The setup: a Taiwanese AI startup spends 80% of its budget on R&D but is not yet profitable — Taiwan’s 15% R&D tax credit is worth zero to it right now (no tax to offset, plus the 30%-of-tax-payable cap). They ask: would Vietnam be better? Answer: Vietnam’s 200% deduction also needs profits to work — a loss-making startup waits in both places. The difference is in how the wait works.
Taiwan: 15% credit capped at 30% of tax payable
- Credit: 15% of qualifying R&D spend.
- Cap: at most 30% of tax payable in the year — low-tax companies can’t use it all.
- Loss-makers: no tax to offset → the credit sits and waits (carried forward within limits).
- Plus: the 5% retained-earnings surtax still applies.
Vietnam: 200% deduction, also needs profit — but more flexible when profit comes
CIT Law 67/2025/QH15 (effective 1 October 2025): a deduction of up to 200% — real value 40% (at 20%). A loss-making startup waits too. But when profits arrive: the 200% deduction has no “30% of tax payable” cap like Taiwan — it can be used more deeply in a big-profit year.
Comparison
| Criterion | Taiwan | Vietnam |
|---|---|---|
| Mechanism | 15% credit | 200% deduction |
| Real value | 15% of spend (direct) | 40% of spend (at 20%) |
| Annual usage cap | 30% of tax payable | No tax-based cap (income-limited) |
| Loss-making startup | Waits (carry forward) | Waits (loss carry, deduction pending) |
The AI startup in the opening scenario: five loss years, then one big profit year. In Taiwan: five years of accumulated 15% credits, but only 30% of tax payable usable per year — it may never use them all. In Vietnam: the 200% deduction lands in the profit year with no 30% cap — used far more completely in a spike year.
Four points a startup should know
1. Losses wait everywhere. No mechanism rewards a loss-maker immediately (except Singapore-style EIS cash payouts).
2. Taiwan’s 30% cap is the bottleneck. Years of accumulated credits but slow release — model multi-year tax flows.
3. Vietnam releases faster. No tax-payable cap — a big profit year absorbs the full 200% deduction.
4. But Taiwan’s ecosystem is priceless. Proximity to TSMC, ITRI and AI talent — for an AI-chip startup the ecosystem can outweigh the tax gap.
Frequently asked questions
1. What is Taiwan’s R&D credit?
15% of qualifying R&D spend, capped at 30% of tax payable per year — unused portions carry forward.
2. Can a loss-making startup use it?
Not immediately in either Taiwan or Vietnam — wait for profits (Taiwan carries credits forward; Vietnam carries losses and pending deductions).
3. How does the 30% cap bite?
However large the accumulated credit, each year offsets at most 30% of tax payable — even a spike profit year may leave credits unused.
4. Does Vietnam have a similar cap?
No — the 200% deduction is limited only by taxable income (you can’t deduct beyond it), with no tax-payable percentage cap.
5. Where should an AI startup be?
Need the chip ecosystem and talent → Taiwan. Need fast incentive release on profits plus low costs → Vietnam. Many startups choose both: core R&D in Taiwan, operations in Vietnam.
This article has been quality-reviewed by the FLAW AI Legal Council.
