Welcome to Start Up In Taiwan!

In our experience, these are foreign investors’ most frequent FAQs:

 Regulation

Q1. Will my business be permitted to run under foreign investment?

  • For foreign investors except those from mainland China: only the listed items are forbidden. (Click to see forbidden items)
  • For mainland Chinese investors: only the listed items are permitted.

Q2. Does this kind of business require a license?

Look up the Business Category Code in the sheet. (Click) If your type of business has a Code ending with “1,” it is highly regulated and requires a license.

Q3. Are there requirements for the location?

The following kinds of business are subject to location / area restrictions: Ballroom, Dance hall, Wine shop, Bar, Particular kinds of coffee / tea shop, Audiovisual and singing service, Bathhouse, Electronic game arcade, Computer recreational activity, Night club, Restaurant, Catering, Public house / beer hall, Massage service (unless involving visually impaired massage therapist), Foot massage, Body shaping service, Retailer of adult products, Automotive repair and maintenance, Motorcycle repair shop, Retailer of automobile and motorcycle parts and appliances, Car detailing, Amusement park, Athletic / recreational sports stadium, Pet grooming, Retailer of pet food and appliances.

 Tax System

Company Level

Overview

  • Business in Taiwan pay a value-added tax (VAT), also known as a goods & services tax (GST) in some countries.
  • Taiwan also has a business income tax system, including:
    • Corporate Income Tax
    • Withholding tax on dividends
    • Tax on undistributed profit

Value-added Tax

Q1. What does Taiwan’s tax system cover and tax rates?

  • On goods sold in Taiwan: 5%
  • On services provided in Taiwan: 5%
  • On goods sold outside of Taiwan (export goods): 0%
  • On services provided outside of Taiwan (i.e., provided from within Taiwan but consumed in another country): 0%

Q2. When do I file for the VAT return?

The VAT return is calculated every other month, with a deadline for submission on the 15th of the reporting month.

Business Income Tax

Q1. What does Taiwan’s tax system cover and tax rates?

Q2. Must my company pay corporate income tax if the Taiwanese research center has no income and provides service only to the parent company?

  • Please note the Transfer Pricing Issue. Transfer pricing refers to rules and methods for pricing transactions within and between enterprises under common ownership or control. Some multinational corporations are accused of manipulating the transfer pricing to allocate profits across different tax jurisdictions. Under such circumstances, most profits are tied to jurisdictions with lower tax rates, regardless of where the profits were actually generated.
  • Currently, most countries have legislated to manage such manipulation of transfer pricing among related parties. In order to avoid suspicion, the Taiwanese research center charges the parent company an arm’s-length price for its service.

Q3. In a subsidiary’s cost-plus structure, what profit margin do you recommend charging the parent company? Is 5% good for our line of business?

Taiwan’s tax office publishes the previous year’s profit level for each industry, and this can be a reference. For example:

Q4. Must business pay the withholding tax even if their subsidiaries don’t distribute dividends?

There is a 5% tax on all undistributed profits.

Q5. When do I file for the corporate income tax return?

The corporate income tax return is calculated annually in May.

Individual Level

Q1. What does Taiwan’s tax system cover?

  • Salaries which include base salaries, stipends, wages, allowances, annuities, cash awards, bonuses and all kinds of subsidies.
  • Dividends
  • Interest
  • Lease income and from royalties
  • Income from professional practice
  • Income from self-employment in farming, fishing, animal husbandry, forestry and mining
  • Income from property transactions
  • Income from contests and games, along with prizes and awards won by chance
  • Separation income
  • Other income

Q2. How do non-Taiwanese people pay these taxes?

  • For visitors staying in Taiwan for <90 days (non-residents):
    Tax on income derived from sources in Taiwan shall be withheld and paid at the respective sources. These taxpayers need not file for an income tax returns; however, if they have gained income from property transactions, occasional trade, etc., they should declare and pay the appropriate taxes prior to departure. For those staying in Taiwan through May 31st any given year, it is necessary to file based on their past year’s income.


  • For visitors staying in Taiwan for 90–183 days (non-residents):
    Tax on income derived from sources in Taiwan shall be withheld and paid at the respective sources. These taxpayers need not file for an income tax return; however, income derived from overseas in exchange for services provided from within Taiwan must be reported prior to departure. For those who stay in Taiwan through May 31st of any given year, it is necessary to file based on their past year’s income.


  • For visitors staying in Taiwan for >183 days (tax residents):
    As long as the 183 days fall within one calendar year, these residents will be required to file at the Tax Bureau based on their annual income of the past year, and to pay any outstanding taxes during the month of May. Those leaving the country in the middle of the year will be required, prior to departure, to file based on income earned in that year.


Q3. What tax rates apply?

  • For non-residents: flate rates, as follows:
    • Salary
      -Monthly > TWD 34,650: 18%
      -Monthly < TWD 34,650: 6%
    • Dividends: 21%
    • Interest: 20%
    • Lease income and royalties: 20%
    • Income from professional practice: 20%
    • Income from property transactions: 20%
    • Income from contests and games along with prizes and awards won by chance: 20%
    • Separation income: 18%
    • Other income: 20%

  • For taxpaying residents: progressive rates
    • Consolidated net income < TWD 540k
      5% of the consolidated net income
    • TWD 540k < Consolidated net income < TWD 1.21 million
      12% of the consolidated net income – TWD 37,800
    • TWD 1.21 million < Consolidated net income < TWD 2.42 million
      20% of the consolidated net income – 134,600
    • TWD 2.42 million < Consolidated net income < TWD 4.53 million
      30% of the consolidated net income – 376,600
    • TWD 4.53 million < Consolidated net income
      40% of the consolidated net income – 829,600

Q4. What if a company leases a house for its non-Taiwanese employee, and pays the rental fee on the employee’s behalf??

  • Salary and subsidy
    As mentioned with Q1, an employee’s salary includes “all kinds of subsidies,” such as relocation allowance or house rental aid. Therefore, the rent paid by the company is a part of the employee’s salary, no matter who signs the leasing contract.
  • Exemption
    If the employee satisfies all of the following requirements, rental aid can be exempted from the salary:
    1. Obtained work permit as a specialized or technical worker, or as an executive in business supported by foreign investment.
    2. Became a tax-paying resident (staying in Taiwan for >183 days of the calendar year)
    3. Reported taxable domestic and foreign salary income > TWD 1.2 million

 Set Up a Company in Taiwan

Q1. What is most crucial?

The nationality of the investor.

Q2. Why does the nationality of the investor matter?

Due to the tension between Taiwan and mainland China, Taiwan’s government holds strict management over Chinese investors. As a result, one of the main purposes in assessing foreign investors is to determine which are Chinese. Any foreign investor considered to be controlled or significantly affected by China will be subject to the special Act Governing Relations Between Peoples Of The Taiwan Area And The Mainland Area.

Q3. What is the first step?

Clarify the investment structure and disclose ultimate beneficiary owners (Click to see exsample)

Q4. What is most difficult?

Sometimes the disclosure of ultimate beneficiary owners is not that easy, especially with complicated investment structures and numerous parties involved.

Q5. Which type of organization is most appropriate for me?

5.1 What are the options?

Generally, there are four options: A. Subsidiary company, B. Branch, C. Partnership, and D. Representative office.

5.2 What are the differences among these options?

5.3 What is most relevant to most investors?

  • If the business entity in Taiwan will generate sales revenue, and the sales revenue cannot be controlled, a branch is more advisable considering the exemption of profit distribution to foreign headquarters.
  • If the entity in Taiwan is designated only for liaison with Taiwanese clients or suppliers, a representative office is recommended considering its comparatively low regulation and exemption from certain tax procedures.

Q6. What are the considerations for amounts of capital?

6.1 Is there a threshold?

Basically, unless certain missionss are involved (see Q2 below), there is no threshold for the amount of capital involved in setting up a company in Taiwan.

6.2 Under what circumstances are there special requirements for the capital amount?

  • When the company in Taiwan is to engage in a highly regulated business, and under certain other conditions.
  • The company in Taiwan will hire foreign employees.
  • The company in Taiwan takes part in the immigrant investor program.

6.3 Will there be any problem if the capital investment is too small?

  • If the accumulated net loss exceeds the capital, the company needs to announce its insolvency.
  • The procedure for injecting additional capital is almost the same as setting up a company. It takes time, effort, and money.

6.4 Will there be any problem if the capital investment is too big?

Generally, in Taiwan, a small or medium-sized enterprise’s financial statements do not require CPA auditing. But if the capital size is over TWD 30 million, the audit will become mandatory.

6.5 Will there be any problem if we borrow from the foreign parent company to bridge the finance gap?

Loans from the parent company lasting over one year are also regarded as investments, just like the capital. They also require the investment committee’s approval in advance.

6.6 Will the working capital be audited?

Yes, the capital needs to be wired from the foreign parent company to the Taiwanese entity’s bank account. It will be audited by both the investment committee and the CPA.

6.7 Can the capital be withdrawn from the Taiwanese entity’s account after the audit?

We’re afraid not. Withdrawing capital can lead to criminal charges.

6.8 Can the capital be used?

Yes. The capital is meant for operating the Taiwanese entity.

6.9 Does capital amount have anything to do with tax treatment?

Capital amount has nothing to do with tax treatment.

Q7. Can we appoint a non-Taiwanese citizen who does not live in Taiwan as a Taiwanese company’s representative?

Theoretically, this is OK; however, it is not advisable in practice due to the anti-money laundering procedures of banks:

  • For Taiwan’s government and Company Law: no problem.
  • For banks: most banks currently prefer that the Taiwanese company’s representative stay in Taiwan a majority of the time. They may require the foreign citizen’s ARC (Alien Resident Certificate), the leasing agreement of a domicile in Taiwan, attendance in person when they visit the office, etc.

Q8. Procedures and timeline

Prior investment approval is required for foreign investors, and the timeline will be different for investors with different nationalities:

Q9. Is a Taiwanese partner required?

No.

Q10. Is a Taiwanese agent required?

A Taiwanese CPA will take responsibility as your investment agent in Taiwan, but no other agent is required.

Q11. Is it difficult to open a bank account in Taiwan?

  • Some banks are friendlier to new foreign clients. These include the Shanghai Commercial & Savings Bank (上海商銀), the Chang Hwa Commercial Bank (彰化商銀), the E.Sun Bank (玉山銀行), the Taishin International Bank (台新銀行), and the CTBC Bank (中國信託).
  • Other banks are more discreet. These include the Bank of Taiwan (台灣銀行), the Cathay United Bank (國泰世華), the Shin Kong Bank (新光銀行), DBS (星展銀行), Citibank, and HSBC.

Q12. Which procedures require my presence in person?

  • Opening a bank account.
  • Meeting with the tax bureau after company setup and before operations’ commencement.

 Hiring

Work Permit for Foreign Workers

Q1. Why do the companies need to apply for work-permits?

  • For the purpose of protecting Taiwanese nationals’ right to work, non-Taiwanese workers’ employment must never jeopardize nationals’ opportunities in employment, employment terms, economic development, or social stability.
  • Accordingly, unless otherwise specified in the Employment Service Act, no foreign worker may work in Taiwan without the employer having first applied for and obtained a permit.
  • No one may illegally let foreign workers stay to engage in work, nor is it legally for anyone to refer a foreign worker to work for any third party.

Q2. What are the types of work permit?

    1. Specialized or technical work.
    2. Director/manager/executive (of a business supported / set up by overseas investment.
    3. Teacher (at regular institutions of higher education).
    4. Teacher (at a cram school).
    5. Sports coach / athlete.
    6. Religious / artistic / entertainment worker.
    7. A crew member of a merchant’s vessel / working vessel.
    8. Marine worker (fishing / netting).
    9. Household assistant / nurse.
    10. Workers designated by the Central Competent Authority in response to major national construction projects, or to economic / social development needs.
    11. Other specialized ad hoc workers (approved by the Central Competent Authority due to the lack of such specialists in the Taiwanese employment market and the business necessity of retaining such specialist’s service.

Q3. What are the requirements in order for a startup to apply for a work permit?

Q4. Are investment visas an alternative form of work permit?

No. An investment visa is for a shareholder who is supposed to affect the company via votes instead of operating the company directly. Therefore, an investment visa doesn’t allow the investor to work in the company and is no substitute for a work permit.

Hiring Costs

Q1. What are the additional costs attached to salary?

1. Labor Pension Premiums
The Labor Pension premium per month by an employer provided to the Annuities Insurance program may not be less than 6% of a worker’s monthly wage. While the contribution from the employee is not required.

2. Labor Insurance Premiums
The labor insurance premium is based on the insured employee’s monthly regular wage level, and paid by both the insured employee and his employer. The program provides ordinary insurance with 5 kinds of benefits (maternity, injury or sickness, disability, old-age and survivors’ benefits), and occupational accident insurance with 4 kinds of benefits (injury and sickness, medical-care, disability and survivors’ benefits).

3. National Health Insurance (NHI) Premiums
Similar to the labor insurance premium, the NHI premium is based on the insured employee’s monthly regular wage level and paid by both the insured employee and his employer.

4. Supplementary National Health Insurance Premiums
It is a response to two main criticism on NHI Premium:
1) The NHI system is supported only by the normal salaried employees
The supplementary NHI Premium is levied on five types of income in addition to regular salaries. They include landlords’ rent income, lenders’ interest income, investors’ dividend income, self-employed’s income from professional practice, extra considerable bonus, and the income not from the employer.
2) Some companies underreports their employee’s wage level in order to evade from a regular fee rate
The supplementary NHI Premium is levied on the difference when the total amount of salary paid exceeds the insured payroll-related amount for that month.

Q2. How much is the total costs of hiring an employee?

The total costs of hiring consists of four parts: salary, Labor Pension premium paid by the employer, Labor Insurance premiums paid by the employer, and NHI premium paid by the employer. And the examples are as below:

Q3. How much an employee can receive after all deductions?

Besides the premiums of pension and insurance, the withholding tax should also be considered and will be elaborated in next question:

Q4. What is wage withholding?

The wage withholding system requires withholding for income taxes on payments by employers to employees. Income tax for the employee for the year is generally determined upon filing a tax return after the end of the year. The amount withheld and paid by the employer to the government is applied as the employee’s prepayment of income taxes and is refundable if it exceeds the income tax liability determined on the employee’s filing the tax return.

Q5. Why wage withholding should not be regarded as a cost of hiring?

It is because the withholding tax is deducted from the employee’s salary instead of additionally charging the employer.

Q6. Why Supplementary NHI premiums should not be regarded as a cost of hiring?

It is because the premiums on extra considerable bonus or the income not from the employer are deducted from the employee’s salary instead of additionally charging the employer.

Q7. How does the company pay the insurance premiums and withholding tax?

For pension and insurance premiums, the government’s information system will calculate and send bills to the employer and can be processed in a convenient store or automatically paid by the bank.
On the other hand, Supplementary NHI premium and wage withholding need to be calculated by the employer himself. The employer then needs to generate bills, pay in a convenient store or bank (automatical payment is not available), and report to the government regularly.

Q8. Why there is always an item of “food allowance” as much as TWD 2,400 per month in most Taiwanese company’s salary?

For the employee, the definition of taxable salary income covers all kinds of payment received from the employer. They include base salaries, stipends, wages, allowances, annuities, cash awards, bonuses and all kinds of subsidies. However, the food allowance as much as TWD 2,400 per month is an exception and can be exempted from the taxable salaries. Therefore, most Taiwanese companies provide employees with such food allowance.

Termination of Employment

Reasons for termination

The following five reasons for termination of employment share the same severance package rules:

  1. Where the employers’ businesses are suspended, or has been transferred.
  2. Where the employer’s business activities suffer operating losses, or business contractions.
  3. Where force majeure necessitates the suspension of business for more than one month.
  4. Where a change in the nature of the business necessitates the reduction of workforce, and terminated employees cannot be reassigned to other suitable positions.
  5. A worker is clearly unable to satisfactorily perform the duties required in the position held.

Additionally, this severance package primarily consists of two parts; there is a period of advance notice, followed by severance pay.

Minimum period of advance notice

This is based on the employee’s seniority:

  • Where a worker has worked continuously for more than three months but less than one year, the notice is to be given 10 days in advance.
  • Where a worker has worked continuously for more than one year but less than three years, the notice must be given 20 days in advance.
  • Where a worker has worked continuously for more than three years, the notice shall be given 30 days in advance.

After receiving advance notice, the worker may ask for leave of absence during hours of work, for the purpose of finding a new job. Such leave of absence may not exceed two workdays per week. Wages shall be paid during such leave of absence.

Where an employer terminates a contract without serving advance notice within the time limit prescribed in the points above, they are required to pay the worker wages for the period of advance notice.

Severance pay

The amount of severance pay, like the amount of advance notice, is based on the employee’s seniority. It is calculated as an amount equal to half a month’s average wages for every full year of employment, and in proportion for any period of employment lasting less than one full year. This severance pay is limited to six months’ average wages.

Example
-Seniority: 1 year, 4 moths, and 23 days
-Average monthly salary: 55,074

Calculation
→ Half of average monthly salary: 27,537 ( = 55,074 / 2 )
→ Severance pay: 38,475

 Work with Us

Q1. How do I request a quote?

Please click on the blue button below to request a quote on setting up a company in Taiwan. If you would like our quote for other services, please contact us directly.

Q2. Why haven’t I received the quote by email after submitting the request form 5 minutes ago?

We are afraid that you filled in an incorrect email address when requesting the quote, and we have no way to connect with you. Please submit the request form again or contact us directly.

Q3. Do you also provide accounting, tax agents, payroll calculations, and other maintenance services?

Yes, we do. Please let us know if you would like to know more.

Q4. Can you provide a formal engagement letter in English?

Certainly. If you are fine with our quote, we will proceed to prepare a formal engagement letter for your review.

Q5. How is the payment arranged?

We will send our first progressive billing (at 50% of the service fee and all known out-of-pocket expenses) with the signature of our engagement letter, and issue the final bill when completion of case.

Q6. Can I pay from a bank account which is not in Taiwan?

Yes, but please be reminded that there will be additional bank processing fees for international remittances.

Q7. Can I use PayPal?

Yes, but please be reminded that there will be additional PayPal processing fees.

Q8. Can I pay in any other currency aside from TWD?

Yes, we accept major currencies as well as TWD.

Q9. If I pay by a foreign currency, what the exchange rate will be?

We refer to the exchange rates published by the Bank of Taiwan.

Q10. What documents do I need to provide to you?

We will make a list of required documents after understanding your case.

Q11. How do I consult with you if I have more questions?

Please feel free to contact us.

Q12. Can we arrange for a face-to-face meeting?

Sure. Please let us know your availability.