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.
Located at the heart of APAC, Taiwan is being tipped as an ideal hub location for businesses looking to establish a presence in developing markets on its periphery. 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.
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. Foreign trade has been the engine of Taiwan's rapid growth during the past 40 years. Coined an ‘economic miracle’ by many international observers, the rapid expansion has led to it being placed with Singapore, Hong Kong and South Korea as one of the ‘Four Asian Tigers’.
Chief among Taiwan’s international investor appeal is its economic stability and measures being taken to cut red tape and remove bureaucracy from business procedures. The Doing Business 2013 report from the World Bank and International Finance Corporation (IFC) saw Taiwan move nine places in rank to 16th in the world for ease of doing business, but there are still several areas where local help is well advised in order to seamlessly expand across borders.
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
Construction has seen substantial improvement over the past year in terms of red tape and bureaucracy. All indicators (construction permits, electricity and property) fall within the top 50, the former two falling within the top ten.
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. However, there are still many areas of the application that will require local help to navigate.
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.
Property registration takes less than a week on average, although the cost is a little higher than the OECD average and the norm for the East Asia and Pacific region. 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.
Tax payments 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, but require careful consideration.
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 ten days in each direction. There are six documents to prepare when trading across borders, which take up the lion’s share of the time.
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.
It takes 1.9 years on average 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.
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.
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Taiwan or just want to streamline your Taiwanese operations, talk to us.