional employees from its current year profit-seeking enterprise income.
If a small and medium enterprise raises the average salary paid to the domestic junior employees,
the small and medium enterprise can deduct up to 175% of the incremental annual gross salary
payments, excluding statutory minimum wage adjustment, to the junior employees from its current
year profit-seeking enterprise income. However, the additional salary paid to the new hires shall
not be deducted here as it has been used for tax benefit applied to the provisions in the preceding
paragraph.
As referred to in the preceding two paragraphs, matters regarding type and number of additional
employees hired, aggregate gross salary payments, the range of junior employees, calculation of
the average salary paid, approving authority, the prerequisites for application, application deadline,
application procedure, and measures of other related matters, shall be prescribed by the central
competent authority in consultation with the Ministry of Finance.
Article 36-3
A small and medium enterprise that has enjoyed tax benefit under other laws may not enjoy tax
benefit under this Act for the same matter again; if same matter conforms to both requirements for
different tax benefits under this Act, the small and medium enterprise shall select the application of
one of tax benefits and may not enjoy both tax benefit repeatedly.
If a small and medium enterprise that has seriously violated the laws relating to environmental
protection, labor, or food safety and health in the most recent three years and has been determined
by the respective central competent authorities for specific business may not apply for tax benefit
under this Act.
Chapter Ⅴ Public Procurement Projects or Public Works
Article 37
Governments at various levels and government-owned enterprises shall assist small and medium
enterprises to acquire business opportunities in making public announcements for procurement
projects or construction of public works.
Article 38
For making public announcement for procurement projects, construction of public works or for
entrustment of research and development tasks, government at various levels and
government-owned enterprises shall, based on actual requirements, establish qualification
requirement and registration system in respect of small and medium enterprises eligible for acting
as a supplier or bidder.
Chapter Ⅵ Supplementary Provisions
Article 39
To review the small and medium enterprise development policy, the central competent authority
may invite relevant agencies and expert scholars to form a Small and Medium Enterprise Policy
Review Committee.
Article 40
This Act shall come into force from the date of promulgation.
Article 35 and Article 36-2 of this Act amended and promulgated on June 4, 2014 shall be enforced
from May 20, 2014 to May 19, 2024; and Article 35-1 shall be enforced from May 20, 2014 to
December 31, 2033.
Paragraphs 2 to 5 of Article 36-2 of this Act amended and promulgated on January 6, 2016 shall be
enforced from January 1, 2016 to May 19, 2024.
Article 35 and Article 36-2 of this Act amended and promulgated on July 12, 2024 shall be
enforced from January 1, 2024 to December 31, 2033.
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