6 August 2013
It seems Taiwan is set to become New Zealand’s eighth-largest export market following last month’s historic trade agreement - the first time Taipei has signed a contract with a non-allied country - which will see tariff duties eliminated on as much as 70% of Taiwan’s imports from New Zealand.
But NZ isn't the only one interested. Taiwan is becoming increasingly attractive as a hub destination, as well as an R&D and testing base for the wider market. In order to make the most of the economy, having local help on board is crucial, says New Zealand Managing Director John Thorman.
“Taiwan is becoming an increasingly attractive destination for foreign direct investment (FDI) as businesses from around the world look to secure a stronghold in the Asia Pacific region, but navigating the complex corporate landscape can be difficult without the right help on board,” says John.
“As the global economic centre moves from west to east, Taiwan has become a gateway between Europe, America, Japan and the economies of Australasia, and the first choice for numerous multi-national company headquarters. And as a member of international organisations such as the World Trade Organisation (WTO) and the Asia Pacific Economic Cooperation (APEC), Taiwan is highly free in economic activities.”
Despite an ease of doing business rank of 16, Taiwan still has plenty of pitfalls for the uninitiated business. John says there are 10 things to remember when doing business in Taiwan:
Starting a business: There are three procedures to complete when starting a business. The online application (http://onestop.nat.gov.tw) can be used to search for a name and apply for incorporation and tax registration, along with arranging various insurance requirements. Once the company seal has been made, an audit report must be submitted showing that the amount of capital invested is sufficient to cover company establishment costs.
Dealing with construction permits: The World Bank and IFC improved Taiwan’s rating by 67 points this year for ease of dealing with construction permits, thanks to a drastic cut in procedures and the time taken to complete the process.
Getting electricity: The Taiwan Power Company (TPC) is responsible for electrical connection, and takes an average of 24 days to plug a property into the national grid. Once the application has been submitted, TPC will conduct an external inspection and connection works, as well as install the meter and carry out an internal wiring inspection.
Registering property: It takes less than a week on average, although the cost is a little higher than the OECD average. Property rights and encumbrances against the property should be researched at the registry of titles. Once that has been completed, the Deed tax can be paid at the municipality and registration of transfer of title can be made at the Land Registry.
Getting credit and protecting investors: Private bureau coverage is excellent in Taiwan, although the lack of a public registry can limit the supply of credit. Taiwan prides itself on investor protection, and ranks well on all indices tracked by the World Bank and IFC.
Paying taxes: These take an average of 221 hours per year to complete, and there are several levies that are likely to be unfamiliar to overseas firms. City house taxes, vehicle licence tax and stamp duty on contracts are all charges which can be easily overlooked.
Trading across borders: As an island economy, Taiwan relies on the efficient import and export of goods. The cost of trading across borders is extremely cheap and goods are generally moved within 10 days in each direction. There are six documents to prepare when trading across borders, which take up the lion’s share of the time.
Enforcing contracts: Businesses looking to enforce contracts are required to navigate 45 procedures which take an average of 510 days to complete in total. Filing and service can take a month to complete alone, with the rest of the time being made up in court.
Resolving insolvency: On average it takes 1.9 years to resolve insolvency. Compared to most other nations in East Asia and Pacific the recovery rate (81.8 cents on the dollar) is impressively high, and the cost of conducting the procedure is very low.
Culture: Most businesses in Taiwan fall into the small to medium-sized category, and there are fierce inter-group rivalries to be found in all areas of the economy. Managers tend to be authoritarian and there is certainly a hierarchical structure to most corporates. All deal-making responsibilities should therefore be directed to the manager of the firm.
Click here to contact John Thorman.