Friday, May 20 2022

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The robustness of Taiwan’s IT industry, its growing openness to foreign investment and foreign companies, and the gradual progress of its digitization efforts are bolstering its appeal as a market for investors and business leaders in Asia- Peaceful. Thus, Taiwan fell to 32nd place in our Global Business Complexity Index 2021from 16th position the previous year.

As the hub of 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 LCD displays for use in its own products, as well as for export. Other major exports include machinery, plastic products and auto parts.

Taiwan has experienced rapid economic growth over the past decades. As a result, it was able to provide high levels of employment and wages. During the Covid-19 pandemic, Taiwan’s economy has benefited from strong demand for its technology exports, especially in the semiconductor industry. Taiwan’s advantages in semiconductors, computing, communication and 5G technology make Taiwan an important part of the global economy.

Steps to create a subsidiary in Taiwan

The Taiwanese government has made several changes in recent years to facilitate the integration of foreign investors in Taiwan. However, although several digital initiatives have been promoted by the government, with regards to incorporation, the process still requires many paper applications and documents, in-person appearances for opening a bank account (if required by the bank) and the use of chops to stamp official documents.

There are four main types of companies available in Taiwan, the first two of which are subsidiaries:

  • Partnership Limited by shares

  • Anonimous society

  • Branch

  • Representative office

The general steps for setting up a subsidiary are as follows:

Step 1 – Request the reservation of a company name in Chinese and the scope of activity of the subsidiary with the Ministry of Economic Affairs (MOEA).

Time: 5-7 working days

2nd step – Apply for foreign investment approval (FIA) from the Investment Commission of the Ministry of Economic Affairs (ICMOEA).

Several documents are required for submission, including a letter of representation, group organization chart, notarized power of attorney, certificate of incorporation (or copy of investors passport), full name and nationality of all company directors of the related group, and any other supporting documents / information requested.

Lead time: 30-45 business days

Step 3 – Open a preparatory office bank account for the subsidiary in Taiwan.

Deadline: to be determined

Step 4 – The “foreign investment” investor(s) pays the capital into the bank account of the subsidiary’s preparatory office.

Deadline: to be determined

Step 5 – Request a capital assessment from the ICMOEA.

Lead time: 10-20 business days

Step 6 – Apply for company registration with the Taipei City Government or other relevant authority.

Lead time: 5-8 working days

Step 7 – Apply for a MOEA IC card and first company report online through the government authority website:

Lead time: 10-15 days

Step 8 – Apply for tax registration

Lead time: 8-10 working days

Step 9 – Apply for importer/exporter registration (if necessary).

Deadline: 1 day

In total, it will take about 12 to 16 weeks to complete the whole procedure, not including the time needed to open a bank, organize the capital injection and apply for authorizations and a business license from the authority. competent for any special regulated commercial element. Many documents will need to be translated into Mandarin Chinese before submission.

It should also be noted that the time required may well exceed 16 weeks for investors in Hong Kong and Mainland China due to increased scrutiny.

As of this writing, the pandemic has had a significant impact on processing times for bank account openings. Some international banks currently allow foreign applicants to apply from abroad, while local banks require a local company representative.

Subsidiary vs Branch

For subsidiaries and branches, no minimum working capital is required for incorporation, unless stipulated by a competent authority for a particular business activity. However, for a branch, the working capital must be sufficient to cover the costs incurred in establishing the entity.

For both types of entities intending to hire foreign employees in the first year of incorporation, an initial investment of NT$5 million (US$180,000) is required, although it is not there is no residency requirement for corporate directors.

The corporation tax rate is 20% for subsidiaries and branches, with a business tax (VAT) of 5%. One of the advantages of a branch is that the income paid to the head office in the form of dividends is not taxed. In addition to the corporate tax rate, a 5% surcharge is imposed on undistributed profits for subsidiaries.

Investors intending to register a foreign subsidiary in Taiwan are advised to start preparing and translating the documents well in advance and to respond quickly to the requirements during each phase of the incorporation process, in order to avoid delays as much as possible.

TMF Taiwan

Since 2009, TMF Group has offered its Taiwanese clients a strong team of specialists in accounting, taxation, entity management, company secretariat, HR and payroll.

Our team serves clients both locally and internationally, providing a full range of business support to help you reduce risk, maintain compliance, better control your costs and simplify your operations.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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