Taiwan Manufacturers' Profits Hit by New Tax Rate

  • Friday, May 25, 2018
  • WG
  • 27946

Taichung, Taiwan – Taiwan's two largest bicycle manufacturer's, Giant and Merida, have both seen profits affected by a new government corporate tax structure. The Taiwanese corporate income tax rate in Taiwan was changed from 17% to 20% for fiscal years starting from January 1st, 2018. Despite showing increased sales compared to last year, the tax increase is eating into corporate profits throughout the, already hard-hit, Taiwanese bike industry.

Giant
Giant announced financial results for the first quarter of this year showing that the Group's consolidated revenue was NT$13.97 billion (approx. US$467 million), 3.2% higher than the same period in 2017, of which high-end electric bike sales rose 30%. The pre-tax net profit was NT$577 (approx. US$19 million)million, which was a 17% decrease from the same period of last year. The net after-tax profit was NT$258 million (approx. US$8.5 million), which was 50% lower than that in 2017. The main reason was that Taiwan’s income tax rate increased from 17% to 20%, which increased the income tax provision by NT$147 million (approx. US$5 million). After eliminating the impact of income tax, net profit after tax fell by 22%.

In terms of sales of its own brand, Giant noted that it was benefiting from the sales of high-end e-bikes. Sales in the European region continued with double-digit growth in the first quarter of 2017. However, US and Japanese subsidiaries were affected by unfavorable weather conditions and saw sales decline slightly.

Merida
Merida’s Board of Directors held a meeting on May 11th and approved the Q1 financial results. The Q1 sales amount was NT$5.76 billion (approx. US$192.5 million), up NT$975.27 million (approx. US$32.5 million), or 20.37%, compared with a year earlier. The Q1 profit before tax was NT$424.88 million (approx. US$14 million), around 5% higher than the year before. However, the unfavorable exchange rate and the increased cooperate income tax rate in Taiwan caused profit after tax to drop to NT$6.28 million.

Merida has started shipping new models in April, and a press release issued by the company noted that, “High-end bikes, e-bikes in particular, are seeing strong demand in many markets globally. The sales from January to April are over 20% up from last year.” According to Merida its factories are now running at full capacity and the company expects sales to continue to grow.