A Guide to Foreign Investment in Taiwan
A first and very important question is to know which type of legal entities you may consider to establish a corporate presence in Taiwan.
The current Taiwanese legislation offers three different types of establishment in Taiwan for foreign corporations.
Please note that this is applicable only to a foreign investment conducted by a foreign company (meaning the investor in a company). If the investor is a foreign individual, only a subsidiary is possible, and in all cases, this may not be the easiest option to consider.
A – Representative Office
A foreign corporation intending to settle down in Taiwan without invoicing or commercial operations (for instance, prospecting or marketing) can just open a representative office.
Such type of establishment is the lightest compared with branch offices or subsidiaries.
However, a representative office cannot provide any service in Taiwan that would be considered as taxable. It is therefore not recommended in case you intend to provide services in Taiwan.
Such legal entity type perfectly meets requirements for businesses that want to do sourcing in Taiwan. However, please note that such legal entity does not allow operating any logistics in Taiwan, such as renting a warehouse and managing shipping throughout the world. Indeed, the representative office is not a commercial entity, and does not have any import-export license.
The representative office can start operating after being approved by the Ministry of Economic Affairs (MOEA).
The scope of operations is limited by two restrictions:
The representative office can only represent the foreign corporation it is settled on behalf of;
The representative office can operate only in the fields as declared in the articles of incorporation of its mother head company.
Therefore, any representation (for legal acts) by the representative office for other companies (for instance, subsidiaries of the mother head company) is not authorized by the Taiwanese laws.
The full registration of a representative office usually takes about a month from the date of application, provided all required documents and information are gathered (please be aware of legalization requirements to process in the foreign country).
The local representative can be a Taiwanese or foreign citizen. Should he/she be a foreigner, it is required that he/she applies for a resident visa, a working permit and a resident card (Alien Resident Card), unless the local representative does not stay in Taiwan. Such procedure usually takes about four weeks.
The representative office can also hire some employees, either Taiwanese (without restrictions) or foreigner (subject to specific approval by the Taiwanese authorities).
It is recommended that a specific bank account be opened in Taiwan in case the parent company sends some money to cover for local expenses.
Some specific tax filing must be done every year, and it is recommended to request assistance from a local CPA for such service.
B – Branch Office
Unlike the representative office, the branch office is allowed to perform commercial transactions and to invoice. It can provide full service in Taiwan.
Although the branch office is not a juristic person, it must have, during its inception, a minimum capital to start with. There is no more minimum capital required to set up a branch office, but there is a minimum recommended amount to prevent any rejection by the local authorities (usually at least 5,000 USD). Also, the capital amount does impact the capacity to hire foreign employees.
It is to be noted that such capital is considered as “working capital”, which implies that it can be used by current operations.
The establishment procedure starts with an application for formal recognition of the foreign parent company (Formal Recognition Certificate) to the MOEA, at the Department of Commerce. It is followed by foreign investment approval, final approval and registration before several administrations.
The branch office must then register with local authorities to obtain its « Business License ». The whole process usually takes about three months. It must be noted that in some cases, depending on the field of activities of the mother hear company, some other licenses may be to apply for (regulated foreign investment).
The branch manager can be a Taiwanese citizen or a foreign person. Under this second option, and only if the foreign manager wishes to live and work in Taiwan, it is required to apply for a work permit, a resident visa and an Alien Resident Certificate (ARC). Such procedure usually takes about four weeks.
For work permit renewal purposes, the branch office must meet a minimum amount of annual revenues depending on the circumstances.
Although the branch office can hire some employees, Taiwanese or foreigners, some specific conditions must be met for it to be eligible to hire foreigners.
Opening a local bank account will be mandatory for establishment purposes, and will be useful for daily operations.
Tax filing is more constraining than a representative office, since it must be done on an annual basis, but also on monthly or bi-monthly basis (for revenue and business tax filing). Assistance from a local CPA is strongly recommended.
C – Subsidiary of a foreign corporation
The Taiwanese law regulates four main types of corporations. The most used ones are the Limited Company, with no mandatory minimum capital (but minimum capital is recommended – usually 5,000 USD), and which can have only one shareholder (either individual or corporation), and besides, the Company Limited by Shares, with no minimum mandatory capital and which has a more structured corporate organization (Board of Directors with three Directors at minimum, minimum of two shareholders, one mandatory supervisor, etc.)
These two different types of structure are chosen according to the needs of shareholders and management (majority rules are different in each case).
The inception of a subsidiary of a foreign corporation may be subject to prior approval (Foreign Investment Approval) by the Commission of Investment of the MOEA. Such procedure usually includes submission of a small business plan to submit to the authorities.
The name of the company will also have to be checked by the MOEA and protected once approved.
The whole establishment process usually takes between two and three-four months, starting from recognition of the foreign parent company, then with foreign investment approval, final approval and registration before several administrations in Taiwan.
The procedure for obtaining a working permit and a residence visa, as regards the foreign President or Director of the company, is the same as for the branch office.
However, in some cases, recruiting foreign managers and employees will be possible only if the capital of the company meets some minimum legal amounts and/or the annual revenues of that company reach some minimum amounts.