Frequently Asked Questions - Structure for Doing Business in Taiwan

1. Is it necessary to set up a business organization in Taiwan to provide services or sell goods in Taiwan?

A foreign company must (1) set up a subsidiary in Taiwan, or (2) establish a branch in Taiwan, which must be recognized by the competent authority, before it can engage in business activities such as providing services or selling goods in Taiwan. However, if a foreign company is not planning to set up operations in Taiwan but merely wishes to appoint a representative to carry out certain legal acts in the course of business on its behalf in Taiwan (which shall be limited to legal acts for the business operated by the foreign company and legal acts in Taiwan by the representative, for example, conducting negotiations or signing contracts to procure raw materials on behalf of the foreign company in Taiwan, or acts as a counsel or agent of the foreign company), it only needs to (3) establish the representative’s office, which must be notified to the competent authority.

The so-called subsidiary is a profit-seeking company registered and established pursuant to the Company Act of Taiwan and is an independent juristic person.

A foreign branch is a branch of a foreign company set up for the purpose of carrying out business activities in Taiwan. A branch can begin its operations in Taiwan upon the recognition and approval of the competent authority according to the Company Act of Taiwan.

A representative office is established when a foreign company has no intention of setting up a subsidiary or branch within the territory of Taiwan and, therefore, appoints a representative to carry out legal acts in the course of business on behalf of the company within the territory of Taiwan.

If a natural person of foreign nationality wishes to engage in commercial activities in Taiwan, he/she may carry out business by way of sole proprietorship without setting up any business organization, or form a partnership with other natural persons. It should be noted, however, that currently a limited liability partnership (LLP) is not allowed in Taiwan.

2. What forms of business organizations can be set up in Taiwan?

The forms of business organizations that a foreign company may set up in order to engage in commercial activities in Taiwan are a subsidiary, foreign branch, or representative office, and a natural person of foreign nationality may form a partnership with other people or carry out business by way of sole proprietorship in order to engage in commercial activities in Taiwan. In particular, a subsidiary can be further divided into an unlimited company, unlimited company with limited liability shareholders, limited company, and company limited by shares. Most subsidiaries are set up in the form of a company limited by shares.

3. What is the process, time required, and cost for setting a limited company (in the case of a company limited by shares) in Taiwan?

(1) Procedure: The procedure for setting up a subsidiary can be divided into five stages - application for registration of the company name and scope of business, application for investment permission, capital remittance, application for capital verification, and company registration.

(2) Time required: The review of an application for registration of the company name and scope of business requires approximately four working days. The time required for the review of an application for investment permission and application for capital verification depends on the amount invested by the foreign company and the type of the industry invested in. The reference time frame is as follows: for an investment amount less than NT$500,000,000, the review requires approximately two to four working days; for an investment amount over NT$500,000,000, the review requires approximately three to five working days; and for an investment amount over NT$1,000,000,000, the review requires approximately 14 to 30 working days. The review of an application for company registration requires approximately four working days.

(3) Cost: The government fee charged for an application for registration of the company name and scope of business is NT$300. There is no government fee required for an application for investment permission or an application for capital verification. The government fee for company registration depends on the total amount of capital stipulated in the Articles of Incorporation, whereby for every NT$4,000 of capital, a fee of NT$1 is charged. Where the amount of the fee calculated based on the total amount of capital is less than NT$1,000, the government fee is NT$1,000.

4. What is the process, time required, and cost for setting a branch in Taiwan?

(1) Procedure: The procedure for setting up a subsidiary can be divided into four stages - application for registration of the company name and scope of business, application for foreign company recognition and branch registration, capital remittance, submission of proof of capital remittance, and completion of recognition and registration procedure.

(2) Time required: The review of an application for registration of the company name and scope of business requires approximately four working days. The review of an application for foreign company recognition and branch registration requires approximately four working days. The review of a submission of proof of capital remittance and completion of recognition and registration procedures also requires approximately four working days.

(3) Cost: The government fee charged for an application for registration of the company name and scope of business is NT$300. The government fee for an application for foreign company recognition and branch registration depends on the total amount of capital as stipulated in the Articles of Incorporation, whereby for every NT$4,000 of capital, a fee of NT$1 is charged. Where the amount of the fee calculated based on the total amount of capital is less than NT$1,000, the fee is NT$1,000.

5. What is the process, time required, and cost for setting a representative office in Taiwan?

(1) Procedure: There is only one stage - submission of an application for setting up a representative office.

(2) Time required: Approximately four working days.

(3) Cost: There is no government fee required.

6. What is the process, time required, and cost for setting a partnership business or sole proprietorship in Taiwan?

(1) Procedure: The procedure for setting up a partnership business or sole proprietorship can be divided into five stages - application for registration of the company name and scope of business, application for investment permission, capital remittance, application for capital verification, and business registration.

(2) Time required: The review of an application for registration of the company name and scope of business requires approximately four working days. The time required for the review of an application for investment permission and an application for capital verification depends on the amount invested by the foreign company and the type of the industry invested in. The reference time frame is as follows: for an investment amount less than NT$500,000,000, the review requires approximately two to four working days; for an investment amount over NT$500,000,000, the review requires approximately three to five working days; and for an investment amount over NT$1,000,000,000, the review requires approximately 14 to 30 working days. The review of an application for business registration requires approximately four working days.

(3) Cost: The government fee charged for an application for registration of the company name and scope of business is NT$300. There is no government fee required for an application for investment permission or an application for capital verification. The government fee for business registration is NT$1,000.

7. Are there any fetters on the business activities that can be carried on by business organizations in Taiwan?

Apart from the general restrictions imposed on (1) investments, (2) loans of capital to others, and (3) guarantees on behalf of others, the Company Act does not impose any restrictions on the activities that a company may carry out, except to the extent of requiring the company to specify in its Articles of Incorporation those activities that require special permission from the competent authority (e.g., banking business).

The restrictions in (1) through (3) are established by the Company Act as follows:

(1) Restrictions imposed on investments (Article 13 of the Company Act)

“A company shall not be a shareholder of unlimited liability in another company or a partner of a partnership enterprise. When a company becomes a shareholder of limited liability in other companies, the total amount of its investments in such other companies shall not exceed 40% of the amount of its own paid-up capital unless it is a professional investment company, or otherwise provided for in its Article of Incorporation, or has obtained the consent of its shareholders or a resolution adopted by its shareholders?meeting in accordance with any of the following provisions:

(a) In the case of an unlimited company or an unlimited company with limited liability shareholders: the unanimous consent of the unlimited liability shareholders;

(b) In the case of a limited company: the unanimous consent of its shareholders; or

(c) In the case of a company limited by shares: a resolution adopted, at a shareholders?meeting, by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares; provided that for a company whose shares have been publicly issued, in the event the total number of shares represented by the shareholders present at a shareholders?meeting of the company is less than two-thirds of the total number of its outstanding shares, the resolution may be adopted by two-thirds of the voting rights exercised by the shareholders present at the shareholders?meeting who represent a majority of the outstanding shares of the company.?/P>

(2) Restrictions imposed on loans of capital to others (Article 15 of the Company Act)

“Unless otherwise under any of the following circumstances, the capital of a company shall not be lent to any shareholder of the company or any other person:

(a) Where an inter-company or inter-firm business transaction calls for such lending arrangement; or

(b) Where an inter-company or inter-firm short-term financing facility is necessary, provided that the amount of such financing facility shall not exceed 40% of the amount of the net value of the lending enterprise.?

(3) Restrictions imposed on guarantees on behalf of others (Article 16 of the Company Act)

“A company shall not act as a guarantor of any nature, unless otherwise permitted by any other law or by the Articles of Incorporation of the company.?/P>

As to partnerships and sole proprietorships, the Civil Code does not impose any restrictions on the type of commercial activities that a partnership may carry out.

8. What are the ongoing obligations in relation to each of the forms of business organizations?

A business organization must commence its operations within six months after registration. Once a business organization begins its operations, unless it has filed for business suspension, it cannot suspend its operations at will, otherwise, the competent authority may order its dissolution.

Moreover, once a company is duly registered, if there is any change to the registered information, e.g., change in the amount of capital or change of director, the company must apply for a change of registration within 15 days (Article 15 of the Regulations Governing Company Registration and Recognition), otherwise the company is not entitled to defend itself based on such changes against a third party claim, and the competent authority may impose a fine of between NT$10,000 to NT$50,000 on the responsible person of the company (Article 387, paragraph 6 of the Company Act).

Furthermore, a company must convene at least one shareholders?meeting per year. The company
must produce a business report, financial statements, and proposals for surplus earnings distribution or loss setoff, and submit these documents for the approval of the shareholders or recognition by a shareholders?resolution. In addition, according to the provisions of the Tax Collection Act, a company must keep independent accounting books, and has an obligation to preserve all relevant proof of expenditure and income.

As to partnerships and sole proprietorships, according to the Tax Collection Act, they must maintain independent accounting books and have the obligation to preserve all relevant proof of expenditure and income.