笨Ben的部落格

 

Guide to Taiwan Business Entities for Foreign Investors

 

The term “company” as used in the Taiwan Company Act denotes a corporate juristic person organized and incorporated in accordance with the act with a view to earning a profit. There are four types of company: unlimited company, limited company, unlimited company with limited liability shareholders, and company limited by shares. In general, limited company and company limited by shares are the two major types of business entities in Taiwan. Alternatively, a foreign investor can apply for recognition of a foreign company and registration of a branch.

 

1.       Profit-Seeking Business Entity

 

The following describes the most common investment vehicles for foreign investors:

 

(1)      Limited Company and Company Limited by Shares

 

Company limited by shares and limited liability company are the most common business entities incorporated by foreign investors. Foreigners can invest in Taiwan by incorporating a new company or acquiring an existing local company in accordance with the Business Mergers and Acquisitions Act (BMAA).

 

The BMAA mainly includes mergers, consolidations, acquisitions, and divisions of a company. To encourage business mergers and acquisitions, the BMAA provides for tax incentives, including an exemption from business tax and stamp duty, deferral of the land value increment tax, the offset of profits and losses, etc. In addition, if the transferor’s employees agree to join the transferee company, the service years of these employees with the transferor will be recognized by the transferee company after the merger/consolidation.

 

(2)      Branch of a Foreign Company

 

A foreign company also can operate in Taiwan by establishing a branch. According to the Company Act, the foreign company must obtain recognition from the MOEA before doing business in Taiwan. Once recognition is obtained, the foreign company will have the same rights and obligations and will be subject to the same jurisdictional authority as a domestic company, unless otherwise provided by law.

 

The following table compares the characteristics of a company limited by shares, limited company, and branch office of a foreign company:

 

	Company		Branch Office of a Foreign Company
	Company Limited by Shares	Limited Company
Permitted activities	General trading, sales, and manufacturing	Same as company limited by shares	Same as company limited by shares
Profit-seeking enterprise income tax*	Tax-free for net income up to NTD120,000 and 17% for net income exceeding that amount	Same as company limited by shares	Same as company limited by shares
Profit remittance tax	20% withholding tax or 10% under an applicable tax treaty; however, the 10% retained earnings tax paid by the company on its undistributed profits may be credited against the withholding tax	Same as company limited by shares	None
Shareholder/head office liabilities	Shareholders are liable to the extent of their capital contribution to the company	Same as company limited by shares	Foreign head office is liable for any liabilities unsettled by the branch
Shareholder requirements	Must have at least one corporate shareholder or two individual shareholders. Shareholders may be foreign nationals residing outside Taiwan	Minimum one individual or corporate shareholder. Shareholders may be foreign nationals residing outside Taiwan.	N/A
Director requirements	Must have at least three directors who can be foreign nationals residing outside Taiwan	One and three directors who can be foreign nationals	N/A

 

 

Comparison of Business Entities in Taiwan
	Company		Branch Office of a Foreign Company
	Company Limited by Shares	Limited Company
Supervisor requirements	Must have at least one supervisor who can be a foreign national residing outside Taiwan	N/A	N/A
Minimum capital requirements	None (Note 1)	None (Note 1)	None (Note 1)
Sources of capital contribution	Capital contribution can be made by a cash infusion or capitalization of retained earnings or capital surplus	Same as company limited by shares	Initial capital must be remitted from the foreign head office. Subsequent operating capital may be made through offshore head office remittance or capitalization of the branch’s retained earnings
Time needed to set up company/ branch	Three weeks	Three weeks	Two weeks
Filing of annual income tax return	Required	Required	Required
Withholding tax on salaries, rental fees, professional’s fees	Required	Required	Required
Allocation of administrative expenses by parent/head office*	Charges will be subject to a 20% withholding tax. The  deductibility of the charges depend on whether the company can provide sufficient documentation to the tax offie	Same as company limited by shares	Expenses are allocable to the branch , and location charges are deductible for the branch if certain criteria are met and not taxable for the head offie
Keeping of books of accounts	Required	Required	Required
Liquidation upon dissolution	Required	Required	Required
Purchase of real property and automobiles	Permitted	Permitted	Permitted

 

Note 1:

If the business entity engages in activities that require a special permit or approval, the authorities may set a higher capital requirement. According to the Qualifications and Criteria Standards for Foreigners Undertaking Jobs Specified under Article 46.1.1 to 46.1.6 of the Employment Service Act (http://law.moj.gov.tw/Eng/), if a company or a branch set up within a year wants to employ a foreigner as a special professional or to carry out a technical assignment, the minimum paid-in capital or operating capital is NTD 5 million.

 

2.       Foreign and Overseas Chinese Investment Approval

 

Two laws designate the regulatory authority for specific types of foreign investment: the Statute for Investment by Overseas Chinese and the Statute for Investment by Foreign Nationals. For investment in a science park or an EPZ, two other laws apply: the Act for the Establishment and Administration of Science Parks and the Statute for the Establishment and Administration of Export Processing Zone. For investment in a science park or an EPZ, an investor must obtain approval of the competent authority, which is the Export Processing Zone Administration (EPZA) or the Science Park Administration of the National Science Council (SPA). For investment in other areas, approval must be obtained from the Investment Commission, MOEA.

 

(1)      Definition of Investment

 

Under current law, an investment is defined as follows:

•         Holding shares or capital issued by a Taiwan company

•         Establishing a proprietary business or a partnership in Taiwan

•         Providing loan(s) to the invested business described in the preceding bullets for a period exceeding one year.

 

(2)      Regulatory Authorities

 

The regulatory authority for foreign investment approval is the Investment Commission, MOEA. For investment in a science park or an EPZ, the investor can obtain approval from the EPZA or the SPA.

 

(3)      Negative List for Investment by Foreign Nationals

 

There are no restrictions on foreign investment, except in certain industries in which foreign investment is prohibited due to national security concerns. However, certain industries do require the participation of nationals, thus restricting the shareholding of foreign investors. Except with respect to items on the “Negative List”, foreign investors enjoy a status comparable to nationals.

 

(4)      Type of Capital Contribution

 

Capital may consist of the following:

•         Cash;

•         Machinery and equipment or raw materials for own use;

•         Patent rights, trademark rights, copyrights, technical know-how, or other IP rights; or

•         Other property recognized by a government authority.

 

3.       Registration for Setting up a Business Entity
 

(1)      Reservation of a Company Name and Business Scope

 

Foreign investors must file an application with the Department of Commerce, MOEA to reserve a Chinese company name and identify the scope of business of a Taiwan business entity.

 

(2)      Foreign Investment Approval and Registration

 

For investment in areas other than a science park or an EPZ, foreign investment approval must be obtained from the Investment Commission, MOEA. Once approval is granted, the foreign investor inject the capital investment; it then must apply to the competent authorities to set up the company or branch, and finally to the local tax office where the company is located to register the business.

 

For investment in a science park or an EPZ, a foreign investor must obtain approval of the competent authority, which is the EPZA or the SPA, respectively, and then register the company with the local tax office.

 

(3)      Registration of a Branch of a Foreign Company

 

To set up a branch of a foreign company, an application must be field with the Department of Commerce, MOEA for recognition of the head office and registration of the branch, and then an application must be submitted to the local tax office to register the business.

 

To set up a branch of a foreign company in a science park or an EPZ, an application must be submitted to the Department of Commerce, MOEA for recognition of the head office, an application must be submitted to the SPA or the EPZ, depending on where the branch is located, to register the setting up of the branch, and then an application must be submitted to the local tax office to register the business.

 

(4)      Registration of an Importer and Exporter

 

According to Article 2 of the Regulations Governing Registration of Exporters and Importers, a company or business entity engaged in the export/import business may apply to the Bureau of Foreign Trade (BOFT), MOEA, unless other prohibitions or restrictions apply. For more details, see http://www.trade.gov.tw/.

 

(5)      Registration of a Factory

 

A foreign investor that engages in the manufacturing and/or processing of goods can apply to the local county/city government, the EPZA or the SPA to register a factory, depending on where the factory is located.

 

4.       Information and Documents Required to Register a Business Entity

 

(1)    Company

 

(a)     Application to Department of Commerce to reserve a company name

Application for Reservation of Corporate Name and Business Scope: The Chinese name of the proposed company and the type of organization, scope of business, applicant’s name, passport or ID card number, and residence address.

 

(b)     Application to Investment Commission, MOEA, SPA, or EPZA (depending on the location of the company) for approval of foreign investment

(i)     Application form

(ii)    Photocopy of Certificate of Incorporation (Note 1) or passport (for foreign individual investor)

(iii)    Power of attorney (Note 1) appointing CPA or lawyer in Taiwan as attorney-in-fact to file the application

(iv)   Declaration of Qualification of Foreign Investor (for foreign legal person)

 

Note 1: Documents must be notarized by a notary public and authenticated by the court or governor of the country, or the nearest Taiwan consulate or the appropriate representative of the Taiwan government in the country in which the foreign investor is located.

 

(c)     Application to Investment Commission of MOEA, SPA, or EPZA to examine and certify foreign equity investment

(i)     Application form

(ii)    Notice of inward remittance

(iii)    Exchange memo

(iv)   Copy of bank passbook

(v)    Photocopy of certificate of incorporation (Note 1)

(vi)   Photocopy of passport of foreign individual investor

(vii)    Declaration for qualification of foreign investor

(viii)   Power of attorney (Note 1) appointing CPA or lawyer in Taiwan as attorney-in-fact to fie the application

 

Note 1: Documents must be notarized by a notary public and authenticated by the court or governor of the country, or the nearest Taiwan consulate or the appropriate representative of Taiwan government in the country in which the foreign investor is located.

 

(d)      Application to competent authorities for approval of a company setup registration

(i)       Application form

(ii)      Approval letter of other government authority (if the scope of business of the Taiwan entity involves a franchise business)

(ii)      Articles of incorporation

(iii)     Minutes of the incorporators’ meeting

(iv)     Minutes of the board of directors’ meeting and attendance record

(v)      Capital certification report issued by the CPA in Taiwan

(vi)     Photocopy of certificate of incorporation

(vii)    Power of attorney appointing individuals as the representatives of the foreign incorporators

(viii)   Photocopy of passports of foreign individual shareholders

(ix)     Identification documents required from directors and supervisors of the company

(x)      Register of shareholders

(xi)     Photocopy of the building tax payment statement, and lease agreement or consent letter of the owner of the building for the offie premises where the company is located

(xii)    Chop engraved with the Chinese name of the board chairperson

(xiii)   Chop engraved with the Chinese name of the company

(xiv)   Registration form

 

(e)     Application to tax office for tax registration

(i)      Application form

(ii)     Photocopy of company’s setup registration approval letter and registration form

(iii)    Photocopy of ID card of the chairperson

(iv)    Photocopy of lease agreement for the offie premises

(v)    Photocopy of building tax payment statement for the offie premises

(vi)   Chop engraved with the Chinese name of the board chairperson

(vii)   Chop engraved with the Chinese name of the subsidiary

 

(2)      Branch Offie

 

(a)     Application to Department of Commerce to reserve a company name

Application for Reservation of Corporate Name and Business Scope. The applicant must be the designated legal representative in Taiwan or the proposed branch manager in Taiwan.

 

(b)    Application for recognition of foreign head office, examination and certification of working capital and establishment of Taiwan branch

(i)     Application form

(ii)    Resolution adopted at a meeting of the head office’s board of directors (Note 1) authorizing the establishment of the branch, appointing the branch manager and legal representative, etc. and a Chinese translation

(iii)   Certificate of incorporation (Note 1) issued by the government authority and a Chinese translation

(iv)   Articles of incorporation and bylaws (Note 1) (including all amendments to-date) and Chinese translations

(v)    Power of attorney for the appointment of the legal representative in Taiwan (Note 1) and a Chinese translation

(vi)   Power of attorney for the appointment of the branch manager (Note 1) and its Chinese translation

(vii)   Photocopy of the building tax payment statement, and lease agreement or consent letter of the owner of the building for the offie premises where the branch is located

(viii) Photocopies of the identification cards (if a Taiwan national) or Photocopies of the passports (if a foreign national, the branch manager must have residence in Taiwan) of the legal representative in Taiwan and branch manager

(ix)   Advice of inward remittance of operating capital and exchange memo

(x)    Chops engraved with the Chinese name of the branch manager and litigation / non-litigation agent in Taiwan

(xi)   Chop engraved with the Chinese name of the branch

(xii) Recognition and registration forms

 

Note 1: Documents must be notarized by a notary public and authenticated by the court or governor of the country, or the nearest Taiwan consulate or the appropriate representative of Taiwan government in the country in which the foreign investor is located.

 

(c)     Application to tax office for tax registration

(i)       Application form

(ii)      Photocopy of Taiwan branch setup registration approval letter, head office’s approval form and registration form

(iii)     Photocopy of ID card of the branch manager

(iv)     Photocopy of building tax payment statement for the building where the branch is located

(v)      Chop engraved with the Chinese name of the branch manager

(vi)     Chop engraved with the Chinese name of the branch

 

(3)      Information and Documents Required to Set Up a Representative Offie

 

(a)     Introduction

A foreign company can set up a representative office in Taiwan rather than a branch office. The foreign company can designate a representative to carry out legal acts relating to its business, such as negotiating and signing contracts, quoting prices, making tenders or procurement in Taiwan. An application must be submitted to register the business with the MOEA and establish a representative office. A representative office is a tax-exempt entity. The activities of a representative office are limited to the above activities, and it cannot conduct any business activities in Taiwan.

 

(b)    Representative Office Registration Procedures

(i)     Application for Reporting Designated Representatives of a Foreign Company to Handle Legal Matters in Taiwan from the Department of Commerce, MOEA

(ii)    Application for a Tax ID from the Local Tax Offie

 

(c)     Documents Required for Application for Registration

(i)     Application form

(ii)    Certificate of incorporation issued by the government authority (Note 1) and a Chinese translation

(iii)   Power of attorney appointing the legal representative in Taiwan (Note 1) and a Chinese translation

(iv)   Photocopy of the lease agreement or house ownership certificate, along with the building tax payment statement for the offie premises where the representative office is located

(v)    Photocopy of the ID card (if a Taiwan national) or Photocopy of the passport (if a foreign national) of the legal representative in Taiwan

(vi)    Chop engraved with the Chinese name of the legal representative in Taiwan

(vii) Registration card of the designated representative

 

Note 1: Documents must be notarized by a notary public and authenticated by the court or governor of the country, or the nearest Taiwan consulate or the appropriate representative of Taiwan government in the country in which the foreign investor is located.

 

(d)    Application to Tax Offie for Tax ID Registration

(i)     Application form

(ii)    Photocopy of the MOEA’s approval letter and registration card

(iii)   Photocopy of the ID card or passport of the legal representative in Taiwan

(iv)   Photocopy of the lease agreement or house ownership certificate, along with the building tax payment statement for the offie premises where the representative office is located.

 

 

 

 

 

 

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:

Tel: +852 2341 1444

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