Opportunities and challenges when incorporating in Taiwan
Taiwan’s robust IT industry, increasing openness to foreign investment and foreign-owned companies, and incremental progress in its digitalisation efforts are increasing its desirability as a market for investors and business leaders in Asia Pacific. As such, Taiwan moved down to 32nd place in our 2021 Global Business Complexity Index, from 16th position the previous year.
As a key hub in the global technology supply chain, Taiwan's economy is largely export-oriented, with the main industries being semiconductors and high-tech. The jurisdiction also manufactures computers and electronic components, such as wireless communication equipment and LCDs for use in its own products, as well as for export. Other top exports include machinery, plastic products and auto parts.
Taiwan has experienced rapid economic growth in the past few decades. As a result, it has been able to provide high levels of employment and wages. During the Covid-19 pandemic, Taiwan’s economy benefited from robust demand for its tech exports, especially in the semiconductor industry. Taiwan’s advantages in semiconductors, IT, communication and 5G technology have make Taiwan an important part of the global economy.
Taiwan’s government has made several changes in recent years to make it easier for foreign investors to incorporate in Taiwan. However, while several digital initiatives have been promoted by the government, when it comes to incorporating, the process still requires numerous applications and paper documents, in-person appearances for bank account opening (if required by the bank) and the use of chops to stamp official documents.
There are four primary types of companies available in Taiwan, the first two of which are subsidiaries:
- Company limited by shares
- Limited company
- Branch office
- Representative office
The general steps for incorporation of a subsidiary are as follows:
Step 1 – Apply for the reservation of a company name in Chinese and business scope of the subsidiary from the Ministry of Economic Affairs (MOEA).
Timeframe: 5-7 working days
Step 2 – Apply for the Foreign Investment Approval (FIA) from the Investment Commission of the Ministry of Economic Affairs (ICMOEA).
Several documents are required for submission, including a declaration letter, group structure chart, notarised power of attorney, certificate of incorporation (or passport copy of the investors), full name and nationality of all the directors of the related group companies, and any other supporting documents/information as requested.
Timeframe: 30-45 working days
Step 3 – Open a preparatory office bank account for the subsidiary in Taiwan.
Timeframe: to be determined
Step 4 – “Foreign investment” investor(s) remits capital to the preparatory office bank account of the subsidiary.
Timeframe: to be determined
Step 5 – Apply for a capital appraisal from the ICMOEA.
Timeframe: 10-20 working days
Step 6 – Apply for a company registration from Taipei City Government, or other competent authority.
Timeframe: 5-8 working days
Step 7 – Apply for an MOEA IC card and an initial company online report through the government authority’s website:
Timeframe: 10-15 days
Step 8 – Apply for tax registration
Timeframe: 8-10 working days
Step 9 – Apply for importer/exporter registration (if required).
Timeframe: 1 day
In total, it will take around 12-16 weeks to complete the entire procedure, not including the time required for opening a bank account, arranging the capital injection and applying for permissions and a business license from the competent authority for any special regulated business items. Many documents will be required to be translated into Mandarin Chinese prior to submission.
It should also be noted that the required timeframe may significantly exceed 16 weeks for Hong Kong and Mainland Chinese investors due to heightened scrutiny.
At the time of writing, the pandemic has significantly impacted processing times for the opening of bank accounts. Certain international banks are currently allowing overseas applicants to apply from abroad, whereas local banks require a local company representative.
For both subsidiaries and branch offices, no minimum working capital is required for incorporation, unless stipulated by a competent authority for a particular special business activity. However, for a branch office, the working capital must be sufficient to cover the costs incurred for the establishment of entity.
For both entity types intending to hire foreign employees in the first year of incorporation, an initial investment of NT$5 million (US$180,000) is required, though there are no resident requirements for company directors.
The corporate income tax rate is 20% tax for both subsidiaries and branch offices, with a 5% business tax (VAT). One benefit of a branch office is that any earnings remitted to the corporate home office as dividends are not taxed. In addition to corporate income tax rate, 5% surtax is imposed on the undistributed profits for subsidiary.
Investors intending to register a foreign-owned subsidiary in Taiwan are advised to begin preparing and translating documents well in advance and promptly responding to requirements during each phase of the incorporation process, so as to avoid delays as much as possible.
Since 2009, TMF Group has offered its clients in Taiwan a strong team of specialists in accounting, tax, entity management, corporate secretarial services, HR and payroll.
Our team services clients both locally and internationally, providing a full range of corporate support to help you reduce risk, maintain compliance, better control your costs and simplify your operations.
Contact our experts today to find out how we can help you grow your business.