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This publication is<br />
a jo<strong>in</strong>t project with<br />
<strong>Do<strong>in</strong>g</strong> Bus<strong>in</strong>ess <strong>in</strong> <strong>Taiwan</strong>
Contents<br />
Executive Summary 4<br />
Foreword 6<br />
Introduction - <strong>Do<strong>in</strong>g</strong> Bus<strong>in</strong>ess <strong>in</strong> <strong>Taiwan</strong> 8<br />
Conduct<strong>in</strong>g Bus<strong>in</strong>ess <strong>in</strong> <strong>Taiwan</strong> 12<br />
Taxation <strong>in</strong> <strong>Taiwan</strong> 14<br />
Audit and Accountancy 29<br />
Human Resources and Employment Law 31<br />
Trade 36<br />
Bank<strong>in</strong>g <strong>in</strong> <strong>Taiwan</strong> 38<br />
<strong>HSBC</strong> <strong>in</strong> <strong>Taiwan</strong> 40<br />
Country Overview 42<br />
Contacts 44<br />
Disclaimer<br />
This document is issued by <strong>HSBC</strong><br />
Bank (<strong>Taiwan</strong>) Limited (the ‘Bank’)<br />
<strong>in</strong> <strong>Taiwan</strong>. It is not <strong>in</strong>tended as an<br />
offer or solicitation for <strong>bus<strong>in</strong>ess</strong> to<br />
anyone <strong>in</strong> any jurisdiction. It is not<br />
<strong>in</strong>tended for distribution to anyone<br />
located <strong>in</strong> or resident <strong>in</strong> jurisdictions<br />
which restrict the distribution of this<br />
document. It shall not be copied,<br />
reproduced, transmitted or further<br />
distributed by any recipient.<br />
The <strong>in</strong>formation conta<strong>in</strong>ed <strong>in</strong> this<br />
document is of a general nature<br />
only. It is not meant to be<br />
comprehensive and does not<br />
constitute f<strong>in</strong>ancial, legal, tax<br />
or other professional advice. You<br />
should not act upon the <strong>in</strong>formation<br />
conta<strong>in</strong>ed <strong>in</strong> this publication without<br />
obta<strong>in</strong><strong>in</strong>g specific professional<br />
advice. This document is produced<br />
by the Bank together with<br />
PricewaterhouseCoopers (‘PwC’).<br />
Whilst every care has been taken<br />
<strong>in</strong> prepar<strong>in</strong>g this document,<br />
neither the Bank nor PwC makes<br />
any guarantee, representation or<br />
warranty (express or implied) as<br />
to its accuracy or completeness,<br />
and under no circumstances will<br />
the Bank or PwC be liable for any<br />
loss caused by reliance on any<br />
op<strong>in</strong>ion or statement made <strong>in</strong> this<br />
document. Except as specifically<br />
<strong>in</strong>dicated, the expressions of op<strong>in</strong>ion<br />
are those of the Bank and/or PwC<br />
only and are subject to change<br />
without notice.<br />
The materials conta<strong>in</strong>ed <strong>in</strong> this<br />
publication were orig<strong>in</strong>ally assembled<br />
<strong>in</strong> November 2010. This guide has<br />
been updated <strong>in</strong> July 2011 based on<br />
the law enforceable and <strong>in</strong>formation<br />
available at that time.
4<br />
Executive Summary<br />
Located <strong>in</strong> the heart of the<br />
Asia Pacific region, <strong>Taiwan</strong> is<br />
a strategic platform connect<strong>in</strong>g<br />
some of the largest economies,<br />
<strong>in</strong>clud<strong>in</strong>g US, Japan and<br />
Ch<strong>in</strong>a. Based on International<br />
Monetary Fund statistics,<br />
<strong>Taiwan</strong> is currently the 24th<br />
largest economy <strong>in</strong> the world,<br />
and consistently scores very<br />
highly <strong>in</strong> global competitiveness<br />
rank<strong>in</strong>gs by lead<strong>in</strong>g economic<br />
organisations such as IMD<br />
World Competitiveness<br />
Yearbook 2011 (<strong>Taiwan</strong> ranked<br />
6th place among the world’s 59<br />
most competitive economies).<br />
This general guide highlights<br />
some of the areas that<br />
<strong>in</strong>vestors should be aware of<br />
when do<strong>in</strong>g <strong>bus<strong>in</strong>ess</strong> <strong>in</strong> <strong>Taiwan</strong>,<br />
although professional advice<br />
may be required <strong>in</strong> specific<br />
circumstances. Below are a<br />
few competitive advantages<br />
for <strong>in</strong>vestors conduct<strong>in</strong>g their<br />
<strong>bus<strong>in</strong>ess</strong> <strong>in</strong> <strong>Taiwan</strong>:<br />
• Attractive <strong>in</strong>centives are offered<br />
by the government to make<br />
<strong>Taiwan</strong> more <strong>in</strong>vestor-friendly,<br />
with foreign <strong>in</strong>vestors enjoy<strong>in</strong>g<br />
the same rights and privileges<br />
as local <strong>in</strong>vestors.<br />
• The reduced corporate <strong>in</strong>come<br />
tax rate, from 25% to 17%,<br />
applies to the tax year 2010<br />
and onwards.<br />
• Personal taxation depends<br />
on the <strong>in</strong>dividual’s length of<br />
stay <strong>in</strong> <strong>Taiwan</strong> and whether<br />
they are domiciled <strong>in</strong> <strong>Taiwan</strong>.<br />
• Recently, the government<br />
has been promot<strong>in</strong>g the<br />
development of six emerg<strong>in</strong>g<br />
<strong>in</strong>dustries (biotechnology,<br />
medic<strong>in</strong>e and health care,<br />
culture and creativity, tourism,<br />
green energy and high-end<br />
agriculture) and four ‘<strong>in</strong>telligent’<br />
<strong>in</strong>dustries (cloud comput<strong>in</strong>g,<br />
smart electric vehicles, smart<br />
green build<strong>in</strong>g and patent<br />
commercialisation), and offer<strong>in</strong>g<br />
new <strong>in</strong>centives to attract<br />
domestic and foreign privatesector<br />
<strong>in</strong>vestment <strong>in</strong> these<br />
target sectors.<br />
• The improvement <strong>in</strong> relations<br />
with Ch<strong>in</strong>a, the sign<strong>in</strong>g of<br />
the Economic Cooperation<br />
Framework Agreement (‘ECFA’)<br />
between Ch<strong>in</strong>a and <strong>Taiwan</strong>,<br />
cont<strong>in</strong>ued deregulation and<br />
streaml<strong>in</strong>ed procedures for<br />
sett<strong>in</strong>g up operations on the<br />
island, along with a series of<br />
tax reforms, have made <strong>Taiwan</strong><br />
a more attractive place for<br />
<strong>bus<strong>in</strong>ess</strong> <strong>in</strong>vestment.
6<br />
Foreword<br />
The global focus on emerg<strong>in</strong>g<br />
markets is greater than ever.<br />
This is particularly true of the<br />
Greater Ch<strong>in</strong>a region, <strong>in</strong> which<br />
<strong>Taiwan</strong> is a key constituent. As<br />
the world’s lead<strong>in</strong>g emerg<strong>in</strong>g<br />
markets bank, <strong>HSBC</strong> is the<br />
ideal partner to enable your<br />
<strong>bus<strong>in</strong>ess</strong> achieve full potential<br />
<strong>in</strong> this excit<strong>in</strong>g area. <strong>HSBC</strong> has<br />
been <strong>in</strong> <strong>Taiwan</strong> s<strong>in</strong>ce 1984.<br />
We now have 42 branches<br />
located across the Island.<br />
As a sign of our long-term<br />
commitment to <strong>Taiwan</strong>, <strong>HSBC</strong><br />
locally <strong>in</strong>corporated on 1 May<br />
2010 and <strong>HSBC</strong> Bank (<strong>Taiwan</strong>)<br />
Limited is now a wholly-owned<br />
subsidiary of the <strong>HSBC</strong> Group.<br />
<strong>HSBC</strong> Group has been do<strong>in</strong>g<br />
<strong>bus<strong>in</strong>ess</strong> <strong>in</strong> the Greater Ch<strong>in</strong>a<br />
region s<strong>in</strong>ce 1865.<br />
We have a comprehensive<br />
network across Asia Pacific<br />
with major presences <strong>in</strong> Hong<br />
Kong SAR and ma<strong>in</strong>land Ch<strong>in</strong>a.<br />
Look<strong>in</strong>g further afield to other<br />
major emerg<strong>in</strong>g markets, <strong>HSBC</strong><br />
is well established <strong>in</strong> both the<br />
Middle East and Lat<strong>in</strong> America,<br />
both of which have <strong>in</strong>creas<strong>in</strong>gly<br />
important l<strong>in</strong>ks with the Greater<br />
Ch<strong>in</strong>a region and <strong>Taiwan</strong>.<br />
The purpose of ‘<strong>Do<strong>in</strong>g</strong> Bus<strong>in</strong>ess<br />
<strong>in</strong> <strong>Taiwan</strong>’ is to help you ga<strong>in</strong><br />
valuable <strong>in</strong>sights <strong>in</strong>to the <strong>Taiwan</strong><br />
market and unlock its very<br />
significant potential. The guide<br />
has been co-written by <strong>HSBC</strong><br />
and PricewaterhouseCoopers<br />
(‘PwC’). Like <strong>HSBC</strong>, PwC has<br />
a strong global network and<br />
understand<strong>in</strong>g of the Greater<br />
Ch<strong>in</strong>a region.Together we<br />
possess a wealth of experience<br />
to support your ambitions <strong>in</strong><br />
this market.<br />
On behalf of <strong>HSBC</strong>, I hope that<br />
you f<strong>in</strong>d this guide useful and<br />
that we have a chance to be<br />
your <strong>bus<strong>in</strong>ess</strong> partner <strong>in</strong> <strong>Taiwan</strong><br />
and beyond.<br />
John Li<br />
President & CEO<br />
<strong>HSBC</strong> Bank (<strong>Taiwan</strong>) Limited
8<br />
Introduction<br />
<strong>Do<strong>in</strong>g</strong> Bus<strong>in</strong>ess <strong>in</strong> <strong>Taiwan</strong><br />
<strong>Taiwan</strong> is one of the world’s<br />
trad<strong>in</strong>g powerhouses and offers<br />
one of the most favourable<br />
environments for <strong>in</strong>vestment<br />
<strong>in</strong> Asia.<br />
Industrial Structure<br />
<strong>Taiwan</strong> currently is the 24th<br />
largest economy <strong>in</strong> the world,<br />
accord<strong>in</strong>g to International<br />
Monetary Fund statistics,<br />
and consistently scores very<br />
highly <strong>in</strong> global competitiveness<br />
rank<strong>in</strong>gs by lead<strong>in</strong>g economic<br />
organisations such as the<br />
International Institute for<br />
Management Development<br />
(plac<strong>in</strong>g <strong>Taiwan</strong> 6th among 59<br />
world economies covered<br />
<strong>in</strong> 2011).<br />
S<strong>in</strong>ce the 1950s, <strong>Taiwan</strong><br />
has evolved from an agrarian<br />
economy based on rice and<br />
sugar to one focused on<br />
capital- and technology<strong>in</strong>tensive<br />
<strong>in</strong>dustries, as<br />
well as creative <strong>in</strong>dustries.<br />
Agriculture now constitutes<br />
just 1-2% of gross domestic<br />
product, down from 35% <strong>in</strong><br />
1952, while manufactur<strong>in</strong>g<br />
and services account for<br />
30% and 69% respectively.<br />
<strong>Taiwan</strong> is now one of the<br />
world’s largest manufacturers<br />
of computer-related products,<br />
and has become a lead<strong>in</strong>g<br />
global producer of<br />
semiconductors and liquid<br />
crystal display (LCD) products.<br />
In the late 1980s, fac<strong>in</strong>g ris<strong>in</strong>g<br />
costs, <strong>Taiwan</strong>’s manufactur<strong>in</strong>g<br />
<strong>in</strong>dustries began to move<br />
their production bases<br />
overseas. Initially, most<br />
relocated to countries <strong>in</strong><br />
South East Asia, but after<br />
<strong>Taiwan</strong>’s government began<br />
to ease restrictions on<br />
cross-strait economic ties<br />
<strong>in</strong> the early 1990s, Ch<strong>in</strong>a<br />
became the <strong>in</strong>vestment<br />
location of choice. High-tech<br />
firms have s<strong>in</strong>ce jo<strong>in</strong>ed more<br />
labour-<strong>in</strong>tensive <strong>in</strong>dustries<br />
<strong>in</strong> shift<strong>in</strong>g capacity to Ch<strong>in</strong>a,<br />
encouraged <strong>in</strong> part by the<br />
<strong>Taiwan</strong> government’s gradual<br />
eas<strong>in</strong>g of restrictions on<br />
technology transfers to<br />
the ma<strong>in</strong>land.<br />
Not withstand<strong>in</strong>g the <strong>in</strong>dustrial<br />
migration to Ch<strong>in</strong>a, <strong>Taiwan</strong><br />
rema<strong>in</strong>s an important hub<br />
for high-tech sector activities.<br />
Production of higher-end<br />
goods such as semiconductors<br />
and LCDs has largely rema<strong>in</strong>ed<br />
<strong>in</strong> <strong>Taiwan</strong>, as have local firms’<br />
R&D facilities. The government<br />
has also encouraged<br />
mult<strong>in</strong>ational companies<br />
to establish their regional<br />
R&D centres on the island.<br />
In addition to the high-tech<br />
sector, the <strong>Taiwan</strong> government<br />
has successfully encouraged<br />
the growth of a domestic<br />
petrochemicals <strong>in</strong>dustry.<br />
Other important <strong>in</strong>dustries<br />
<strong>in</strong>clude chemicals, steel, textiles,<br />
plastics and mach<strong>in</strong>ery.<br />
More recently, the<br />
government has been<br />
promot<strong>in</strong>g the development<br />
of six emerg<strong>in</strong>g <strong>in</strong>dustries<br />
(biotechnology, medic<strong>in</strong>e<br />
and health care, culture and<br />
creativity, tourism, green energy<br />
and high-end agriculture) and<br />
four ‘<strong>in</strong>telligent’ <strong>in</strong>dustries<br />
(cloud comput<strong>in</strong>g, smart electric<br />
vehicles, smart green build<strong>in</strong>g<br />
and patent commercialisation),<br />
and offer<strong>in</strong>g new <strong>in</strong>centives<br />
to attract domestic and foreign<br />
private-sector <strong>in</strong>vestment<br />
<strong>in</strong> these target sectors.<br />
International Trade<br />
Foreign trade has been<br />
the eng<strong>in</strong>e of <strong>Taiwan</strong>’s rapid<br />
economic growth s<strong>in</strong>ce the<br />
1960s. The economy rema<strong>in</strong>s<br />
export oriented, so much so<br />
that <strong>Taiwan</strong> depends on an open<br />
world trade regime and rema<strong>in</strong>s<br />
vulnerable to downturns <strong>in</strong><br />
the global economy. In 2010,<br />
<strong>Taiwan</strong> ranked the world’s<br />
18th largest trad<strong>in</strong>g economy,<br />
accord<strong>in</strong>g to the World Trade<br />
Organisation (WTO). <strong>Taiwan</strong><br />
jo<strong>in</strong>ed the WTO membership<br />
on 1 January 2002 under the<br />
title of ‘The Separate Customs<br />
Territory of <strong>Taiwan</strong>, Penghu,<br />
K<strong>in</strong>men and Matsu’) which<br />
further deepened <strong>Taiwan</strong>’s<br />
<strong>in</strong>tegration <strong>in</strong>to the global<br />
economy and opened up its<br />
domestic market to foreign<br />
<strong>in</strong>vestment, products<br />
and services.
10<br />
In January 20 09, <strong>Taiwan</strong><br />
jo<strong>in</strong>ed the WTO’s Government<br />
Procurement Agreement, which<br />
now grants foreign contractors<br />
access to procurement<br />
opportunities, such as the<br />
‘i-<strong>Taiwan</strong> 12 Projects’ – the<br />
‘i’ <strong>in</strong>dicat<strong>in</strong>g an emphasis on<br />
<strong>in</strong>vestment and <strong>in</strong>frastructure –<br />
which the government launched<br />
<strong>in</strong> 2009 to stimulate the island’s<br />
recession-hit economy.<br />
Foreign Investment<br />
<strong>Taiwan</strong> welcomes foreign<br />
direct <strong>in</strong>vestment, except<br />
<strong>in</strong> a limited number of<br />
<strong>in</strong>dustries <strong>in</strong>volv<strong>in</strong>g national<br />
security and environmental<br />
protection. Liberalisation has<br />
reduced the ‘negative’ list for<br />
<strong>in</strong>vestment by foreigners and<br />
overseas Ch<strong>in</strong>ese – which<br />
can be found at www.moeaic.<br />
gov.tw – to less than 1% of<br />
manufactur<strong>in</strong>g categories<br />
and less than 5% of service<br />
<strong>in</strong>dustries. Also, most<br />
foreign ownership limits<br />
have been removed, while<br />
restrictions on Ch<strong>in</strong>ese<br />
<strong>in</strong>vestment <strong>in</strong>to <strong>Taiwan</strong> are<br />
be<strong>in</strong>g gradually eased.<br />
The improvement <strong>in</strong><br />
relations with Ch<strong>in</strong>a,<br />
cont<strong>in</strong>ued deregulation<br />
and streaml<strong>in</strong>ed procedures<br />
for sett<strong>in</strong>g up operations<br />
on the island, along with a<br />
series of tax reforms, have<br />
made <strong>Taiwan</strong> a more attractive<br />
place for <strong>bus<strong>in</strong>ess</strong> <strong>in</strong>vestment.<br />
Its 2010 rank<strong>in</strong>g <strong>in</strong> the World<br />
Bank’s Ease of <strong>Do<strong>in</strong>g</strong> Bus<strong>in</strong>ess<br />
Index jumped to 33rd place among<br />
the 183 territories covered.<br />
The government also offers<br />
various attractive <strong>in</strong>centives to<br />
make <strong>Taiwan</strong> more<br />
<strong>in</strong>vestor-friendly, with<br />
foreign <strong>in</strong>vestors enjoy<strong>in</strong>g<br />
the same rights and privileges<br />
as local <strong>in</strong>vestors. These<br />
<strong>in</strong>centives are generally <strong>in</strong><br />
the form of tax credits aimed<br />
at encourag<strong>in</strong>g <strong>in</strong>vestors<br />
to step up their capital<br />
<strong>in</strong>vestment R&D and human<br />
resource cultivation <strong>in</strong> <strong>Taiwan</strong>.<br />
Most of the tax breaks<br />
were previously offered<br />
under the Statute for Upgrad<strong>in</strong>g<br />
Industries, which expired at<br />
the end of 2009. This law has<br />
s<strong>in</strong>ce been replaced by a new<br />
Statute for Industrial Innovation,<br />
which reta<strong>in</strong>s tax breaks for<br />
<strong>in</strong>vestments <strong>in</strong> R&D and<br />
<strong>in</strong>novation. Additional <strong>in</strong>centives<br />
are available under the Statute<br />
for Investment by Foreign<br />
Nationals/Overseas Ch<strong>in</strong>ese,<br />
the Bus<strong>in</strong>ess Mergers and<br />
Acquisitions Act, the F<strong>in</strong>ancial<br />
Institutions Merger Act and<br />
other laws and regulations.<br />
Pr<strong>in</strong>cipal<br />
Government Agencies<br />
For companies look<strong>in</strong>g to do<br />
<strong>bus<strong>in</strong>ess</strong> or <strong>in</strong>vest <strong>in</strong> <strong>Taiwan</strong>,<br />
the ma<strong>in</strong> regulatory agencies<br />
and their areas of jurisdiction<br />
are as follows:<br />
M<strong>in</strong>istry of Economic Affairs<br />
The MOEA is responsible<br />
for issu<strong>in</strong>g <strong>bus<strong>in</strong>ess</strong> laws<br />
and regulations. Four of its<br />
most important agencies for<br />
<strong>in</strong>vestors are the Department<br />
of Commerce, Department<br />
of Investment Services, the<br />
Investment Commission, and the<br />
Industrial Development Bureau:<br />
• Department of Commerce<br />
reviews applications for<br />
company registration, <strong>in</strong>clud<strong>in</strong>g<br />
the establishment of branch<br />
offices and subsidiaries of<br />
foreign-owned entities.<br />
• Department of Investment<br />
Services promotes and<br />
facilitates foreign <strong>in</strong>vestment<br />
<strong>in</strong> <strong>Taiwan</strong>, and also acts as a<br />
coord<strong>in</strong>ator between <strong>in</strong>vestors<br />
and all agencies <strong>in</strong>volved <strong>in</strong><br />
the <strong>in</strong>vestment process.<br />
• Investment Commission<br />
is responsible for matters<br />
relat<strong>in</strong>g to the screen<strong>in</strong>g and<br />
approval of <strong>in</strong>ward <strong>in</strong>vestment<br />
and technical cooperation<br />
by foreigners and overseas<br />
Ch<strong>in</strong>ese, as well as outward<br />
<strong>in</strong>vestment from <strong>Taiwan</strong>.<br />
• Industrial Development<br />
Bureau is responsible for<br />
promot<strong>in</strong>g <strong>in</strong>dustry upgrad<strong>in</strong>g<br />
and provid<strong>in</strong>g comprehensive<br />
assistance to <strong>in</strong>vestors to<br />
overcome <strong>in</strong>vestment obstacles.<br />
Bureau of Foreign Trade<br />
The BOFT is an agency of the<br />
MOEA charged with execut<strong>in</strong>g<br />
trade policies and promot<strong>in</strong>g<br />
trade. It is responsible for<br />
regulations cover<strong>in</strong>g all import<br />
and export activities, and for<br />
supervis<strong>in</strong>g the import and<br />
export of controlled items.<br />
<strong>Taiwan</strong> Intellectual<br />
Property Office<br />
The TIPO is an agency<br />
of the MOEA and deals<br />
with patent, trademark and<br />
copyright matters, as well<br />
as the protection of<br />
<strong>in</strong>tellectual property rights.<br />
F<strong>in</strong>ancial Supervisory<br />
Commission<br />
The FSC is an <strong>in</strong>dependent,<br />
cab<strong>in</strong>et-level authority charged<br />
with the supervision and<br />
exam<strong>in</strong>ation of the bank<strong>in</strong>g,<br />
securities and <strong>in</strong>surance<br />
<strong>in</strong>dustries, as well as f<strong>in</strong>ancial<br />
hold<strong>in</strong>g companies. The FSC<br />
comprises four bureaus:<br />
Bank<strong>in</strong>g, Securities and<br />
Futures, Insurance<br />
and F<strong>in</strong>ancial Exam<strong>in</strong>ation.<br />
M<strong>in</strong>istry of F<strong>in</strong>ance<br />
The MOF is responsible<br />
for the adm<strong>in</strong>istration of<br />
taxation, customs and the<br />
national treasury, as well<br />
as the management of state<br />
property. The Taxation Agency<br />
is an adm<strong>in</strong>istrative authority<br />
directly subord<strong>in</strong>ate to the<br />
MOF and is <strong>in</strong> charge of<br />
taxation matters, <strong>in</strong>clud<strong>in</strong>g<br />
tax audit<strong>in</strong>g. Five tax collection<br />
agencies are also under the<br />
supervision of the MOF.<br />
Fair Trade Commission<br />
The FTC is <strong>in</strong> charge of<br />
competition policy and fair<br />
trade law. It also <strong>in</strong>vestigates<br />
and handles various activities<br />
that may impede competition,<br />
such as monopolies, mergers,<br />
and restra<strong>in</strong>ts on competition<br />
or unfair trade practices.<br />
Food and Drug<br />
Adm<strong>in</strong>istration<br />
<strong>Taiwan</strong>’s FDA was formally<br />
<strong>in</strong>augurated on 1 January 2010<br />
and <strong>in</strong>tegrates four exist<strong>in</strong>g<br />
agencies under the cab<strong>in</strong>et-<br />
level Department of Health.<br />
The FDA’s responsibilities<br />
cover the licens<strong>in</strong>g and<br />
<strong>in</strong>spection of food and<br />
pharmaceutical products<br />
<strong>in</strong> <strong>Taiwan</strong>.<br />
Environmental<br />
Protection Adm<strong>in</strong>istration<br />
The EPA is the agency<br />
responsible for protect<strong>in</strong>g<br />
and conserv<strong>in</strong>g the natural<br />
environment <strong>in</strong> <strong>Taiwan</strong>.<br />
It sets pollution control<br />
regulations and carries<br />
out various programmes<br />
to monitor and protect<br />
the environment.<br />
Council for Labour Affairs<br />
The CLA is <strong>in</strong> charge of<br />
adm<strong>in</strong>ister<strong>in</strong>g labour policies<br />
and regulations cover<strong>in</strong>g labour<br />
rights, labour security, labour<br />
<strong>in</strong>surance, work quality, and<br />
so on. It is also responsible<br />
for issu<strong>in</strong>g work permits for<br />
foreign professionals.
12<br />
Conduct<strong>in</strong>g Bus<strong>in</strong>ess <strong>in</strong> <strong>Taiwan</strong><br />
Forms of Bus<strong>in</strong>ess<br />
Foreign <strong>in</strong>vestors may<br />
choose to establish a<br />
<strong>bus<strong>in</strong>ess</strong> presence <strong>in</strong> <strong>Taiwan</strong><br />
<strong>in</strong> the form of a company,<br />
branch office, representative<br />
office, job-site office,<br />
partnership or sole<br />
proprietorship.<br />
Company (Subsidiary)<br />
A company is an <strong>in</strong>corporated<br />
entity with a legal status<br />
separate and dist<strong>in</strong>ct from its<br />
owners. <strong>Taiwan</strong>’s Company<br />
Law provides for four<br />
organisational forms:<br />
• Unlimited company:<br />
A company organised by<br />
two or more shareholders<br />
who bear unlimited jo<strong>in</strong>t<br />
and several liability for<br />
the discharge of the<br />
company’s obligations;<br />
• Unlimited company with<br />
limited liability shareholders:<br />
A company organised by<br />
one or more shareholders<br />
of limited liability. Shareholders<br />
with unlimited liability bear<br />
unlimited jo<strong>in</strong>t and several<br />
liabilities for the obligations<br />
of the company, while<br />
shareholders with limited<br />
liability may be held liable<br />
up to the amount of capital<br />
each has subscribed;<br />
• Limited company: A company<br />
organised by one or more<br />
shareholders, with the liability<br />
of shareholders limited to the<br />
respective amounts of capital<br />
they have subscribed; and<br />
• Company limited by shares:<br />
A company organised by two<br />
or more shareholders, or one<br />
governmental or corporate<br />
shareholder, with the liability<br />
of shareholders limited to the<br />
amount of share capital each<br />
has subscribed.<br />
Except <strong>in</strong> certa<strong>in</strong> restricted<br />
<strong>in</strong>dustries, foreign <strong>in</strong>vestors<br />
are generally allowed to set<br />
up companies <strong>in</strong> any of the<br />
above classes after obta<strong>in</strong><strong>in</strong>g<br />
approval from the M<strong>in</strong>istry of<br />
Economic Affairs’ Investment<br />
Commission, (MOEAIC).<br />
A foreign company that<br />
receives approval from the<br />
MOEAIC is called a Foreign<br />
Investment Approved<br />
(FIA) company.<br />
Branch Office<br />
A foreign company may<br />
open a branch office to<br />
do <strong>bus<strong>in</strong>ess</strong> <strong>in</strong> <strong>Taiwan</strong> after<br />
obta<strong>in</strong><strong>in</strong>g recognition from<br />
the M<strong>in</strong>istry of Economic<br />
Affairs (MOEA) and complet<strong>in</strong>g<br />
the procedures for branch<br />
office registration. To receive<br />
recognition, a foreign company<br />
must have its <strong>in</strong>corporation<br />
registered <strong>in</strong> its own country<br />
and conduct its <strong>bus<strong>in</strong>ess</strong><br />
operations there. There is<br />
no m<strong>in</strong>imum work<strong>in</strong>g capital<br />
requirement if the branch’s<br />
activities relate to <strong>in</strong>ternational<br />
trade, but a foreign company’s<br />
head office must remit<br />
sufficient funds for the operation<br />
of the branch. It must also<br />
appo<strong>in</strong>t a litigious and nonlitigious<br />
representative and<br />
a branch manager, who may<br />
be the same person and may<br />
be either a <strong>Taiwan</strong> citizen<br />
or a foreign national.<br />
Representative Office<br />
The option of a representative<br />
office is available to foreign<br />
companies that do not <strong>in</strong>tend to<br />
transact <strong>bus<strong>in</strong>ess</strong> <strong>in</strong> <strong>Taiwan</strong>, but<br />
<strong>in</strong>tend to conduct limited acts<br />
of a legal nature relat<strong>in</strong>g to their<br />
<strong>bus<strong>in</strong>ess</strong>. If a foreign company<br />
needs its representative to<br />
reside <strong>in</strong> <strong>Taiwan</strong> most of the<br />
time, it can apply to the MOEA<br />
to establish a representative<br />
office. A representative acts<br />
as the company’s legal agent<br />
for such matters as obta<strong>in</strong><strong>in</strong>g<br />
quotations, participate <strong>in</strong> tenders<br />
and conclud<strong>in</strong>g procurement<br />
contracts.<br />
There is no capital requirement<br />
for representative office, but<br />
only <strong>bus<strong>in</strong>ess</strong>es recognised by<br />
the MOEA as legally established<br />
companies <strong>in</strong> a foreign country<br />
may set up a representative<br />
office <strong>in</strong> <strong>Taiwan</strong>.<br />
Job-site Office<br />
A foreign enterprise<br />
<strong>in</strong>tend<strong>in</strong>g to contract long-term<br />
construction work <strong>in</strong> <strong>Taiwan</strong><br />
may f<strong>in</strong>d it preferable to set<br />
up a local job-site office. A<br />
job-site office need only apply<br />
for <strong>bus<strong>in</strong>ess</strong> registration, not<br />
corporate registration, and is<br />
allowed to make purchases<br />
and issue government uniform<br />
<strong>in</strong>voices (GUIs). However,<br />
it has the usual tax-withhold<strong>in</strong>g<br />
obligation and must pay<br />
<strong>bus<strong>in</strong>ess</strong> tax (i.e., value-added<br />
tax, or VAT) and <strong>in</strong>come tax.<br />
Partnerships and<br />
Proprietorships<br />
In accordance with the Statute<br />
for Investment by Foreign<br />
Nationals (SIFN), a foreign<br />
<strong>in</strong>dividual may <strong>in</strong>vest <strong>in</strong><br />
<strong>Taiwan</strong> by sett<strong>in</strong>g up a general<br />
partnership with one or more<br />
other <strong>in</strong>dividuals. All partners<br />
are jo<strong>in</strong>tly and severally<br />
liable for the obligations of<br />
the partnership. There is no<br />
m<strong>in</strong>imum capital requirement<br />
for partnerships and<br />
sole proprietorships.
14<br />
Taxation <strong>in</strong> <strong>Taiwan</strong><br />
Corporation Tax<br />
Scope and Rates<br />
<strong>Taiwan</strong>’s <strong>in</strong>come tax system<br />
consists of <strong>in</strong>dividual <strong>in</strong>come<br />
tax and profit-seek<strong>in</strong>g<br />
enterprise <strong>in</strong>come tax<br />
(corporate <strong>in</strong>come tax).<br />
The term ‘profit-seek<strong>in</strong>g<br />
enterprise’ refers to any entity<br />
that engages <strong>in</strong> profit-seek<strong>in</strong>g<br />
activities, <strong>in</strong>clud<strong>in</strong>g companies,<br />
sole proprietorships,<br />
partnerships and other forms<br />
of <strong>bus<strong>in</strong>ess</strong> organisations.<br />
Any company operat<strong>in</strong>g<br />
with<strong>in</strong> the territory of <strong>Taiwan</strong><br />
must pay <strong>in</strong>come tax, except<br />
where exemptions are<br />
provided. A company’s tax<br />
status determ<strong>in</strong>es how and<br />
at what rate the <strong>in</strong>come tax<br />
is levied. The tax status of<br />
corporate taxpayers is divided<br />
<strong>in</strong>to three categories:<br />
• A resident enterprise that<br />
has its head office located<br />
<strong>in</strong> <strong>Taiwan</strong> (<strong>in</strong>clud<strong>in</strong>g locally<br />
<strong>in</strong>corporated subsidiaries<br />
of foreign companies) –<br />
subject to <strong>in</strong>come tax<br />
on its worldwide <strong>in</strong>come.<br />
• A non-resident foreign<br />
enterprise with its head<br />
office outside <strong>Taiwan</strong><br />
but with a permanent<br />
establishment (PE) <strong>in</strong> <strong>Taiwan</strong><br />
(such as a branch office) –<br />
subject to <strong>in</strong>come tax only<br />
on its <strong>Taiwan</strong>-source <strong>in</strong>come.<br />
• A non-resident foreign enterprise<br />
with no PE <strong>in</strong> <strong>Taiwan</strong> – subject<br />
to withhold<strong>in</strong>g tax at source.<br />
Under <strong>Taiwan</strong> tax law, the PE<br />
concept refers to a fixed place<br />
of <strong>bus<strong>in</strong>ess</strong> or a <strong>bus<strong>in</strong>ess</strong> agent.<br />
Corporate Income Tax Rates<br />
Taxable<br />
Income<br />
Up to<br />
NT$120,000<br />
NT$120,001<br />
and over<br />
0%<br />
17%<br />
Tax<br />
Rate<br />
On 28 May 2010, <strong>Taiwan</strong>’s<br />
Legislative Yuan (parliament)<br />
amended the Income Tax<br />
Act to reduce the corporate<br />
<strong>in</strong>come tax rate to 17% from<br />
20%, hav<strong>in</strong>g previously cut<br />
the rate from 25% a year earlier.<br />
The reduced tax rate applies<br />
to the tax year 2010 and onward.<br />
The additional cut was made<br />
<strong>in</strong> response to the elim<strong>in</strong>ation<br />
of several tax <strong>in</strong>centives under<br />
the Statute for Industrial<br />
Innovation, which was ratified<br />
by the Legislative Yuan on<br />
16 April 2010.<br />
In addition to normal tax<br />
calculations, <strong>Taiwan</strong> resident<br />
companies and foreign<br />
companies with a PE <strong>in</strong> <strong>Taiwan</strong><br />
are subject to a separate<br />
alternative m<strong>in</strong>imum tax<br />
calculation under the Income<br />
Basic Tax Act.
16<br />
Taxable Corporate Income<br />
Taxable Income<br />
The taxable <strong>in</strong>come of a<br />
profit-seek<strong>in</strong>g enterprise is<br />
net <strong>in</strong>come, which is def<strong>in</strong>ed as<br />
gross annual <strong>in</strong>come after the<br />
deduction of costs, expenses,<br />
losses and taxes. Except for<br />
certa<strong>in</strong> exempt items, <strong>in</strong>come<br />
from all sources is subject to<br />
corporate <strong>in</strong>come tax. Article<br />
8 of the Income Tax Act and<br />
related guidel<strong>in</strong>es def<strong>in</strong>e the<br />
types of <strong>in</strong>come that should<br />
be regarded as <strong>Taiwan</strong>-sourced.<br />
To determ<strong>in</strong>e a company’s<br />
taxable <strong>in</strong>come, its account<strong>in</strong>g<br />
<strong>in</strong>come is adjusted by tak<strong>in</strong>g<br />
<strong>in</strong>to account exempt <strong>in</strong>come,<br />
non-deductible expenses and<br />
allowable provisions, and losses<br />
carried forward.<br />
Exempt Income<br />
Corporate taxpayers <strong>in</strong><br />
<strong>Taiwan</strong> are subject to a s<strong>in</strong>gle<br />
assessment on all <strong>in</strong>come<br />
received. Exceptions to this<br />
rule <strong>in</strong>clude the follow<strong>in</strong>g<br />
<strong>in</strong>come items, as detailed<br />
<strong>in</strong> the Income Tax Act and<br />
related laws:<br />
• Proceeds from land sales;<br />
• Income from securities<br />
and futures transactions;<br />
• Dividends received by<br />
a <strong>Taiwan</strong> company from<br />
another local company;<br />
• Royalties paid to a foreign<br />
company for the use of its<br />
patents, trademarks or<br />
technical know-how <strong>in</strong> order<br />
to <strong>in</strong>troduce new production<br />
technology or products,<br />
improve product quality,<br />
or reduce production costs,<br />
subject to special approval;<br />
• Certa<strong>in</strong> technical service<br />
fees received by foreign<br />
entities, subject to<br />
government approval; and<br />
• Bus<strong>in</strong>ess <strong>in</strong>come obta<strong>in</strong>ed<br />
with<strong>in</strong> <strong>Taiwan</strong> by a foreign<br />
company engaged <strong>in</strong><br />
<strong>in</strong>ternational transportation,<br />
provided reciprocal treatment<br />
is granted to <strong>Taiwan</strong><br />
transportation enterprises.<br />
Deductions<br />
In general, expenses or losses<br />
<strong>in</strong>curred <strong>in</strong> the normal course<br />
of <strong>bus<strong>in</strong>ess</strong> are tax deductible,<br />
except where these are not<br />
substantiated by adequate and<br />
acceptable documents.<br />
Non-deductible Items<br />
Expenses and losses unrelated<br />
to the <strong>bus<strong>in</strong>ess</strong> operations of<br />
a company are not tax deductible.<br />
Unrealised expenses and<br />
losses may not be claimed<br />
as tax deductible items<br />
except <strong>in</strong> the case of employee<br />
retirement funds, labour pension<br />
reserves, allowances for doubtful<br />
accounts and provisions for<br />
foreign <strong>in</strong>vestment losses, as<br />
specified <strong>in</strong> the Income Tax Act<br />
and other related laws, or where<br />
specially approved by the MOF.<br />
In order to qualify for tax<br />
deductibility, provisions<br />
and allowances must be<br />
recorded on the books<br />
based on relevant laws;<br />
that is, these provisions<br />
cannot be made off the<br />
books for tax purposes only.<br />
Th<strong>in</strong> Capitalisation<br />
In January 2011, <strong>Taiwan</strong><br />
<strong>in</strong>troduced a new th<strong>in</strong>k<br />
capitalisation rule. From 2011<br />
onwards, deductible <strong>in</strong>terest<br />
on <strong>in</strong>ter-company loans is<br />
capped at a debt-to-equity ratio<br />
of 3:1 as currently prescribed<br />
by the MOF.<br />
The new rule generally<br />
applies to profit-seek<strong>in</strong>g<br />
enterprises, except banks,<br />
credit cooperatives, f<strong>in</strong>ancial<br />
hold<strong>in</strong>g companies,<br />
bills f<strong>in</strong>ance companies,<br />
<strong>in</strong>surance companies and<br />
securities companies.<br />
Capital Ga<strong>in</strong>s<br />
<strong>Taiwan</strong> does not impose<br />
a separate capital ga<strong>in</strong>s tax,<br />
as all ga<strong>in</strong>s, unless specifically<br />
exempt by law, are assessed<br />
as ord<strong>in</strong>ary <strong>in</strong>come and subject<br />
to <strong>in</strong>come tax. Ga<strong>in</strong>s from<br />
the sale of land and securities<br />
and futures transactions<br />
are exempt from <strong>in</strong>come<br />
tax, while losses therefrom<br />
are not tax deductible.<br />
Note however, that <strong>Taiwan</strong><br />
resident companies and foreign<br />
companies with a PE <strong>in</strong> <strong>Taiwan</strong><br />
are required to <strong>in</strong>clude any<br />
ga<strong>in</strong>s aris<strong>in</strong>g from securities<br />
and futures transactions <strong>in</strong><br />
their alternative m<strong>in</strong>imum tax<br />
calculation <strong>in</strong> accordance with<br />
the provisions of the Income<br />
Basic Tax Act.<br />
Ga<strong>in</strong>s from land sales are<br />
subject to land value <strong>in</strong>crement<br />
tax at rates rang<strong>in</strong>g from<br />
20% to 40%, while proceeds<br />
from securities and futures<br />
transactions are subject<br />
to securities transaction<br />
tax and futures transaction<br />
tax at rates of 0.1%-0.3%<br />
and 0.0000125%-0.6%,<br />
respectively. Start<strong>in</strong>g from<br />
1 June 2011 onwards, 15%<br />
or 10% of luxury tax will apply<br />
on real estate properties<br />
purchased not for self-use and<br />
sold with<strong>in</strong> one or two years<br />
period. Luxury tax is levied on<br />
the actual sales price (<strong>in</strong>clud<strong>in</strong>g<br />
<strong>bus<strong>in</strong>ess</strong> tax (VAT)) of real<br />
estate. Exemption on luxury tax<br />
applies on certa<strong>in</strong> conditions<br />
(e.g. non-voluntary transfer,<br />
<strong>in</strong>heritance, gift, etc).<br />
Dividends<br />
<strong>Taiwan</strong> operates an imputation<br />
tax system to avoid double<br />
taxation of dividends by<br />
allow<strong>in</strong>g shareholders to<br />
claim credits for taxes paid<br />
on dividends received at the<br />
corporate and <strong>in</strong>dividual levels.<br />
Treatment of Dividends<br />
For <strong>Taiwan</strong> corporate<br />
shareholders, dividends<br />
received from local <strong>in</strong>vestee<br />
companies are not <strong>in</strong>cluded<br />
<strong>in</strong> their taxable <strong>in</strong>come.<br />
However, they must record<br />
any imputation tax credit<br />
distributed by other <strong>Taiwan</strong><br />
companies along with the<br />
dividends <strong>in</strong> a shareholderimputed<br />
credit account.<br />
Any dividends paid by<br />
such a corporate shareholder<br />
to its resident <strong>in</strong>dividual<br />
shareholders would, <strong>in</strong> turn,<br />
carry the underly<strong>in</strong>g tax credit<br />
for corporate tax paid by<br />
its subsidiary.<br />
For resident <strong>in</strong>dividual<br />
shareholders, dividend<br />
<strong>in</strong>come is not subject to<br />
withhold<strong>in</strong>g tax. The gross<br />
dividend received is <strong>in</strong>cluded<br />
<strong>in</strong> an <strong>in</strong>dividual’s taxable<br />
<strong>in</strong>come, and the associated<br />
imputation tax credit (for the<br />
underly<strong>in</strong>g corporate tax paid<br />
by the company distribut<strong>in</strong>g<br />
the dividend) can be used to<br />
offset their <strong>in</strong>dividual <strong>in</strong>come<br />
tax liability. Any excess<br />
credit is refundable to<br />
<strong>in</strong>dividual shareholders.<br />
For foreign shareholders,<br />
cash or share dividends<br />
distributed by a resident<br />
company <strong>in</strong> <strong>Taiwan</strong> are subject<br />
to 20% withhold<strong>in</strong>g tax if no tax<br />
treaty protection is available.<br />
Undistributed Earn<strong>in</strong>gs<br />
A 10% profit retention surtax<br />
may be imposed on any part<br />
of a resident company’s current<br />
year profit (after taxes and<br />
statutory reserves) that<br />
is not distributed as dividends<br />
<strong>in</strong> the follow<strong>in</strong>g year. This<br />
rule also applies to the<br />
<strong>Taiwan</strong> subsidiaries of foreign<br />
companies.<br />
The profit retention surtax paid<br />
by the company may be used<br />
by a resident <strong>in</strong>dividual<br />
shareholder to offset the<br />
shareholder’s tax liabilities<br />
once the company distributes<br />
dividends from the<br />
correspond<strong>in</strong>g undistributed<br />
earn<strong>in</strong>gs <strong>in</strong> subsequent years.<br />
Please note that the credit<br />
for the profit retention surtax<br />
aga<strong>in</strong>st the dividend withhold<strong>in</strong>g<br />
tax is not a dollar-to-dollar<br />
credit but calculated based<br />
on a prescribed formula.
18<br />
Withhold<strong>in</strong>g Taxes<br />
A foreign company with no<br />
PE <strong>in</strong> <strong>Taiwan</strong> is subject to<br />
withhold<strong>in</strong>g tax at source<br />
on its <strong>Taiwan</strong>-source <strong>in</strong>come.<br />
Withhold<strong>in</strong>g tax rates on<br />
dividends, <strong>in</strong>terest and royalties<br />
may be reduced if the recipient<br />
is a tax resident of a tax treaty<br />
country and the relevant treaty<br />
provides for a reduced rate.<br />
A <strong>Taiwan</strong> branch of a foreign<br />
company may remit after-tax<br />
profits to its head office<br />
without further <strong>Taiwan</strong> tax.<br />
Withhold<strong>in</strong>g taxes on wages,<br />
commissions, rentals, <strong>in</strong>terest<br />
paid to non-f<strong>in</strong>ancial <strong>in</strong>stitutions,<br />
royalties, cash awards and<br />
professional fees must be paid<br />
to the tax authority with<strong>in</strong> ten<br />
days after the close of the month<br />
<strong>in</strong> which the payment was made.<br />
The withholders should prepare<br />
withhold<strong>in</strong>g certificates and<br />
submit them to the tax collection<br />
office for verification by the end<br />
of January of the follow<strong>in</strong>g year.<br />
Accord<strong>in</strong>g to MOF guidel<strong>in</strong>es<br />
issued <strong>in</strong> September 2009,<br />
a foreign enterprise with no<br />
PE <strong>in</strong> <strong>Taiwan</strong> is subject to<br />
withhold<strong>in</strong>g tax if it receives<br />
<strong>Taiwan</strong>-source <strong>in</strong>come from<br />
service fees, rental <strong>in</strong>come,<br />
<strong>bus<strong>in</strong>ess</strong> profits, awards/<br />
grants and other <strong>in</strong>come.<br />
However, the enterprise may<br />
appo<strong>in</strong>t a tax agent <strong>in</strong> <strong>Taiwan</strong><br />
to claim a tax deduction for<br />
costs and expenses <strong>in</strong>curred<br />
(supported by evidentiary<br />
Type of<br />
Income<br />
Resident<br />
Individuals<br />
(%)<br />
Resident<br />
Enterprises<br />
(%)<br />
Dividends N/A N/A 20<br />
Commissions 10 10 1<br />
Rentals 10 10 1<br />
Interest 10 10 15,20 2<br />
Royalties 10 10 1<br />
Technical service<br />
fees<br />
Prizes/Awards 6<br />
Professional<br />
Fees<br />
documents), and it may apply<br />
for a tax refund with<strong>in</strong> five years<br />
from the payment date.<br />
Alternative M<strong>in</strong>imum Tax<br />
In addition to normal tax<br />
calculations under the Income<br />
Tax Act, <strong>Taiwan</strong> imposes a<br />
so called alternative m<strong>in</strong>imum<br />
tax (AMT) under the Income<br />
Basic Tax Act, effective from<br />
1 January 2006. There are<br />
two AMT systems, one for<br />
companies and one<br />
for <strong>in</strong>dividuals.<br />
The AMT applies to all <strong>Taiwan</strong><br />
resident companies, as well<br />
as foreign companies with<br />
a PE <strong>in</strong> <strong>Taiwan</strong>, if they earn<br />
certa<strong>in</strong> <strong>in</strong>come that is tax<br />
exempt or enjoy certa<strong>in</strong> tax<br />
<strong>in</strong>centives, or if their annual<br />
basic <strong>in</strong>come (that is, <strong>in</strong>come<br />
subject to AMT) exceeds<br />
NT$2 million.<br />
Non-resident<br />
<strong>in</strong>dividuals and<br />
enterprises (%)<br />
20<br />
20<br />
0,20 3<br />
10 N/A 3,20 4,5<br />
10, 20 10 20<br />
10 N/A 20<br />
The follow<strong>in</strong>g are not<br />
subject to AMT:<br />
• Sole proprietors<br />
and partnerships;<br />
• Non-profit organisations;<br />
• Government-owned<br />
enterprises;<br />
• Enterprises with no PE<br />
<strong>in</strong> <strong>Taiwan</strong>; and<br />
• Bus<strong>in</strong>esses <strong>in</strong> liquidation<br />
or declared <strong>in</strong>solvent.<br />
If the regular taxable <strong>in</strong>come<br />
is greater than the AMT taxable<br />
<strong>in</strong>come, no special action is<br />
required. If the AMT taxable<br />
<strong>in</strong>come is greater than the<br />
regular taxable <strong>in</strong>come,<br />
taxpayers have to calculate<br />
and pay AMT based on the<br />
follow<strong>in</strong>g formulae:<br />
• Income subject to AMT<br />
= Regular taxable <strong>in</strong>come<br />
+ add-back items;<br />
• AMT = (Income subject to<br />
AMT – NT$2 million) x 10%.<br />
Tonnage Tax System<br />
In January 2011, <strong>Taiwan</strong><br />
<strong>in</strong>troduced a new tonnage tax<br />
regime. From 2011 onwards, a<br />
qualify<strong>in</strong>g enterprise engaged<br />
<strong>in</strong> maritime transportation<br />
hav<strong>in</strong>g its head office <strong>in</strong><br />
<strong>Taiwan</strong> may apply to re-base<br />
the taxation of their maritime<br />
transportation <strong>in</strong>come from the<br />
regular <strong>in</strong>come tax system to a<br />
lump sum tax calculated on the<br />
net tonnage of their fleet.<br />
If the qualify<strong>in</strong>g enterprise<br />
has <strong>in</strong>come other than<br />
<strong>in</strong>come derived from maritime<br />
transportation, such <strong>in</strong>come<br />
will still be taxed pursuant<br />
to the relevant rules of the<br />
Income Tax Act.<br />
Tax Adm<strong>in</strong>istration<br />
The tax year <strong>in</strong> <strong>Taiwan</strong> runs<br />
from 1 January to 31<br />
December; companies must<br />
obta<strong>in</strong> prior approval to adopt<br />
a fiscal year other than the<br />
calendar year. Tax payments<br />
are filed on a self-<br />
assessment basis.<br />
All <strong>Taiwan</strong> resident companies,<br />
as well as foreign companies<br />
with a PE <strong>in</strong> <strong>Taiwan</strong>, must<br />
file annual returns with the<br />
tax authority no later than five<br />
months after the end of the<br />
tax year. Penalties are imposed<br />
for late fil<strong>in</strong>g and failure to file<br />
a return, and <strong>in</strong>terest is charged<br />
on delayed payments.<br />
Tax Returns<br />
Corporate taxpayers must file<br />
returns us<strong>in</strong>g one of the<br />
follow<strong>in</strong>g prescribed forms:<br />
• Ord<strong>in</strong>ary return – used by all<br />
types of profit-seek<strong>in</strong>g<br />
enterprises; or<br />
• Blue return – used by<br />
enterprises with good fil<strong>in</strong>g<br />
records, subject to prior<br />
approval.<br />
Group companies qualify<strong>in</strong>g<br />
under the Bus<strong>in</strong>ess Mergers<br />
& Acquisitions Act, and<br />
f<strong>in</strong>ancial hold<strong>in</strong>g companies<br />
as def<strong>in</strong>ed by the F<strong>in</strong>ancial<br />
Hold<strong>in</strong>g Company Act, can<br />
file a comb<strong>in</strong>ed return for<br />
the parent and its first tier<br />
subsidiaries. Consolidated<br />
returns are not permitted<br />
for other enterprises.<br />
Consequently, the losses of<br />
one affiliate cannot be used<br />
to offset the profits of another.<br />
As a general rule, losses<br />
<strong>in</strong>curred by a profit-seek<strong>in</strong>g<br />
enterprise <strong>in</strong> an account<strong>in</strong>g<br />
year may not be carried<br />
forward. However, companies<br />
which keep a complete set of<br />
account<strong>in</strong>g books and records,<br />
use blue returns, or have their<br />
1. Commissions, rentals and royalties<br />
received by resident enterprises<br />
that issue unified <strong>in</strong>voices are<br />
exempt from withhold<strong>in</strong>g tax.<br />
2. For non-resident enterprises, a 15%<br />
withhold<strong>in</strong>g tax applies to <strong>in</strong>terest<br />
<strong>in</strong>come derived from short-term<br />
bills, securitised certificates, corporate<br />
bonds, government bonds or f<strong>in</strong>ancial<br />
debentures, as well as <strong>in</strong>terest<br />
derived from repurchase transactions<br />
<strong>in</strong>volv<strong>in</strong>g these bonds or certificates.<br />
The rate <strong>in</strong> all other cases is 20%,<br />
unless reduced under a tax treaty.<br />
3. Royalties received by foreign<br />
enterprises with IPs registered <strong>in</strong><br />
<strong>Taiwan</strong> that are specially approved<br />
<strong>in</strong> advance by the government are<br />
exempt from <strong>in</strong>come tax.<br />
4. A 3% withhold<strong>in</strong>g tax rule may<br />
be applicable if approved by the<br />
tax authority.<br />
5. Technical service fees received<br />
by foreign enterprises <strong>in</strong> relation<br />
to the construction of power plants<br />
for power generat<strong>in</strong>g companies,<br />
and approved by the government<br />
are exempt from <strong>in</strong>come tax.<br />
6. For prizes or payment from<br />
contests and games won by<br />
chance, the withhold<strong>in</strong>g tax rate<br />
is 10% for resident <strong>in</strong>dividuals and<br />
enterprises and 20% for nonresident<br />
<strong>in</strong>dividuals and enterprises.<br />
However, cash awards less than<br />
NT$2,000 from lottery tickets<br />
issued by the government are<br />
not subject to withhold<strong>in</strong>g tax.<br />
Whereas, cash awards more than<br />
NT$2,000 from lottery tickets issued<br />
by the government are subject to<br />
20% withhold<strong>in</strong>g tax. This applies<br />
regardless of whether resident<br />
or non-resident <strong>in</strong>dividuals and<br />
enterprises are <strong>in</strong>volved.<br />
.
eturns exam<strong>in</strong>ed and certified<br />
by a certified public accountant<br />
(CPA), may carry losses<br />
forward for a period of up<br />
to 10 years. Losses cannot<br />
be carried back.<br />
Certification<br />
Submission of audited f<strong>in</strong>ancial<br />
statements with tax returns is<br />
neither required nor customary<br />
That said, certa<strong>in</strong> enterprises<br />
must have their <strong>in</strong>come tax<br />
returns exam<strong>in</strong>ed and certified<br />
by a qualified CPA, <strong>in</strong>clud<strong>in</strong>g:<br />
• Banks, credit cooperatives,<br />
<strong>in</strong>surance companies,<br />
<strong>in</strong>vestment trust companies,<br />
short-term bill and f<strong>in</strong>ance<br />
companies, capital leas<strong>in</strong>g<br />
companies, and companies<br />
engaged <strong>in</strong> securities<br />
and futures trad<strong>in</strong>g;<br />
• Public companies;<br />
• Companies that have received<br />
approval for corporate <strong>in</strong>come<br />
tax exemption <strong>in</strong> accordance<br />
with the Statute for<br />
Encouragement of Investment<br />
and other relevant laws, and<br />
have annual net sales and<br />
non-operat<strong>in</strong>g <strong>in</strong>come<br />
<strong>in</strong> excess of NT$50 million;<br />
• Companies that have filed<br />
a consolidated <strong>in</strong>come tax<br />
return <strong>in</strong> accordance with<br />
the Bus<strong>in</strong>ess Mergers and<br />
Acquisitions Act or the F<strong>in</strong>ancial<br />
Hold<strong>in</strong>g Company Act; and<br />
• Companies other than those<br />
listed above whose annual net<br />
sales and non-operat<strong>in</strong>g <strong>in</strong>come<br />
are <strong>in</strong> excess of NT$100 million.<br />
Payment<br />
Tax is paid on a selfassessment<br />
basis <strong>in</strong> two<br />
<strong>in</strong>stalments. A company<br />
must pay provisional <strong>in</strong>come<br />
tax between 1 and 30<br />
September equal to 50% of<br />
the tax liability declared for<br />
the previous year. However,<br />
if the taxpayer meets certa<strong>in</strong><br />
requirements, it can opt to pay<br />
the provisional tax based on its<br />
taxable <strong>in</strong>come for the first six<br />
months of the current tax year.<br />
The second payment is made<br />
when fil<strong>in</strong>g the annual return.<br />
The return is then reviewed<br />
by the tax authority and a f<strong>in</strong>al<br />
assessment is issued.<br />
Penalties are imposed for late<br />
fil<strong>in</strong>g and failure to file a return.<br />
The taxpayer is also required<br />
to pay <strong>in</strong>terest on any unpaid<br />
taxes from the orig<strong>in</strong>al due<br />
date to the date of payment.<br />
The <strong>in</strong>terest charge is based<br />
on the prevail<strong>in</strong>g one-year time<br />
deposit <strong>in</strong>terest rate set by<br />
the Directorate General of the<br />
Postal Remittances & Sav<strong>in</strong>gs<br />
Bank each year. The charge<br />
may be waived if the amount<br />
is under NT$1,500.<br />
Assessments<br />
The tax authority is allowed<br />
to exam<strong>in</strong>e tax returns,<br />
account<strong>in</strong>g books and<br />
support<strong>in</strong>g documents.<br />
After a tax audit has been<br />
completed, the tax authority<br />
may request the taxpayer<br />
to expla<strong>in</strong> any questionable<br />
items and present additional<br />
support<strong>in</strong>g documents. If the<br />
tax authority comes up with<br />
a different assessment, it will<br />
issue a formal assessment notice<br />
to the taxpayer, who then can<br />
opt to pay the tax as assessed<br />
or follow the appeal procedures<br />
provided under the relevant<br />
tax provisions.<br />
Tax Incentives<br />
Certa<strong>in</strong> tax <strong>in</strong>centives are<br />
provided to <strong>in</strong>vestors if they<br />
are located <strong>in</strong> prescribed<br />
areas such as science parks,<br />
economic process<strong>in</strong>g zones,<br />
free trade zones and so on.<br />
Most tax breaks were previously<br />
offered under the Statute for<br />
Upgrad<strong>in</strong>g Industries, which<br />
expired at the end of 2009.<br />
This law has s<strong>in</strong>ce been<br />
replaced by a new Statute<br />
for Industrial Innovation (SII),<br />
which reta<strong>in</strong>s tax breaks for<br />
<strong>in</strong>vestments <strong>in</strong> R&D. Under<br />
the SII, R&D credits are<br />
available up to 15% of qualified<br />
R&D expenses <strong>in</strong>curred, with<br />
the maximum amount of<br />
tax credit capped at 30%<br />
of the tax payable for the<br />
year <strong>in</strong> which the expenses<br />
are <strong>in</strong>curred. The unutilised<br />
R&D credits will be forfeited,<br />
and cannot be carried back<br />
or carried forward.<br />
Additional tax <strong>in</strong>centives are<br />
available under the Statute for<br />
Investment by Foreign Nationals/<br />
Overseas Ch<strong>in</strong>ese, the Bus<strong>in</strong>ess<br />
Mergers and Acquisitions<br />
Act, the F<strong>in</strong>ancial Institutions<br />
Merger Act and other laws<br />
and regulations<br />
Double Taxation Relief<br />
<strong>Taiwan</strong> companies (<strong>in</strong>clud<strong>in</strong>g<br />
the <strong>Taiwan</strong> subsidiaries<br />
of foreign companies) are<br />
subject to <strong>in</strong>come tax on<br />
their worldwide <strong>in</strong>come,<br />
regardless of whether that<br />
<strong>in</strong>come was derived <strong>in</strong>side<br />
or outside <strong>Taiwan</strong>.<br />
<strong>Taiwan</strong> uses the credit<br />
method (unilaterally) to avoid<br />
the double taxation of <strong>in</strong>come.<br />
Foreign taxes paid on foreign<br />
source <strong>in</strong>come may be<br />
credited aga<strong>in</strong>st a company’s<br />
total <strong>Taiwan</strong> <strong>in</strong>come tax<br />
liability. However, the credit<br />
is limited to the amount of<br />
<strong>Taiwan</strong> <strong>in</strong>come tax derived<br />
from foreign source <strong>in</strong>come.<br />
Double Taxation<br />
Agreements<br />
In addition to <strong>Taiwan</strong>’s domestic<br />
arrangements that provide<br />
relief from <strong>in</strong>ternational double<br />
taxation, <strong>Taiwan</strong> has entered<br />
<strong>in</strong>to bilateral double taxation<br />
treaties with 20 countries as<br />
of July 2011. These treaties<br />
generally follow the Organisation<br />
for Economic Co-operation and<br />
Development (OECD) model and<br />
their contents are summarised <strong>in</strong><br />
the table on the next page.<br />
Transfer Pric<strong>in</strong>g<br />
<strong>Taiwan</strong> has transfer pric<strong>in</strong>g<br />
rules requir<strong>in</strong>g that transactions<br />
between related parties be<br />
conducted on arm’s length<br />
terms. The ‘Regulations<br />
Govern<strong>in</strong>g Assessment<br />
of Profit-Seek<strong>in</strong>g Enterprise<br />
Income Tax on Non-Arm’s<br />
Length Transfer Pric<strong>in</strong>g’ were<br />
issued <strong>in</strong> December 2004 and<br />
are <strong>in</strong> l<strong>in</strong>e with OECD transfer<br />
pric<strong>in</strong>g guidel<strong>in</strong>es.
22<br />
Withhold<strong>in</strong>g Taxes Under Double Taxation Agreements<br />
(as of 31 July 2011)<br />
Country Dividends (%) Interest (%) Royalties (%)<br />
Australia 10,15 1<br />
10 12.5<br />
Belgium 10 10 10<br />
Denmark 10 10 10<br />
France 10 10 10<br />
Gambia 10 10 10<br />
Hungary 10 10 10<br />
Indonesia 10 10 10<br />
Israel<br />
10 7,10 2<br />
Macedonia 10 10 10<br />
Malaysia3 12.5 10 10<br />
Netherlands 10 10 10<br />
New Zealand 15 10 10<br />
Paraguay 5 10 10<br />
Senegal 10 15 12.5<br />
S<strong>in</strong>gapore 40 4<br />
South Africa 5,15 5<br />
10<br />
NA 15<br />
10 10<br />
Swaziland 10 10 10<br />
Sweden 10 10 10<br />
United K<strong>in</strong>gdom 10 10 10<br />
Vietnam 15 10 15<br />
1. 10% for shareholders that are<br />
companies (other than partnerships)<br />
with at least a 25% sharehold<strong>in</strong>g.<br />
2. 7% of the gross amount of the<br />
<strong>in</strong>terest aris<strong>in</strong>g <strong>in</strong> a territory and paid<br />
on any loan of whatever k<strong>in</strong>d granted<br />
by a bank of the other territory.<br />
3. The withhold<strong>in</strong>g tax rate on<br />
technical service fee payments<br />
is reduced to 7.5%.<br />
4. The total tax burden of corporate<br />
<strong>in</strong>come tax and dividend tax must<br />
not exceed 40% of the total profits<br />
of the company.<br />
5. 5% for shareholders with at<br />
least a 10% sharehold<strong>in</strong>g.<br />
Personal Income Tax<br />
Scope and Rates<br />
Individual <strong>in</strong>come tax is<br />
levied on the <strong>Taiwan</strong>-source<br />
<strong>in</strong>come of both resident and<br />
non-resident <strong>in</strong>dividuals,<br />
unless exempt under the<br />
provisions of the Income<br />
Tax Act and other laws. Income<br />
received for services rendered<br />
<strong>in</strong> <strong>Taiwan</strong> is considered to be<br />
<strong>Taiwan</strong>-source <strong>in</strong>come subject<br />
to tax regardless of whether<br />
such <strong>in</strong>come is paid by a local<br />
or an offshore employer.<br />
Start<strong>in</strong>g from 1 January 2010,<br />
the alternative m<strong>in</strong>imum tax,<br />
based on the Income Basic Tax<br />
Act, will apply to the overseas<br />
<strong>in</strong>come of resident <strong>in</strong>dividuals,<br />
<strong>in</strong>clud<strong>in</strong>g qualify<strong>in</strong>g expatriates.<br />
An <strong>in</strong>dividual is considered<br />
resident <strong>in</strong> <strong>Taiwan</strong> for <strong>in</strong>come<br />
tax purposes if:<br />
• Domiciled or ord<strong>in</strong>arily resid<strong>in</strong>g<br />
<strong>in</strong> <strong>Taiwan</strong>; or<br />
• Not domiciled but resid<strong>in</strong>g <strong>in</strong><br />
<strong>Taiwan</strong> for 183 days or more<br />
<strong>in</strong> a taxable year.<br />
Foreigners who reside <strong>in</strong><br />
<strong>Taiwan</strong> for less than 183 days<br />
are considered non-residents,<br />
and <strong>in</strong> general, their <strong>Taiwan</strong>source<br />
<strong>in</strong>come is subject to<br />
withhold<strong>in</strong>g tax at source.<br />
For non-resident <strong>in</strong>dividuals<br />
stay<strong>in</strong>g <strong>in</strong> <strong>Taiwan</strong> for 90<br />
days or less <strong>in</strong> a taxable<br />
year, there is no tax payable<br />
if their compensation is<br />
paid by an entity registered<br />
outside of <strong>Taiwan</strong>.
24<br />
Personal Income Tax Rates<br />
(as of 1 January 2010)<br />
Length of stay Less than<br />
183 days<br />
Personal<br />
exemption<br />
Fil<strong>in</strong>g Obligations<br />
<strong>Taiwan</strong>’s tax year runs from<br />
1 January to 31 December.<br />
Individual taxpayers are required<br />
to report all their <strong>Taiwan</strong>-source<br />
<strong>in</strong>come, irrespective of the<br />
payment location of such<br />
<strong>in</strong>come, and to file an annual<br />
return with the tax authority<br />
by 31 May of the follow<strong>in</strong>g year,<br />
with no extensions allowed.<br />
For resident <strong>in</strong>dividuals, a<br />
consolidated personal <strong>in</strong>come<br />
tax return must be filed with<br />
respect to <strong>Taiwan</strong>-source<br />
<strong>in</strong>come. Married couples must<br />
Non-resident Resident<br />
No Yes<br />
Deductions No Yes<br />
Tax rates In general 15%-<br />
20%, depend<strong>in</strong>g<br />
on <strong>in</strong>come type<br />
183 days or more<br />
Progressive tax rates for 2010 tax year:<br />
Net Taxable Income<br />
(NT$)<br />
Tax Rate<br />
(%)<br />
0-500,000 5 0<br />
500,001-1,130,000 12 35,000<br />
1,130,001-2,260,000 20 125,400<br />
2,260,001-4,230,000 30 351,400<br />
4,230,001 or higher 40 774,400<br />
file jo<strong>in</strong>t returns if both spouses<br />
have resided <strong>in</strong> <strong>Taiwan</strong> for more<br />
than 183 days <strong>in</strong> a taxable year.<br />
However, a spouse can opt<br />
to calculate taxes due on that<br />
spouse’s wages and salary<br />
separately. The <strong>in</strong>come of<br />
any dependants for whom the<br />
taxpayer has claimed a personal<br />
exemption must also be<br />
<strong>in</strong>cluded <strong>in</strong> the jo<strong>in</strong>t tax return.<br />
Non-residents who stay <strong>in</strong><br />
<strong>Taiwan</strong> for 90 days or less<br />
<strong>in</strong> a year are not required<br />
to file <strong>in</strong>come tax returns,<br />
although tax is withheld by<br />
employers on any compensation<br />
Progressive Difference<br />
(NT$)<br />
paid <strong>in</strong> <strong>Taiwan</strong>. Income tax is<br />
withheld on locally paid salaries.<br />
Any additional tax due must be<br />
paid at the time of fil<strong>in</strong>g.<br />
Taxable Personal Income<br />
Taxable <strong>in</strong>come <strong>in</strong>cludes salaries<br />
or wages (and any allowances,<br />
bonuses or similar<br />
compensation), professional<br />
fees, rental <strong>in</strong>come from<br />
property <strong>in</strong> <strong>Taiwan</strong>, dividends,<br />
<strong>in</strong>terest and royalties derived<br />
from sources <strong>in</strong> <strong>Taiwan</strong>. Awards<br />
and prizes are also subject to<br />
<strong>in</strong>come tax.<br />
A foreigner who is present<br />
<strong>in</strong> <strong>Taiwan</strong> for more than 90<br />
days is taxed on salary,<br />
bonuses and commissions<br />
earned for work done <strong>in</strong> <strong>Taiwan</strong>,<br />
regardless of where payment<br />
is made, but is not taxed on<br />
compensation for services<br />
performed outside <strong>Taiwan</strong>.<br />
Expatriates work<strong>in</strong>g <strong>in</strong><br />
<strong>Taiwan</strong> are also taxed on<br />
fr<strong>in</strong>ge benefits such as<br />
hous<strong>in</strong>g, liv<strong>in</strong>g, education<br />
and transportation allowances.<br />
Fr<strong>in</strong>ge benefits to <strong>in</strong>dividual<br />
taxpayers <strong>in</strong> the form of cash<br />
allowances are all taxable<br />
regardless of the nature of<br />
the benefits. Fr<strong>in</strong>ge benefits<br />
provided directly by the<br />
employer without cash payment<br />
to the employee are also taxed<br />
unless the recruitment of a<br />
foreign employee satisfies<br />
certa<strong>in</strong> criteria for special tax<br />
<strong>in</strong>centives applied to<br />
foreign professionals.<br />
Capital Ga<strong>in</strong>s<br />
<strong>Taiwan</strong> does not impose<br />
a separate capital ga<strong>in</strong>s tax,<br />
as all ga<strong>in</strong>s, unless specifically<br />
exempt by law, are assessed as<br />
ord<strong>in</strong>ary <strong>in</strong>come and subject to<br />
<strong>in</strong>come tax. Ga<strong>in</strong>s from the sale<br />
of land and qualified securities<br />
transactions are currently<br />
exempt from <strong>in</strong>come tax.<br />
Luxury tax (please see Page 17)<br />
will apply on sale of real estate<br />
properties purchased not<br />
for self-use and sold with<strong>in</strong><br />
two years.
26<br />
Note however, that resident<br />
<strong>in</strong>dividuals must <strong>in</strong>clude any<br />
ga<strong>in</strong>s attributable to sales of<br />
unlisted shares <strong>in</strong> <strong>Taiwan</strong><br />
<strong>in</strong> their alternative m<strong>in</strong>imum<br />
tax calculation.<br />
Dividends<br />
For resident <strong>in</strong>dividuals,<br />
dividends received are not<br />
subject to withhold<strong>in</strong>g tax.<br />
The gross dividend received<br />
is <strong>in</strong>cluded <strong>in</strong> an <strong>in</strong>dividual’s<br />
taxable <strong>in</strong>come, and the<br />
associated imputation tax<br />
credit (for the tax paid by<br />
the company distribut<strong>in</strong>g<br />
the dividend) can be used to<br />
offset their <strong>in</strong>come tax liability.<br />
Any excess credit is refundable<br />
to resident <strong>in</strong>dividuals.<br />
For non-resident <strong>in</strong>dividuals,<br />
dividends received are subject<br />
to 20% withhold<strong>in</strong>g tax.<br />
Exemptions and Deductions<br />
Certa<strong>in</strong> exemptions and<br />
deductions are available for<br />
a resident <strong>in</strong>dividual taxpayer,<br />
their spouse and dependants.<br />
A resident taxpayer may elect<br />
to claim either the standard<br />
deduction or itemised<br />
deductions, <strong>in</strong> addition<br />
to other special deductions.<br />
Non-resident <strong>in</strong>dividuals<br />
are not entitled to personal<br />
exemptions and deductions.<br />
Exemption<br />
amount<br />
Taxpayer NT$82,000 None.<br />
Support<strong>in</strong>g<br />
documents<br />
Spouse NT$82,000 Copy of marriage certificate.<br />
Dependants not<br />
over 20 years of age<br />
Dependants over<br />
20 years of age<br />
and study<strong>in</strong>g <strong>in</strong> an<br />
approved college or<br />
university<br />
Dependants over<br />
60 years of age<br />
Dependants over<br />
70 years of age<br />
NT$82,000 Copy of birth certificate.<br />
NT$82,000 1. Copy of birth certificate.<br />
2. Copy of tuition receipt and<br />
valid student ID.<br />
NT$82,000 1. Copy of the birth certificate<br />
of the taxpayer/spouse.<br />
2. Document certify<strong>in</strong>g the<br />
parent is supported by the<br />
taxpayer/spouse.<br />
NT$123,000 1. Copy of the birth certificate<br />
of the taxpayer/spouse.<br />
2. Document certify<strong>in</strong>g the<br />
parent is supported by the<br />
taxpayer/spouse.<br />
3. Documents evidenc<strong>in</strong>g<br />
the parent’s liv<strong>in</strong>g<br />
arrangements.<br />
Standard Deductions (as of 1 January 2010)<br />
Deduction item Deduction amount Support<strong>in</strong>g documents<br />
S<strong>in</strong>gle taxpayer NT$76,000 None.<br />
Married, fil<strong>in</strong>g jo<strong>in</strong>tly NT$152,000 Copy of marriage certificate.<br />
Itemised Deductions (as of 1 January 2010)<br />
Deduction item Maximum deduction Support<strong>in</strong>g documents<br />
Charitable donations Limited to donations to <strong>Taiwan</strong>registered<br />
non-profit organisations and<br />
20% of annual gross taxable <strong>in</strong>come<br />
Life <strong>in</strong>surance premiums Limited to NT$24,000 for each<br />
person per year<br />
Medical and<br />
maternity expenses<br />
Orig<strong>in</strong>al receipts.<br />
Orig<strong>in</strong>al receipts.<br />
No limit Orig<strong>in</strong>al receipts issued by<br />
a qualified hospital or cl<strong>in</strong>ic.<br />
Calamity losses No limit Certificate issued by local tax office.<br />
Interest paid on loans<br />
for the purchase of an<br />
owner-occupied<br />
residence <strong>in</strong> <strong>Taiwan</strong>*<br />
Rental expense for<br />
the lease of a self-use<br />
residence <strong>in</strong> <strong>Taiwan</strong>*<br />
Limited to NT$300,000<br />
for a tax fil<strong>in</strong>g unit<br />
Limited to NT$120,000<br />
for a tax fil<strong>in</strong>g unit<br />
* Either ‘<strong>in</strong>terest paid on loans’ or ‘rental expense’ is to be claimed.<br />
• Interest payment receipt.<br />
• Title deed.<br />
• Documents evidenc<strong>in</strong>g the residence<br />
was owner-occupied <strong>in</strong> the tax year.<br />
• Rental contract with the name of the<br />
taxpayer as lessee.<br />
• Rental payment receipt issued by the<br />
landlord.<br />
• Documents evidenc<strong>in</strong>g the residence was<br />
for self-use <strong>in</strong> the tax year.<br />
A taxpayer can claim either the standard deduction or itemised deductions, depend<strong>in</strong>g on whichever gives a higher total deduction amount.<br />
There is no ceil<strong>in</strong>g on the itemised deduction total.
28<br />
Special Deductions (as of 1 January 2010)<br />
Deduction<br />
item<br />
Maximum<br />
deduction<br />
Salaries and wages Limited to NT$104,000,<br />
or actual salary/wages<br />
received, per person,<br />
whichever is lower<br />
Property transaction<br />
losses<br />
Sav<strong>in</strong>gs and<br />
<strong>in</strong>vestment<br />
Disability<br />
(mental or physical)<br />
Dependent child<br />
tuition<br />
Alternative M<strong>in</strong>imum Tax<br />
In addition to normal tax<br />
calculations under the Income<br />
Tax Act, <strong>Taiwan</strong> imposes a<br />
so-called alternative m<strong>in</strong>imum<br />
tax (AMT) on <strong>in</strong>dividuals who<br />
are tax residents <strong>in</strong> <strong>Taiwan</strong><br />
(<strong>in</strong>clud<strong>in</strong>g expatriates who stay<br />
<strong>in</strong> <strong>Taiwan</strong> for 183 days or more<br />
<strong>in</strong> a tax year). Effective from<br />
Limited to property<br />
transaction ga<strong>in</strong>s for<br />
the same year. Any<br />
residual balance may<br />
be carried forward for<br />
three years<br />
Limited to NT$270,000<br />
per tax fil<strong>in</strong>g unit<br />
NT$104,000 per<br />
taxpayer, spouse<br />
and dependant,<br />
if handicapped<br />
NT$25,000 per<br />
dependent child<br />
if study<strong>in</strong>g <strong>in</strong> an<br />
approved college<br />
or university<br />
Support<strong>in</strong>g documents<br />
None.<br />
• Certificate issued<br />
by local tax office.<br />
• Purchase and sales<br />
contracts show<strong>in</strong>g<br />
the purchase and<br />
sales price, and other<br />
relevant documentation<br />
detail<strong>in</strong>g the related<br />
costs and expenses<br />
<strong>in</strong>curred.<br />
None.<br />
Copy of a psychiatrist’s<br />
diagnosis certificate<br />
or copy of Disability<br />
Identification.<br />
Student certificate or<br />
tuition receipts issued<br />
by the dependant child’s<br />
college or university.<br />
1 January 2010, the overseas<br />
<strong>in</strong>come of resident <strong>in</strong>dividuals is<br />
<strong>in</strong>cluded <strong>in</strong> the AMT calculation.<br />
Resident taxpayers with AMT<br />
taxable <strong>in</strong>come of more than<br />
NT$6 million may be subject to<br />
AMT at the current rate of 20%.<br />
Under the Income Basic Tax Act,<br />
a taxpayer must calculate the<br />
amount of AMT due on <strong>in</strong>come<br />
subject to AMT after add<strong>in</strong>g back<br />
certa<strong>in</strong> items and compare the<br />
result with the regular <strong>in</strong>come tax<br />
amount. If the AMT tax payable<br />
is greater than the regular <strong>in</strong>come<br />
tax payable, the taxpayer has to<br />
calculate and pay AMT based on<br />
the follow<strong>in</strong>g formulae:<br />
• Income subject to AMT = Regular<br />
taxable <strong>in</strong>come + add-back<br />
items;<br />
• AMT = (Income subject to AMT<br />
– NT$6 million) x 20%.<br />
The add-back items <strong>in</strong>clude<br />
qualified <strong>in</strong>surance benefits,<br />
capital ga<strong>in</strong>s from unlisted<br />
securities, non-cash charitable<br />
contributions, the excess of<br />
market value over par value<br />
of stock dividends granted to<br />
employees, and foreign-source<br />
<strong>in</strong>come totall<strong>in</strong>g NT$1 million<br />
or more.<br />
Except for overseas <strong>in</strong>come,<br />
the other items have been<br />
<strong>in</strong>cluded <strong>in</strong> the AMT s<strong>in</strong>ce<br />
1 January 2006. Although the<br />
<strong>in</strong>clusion of foreign-source<br />
<strong>in</strong>come will <strong>in</strong>crease the AMT<br />
burden, any foreign taxes<br />
paid on such <strong>in</strong>come may be<br />
credited aga<strong>in</strong>st AMT payable,<br />
with certa<strong>in</strong> limitations.<br />
Audit and Accountancy<br />
Bus<strong>in</strong>esses are required<br />
to ma<strong>in</strong>ta<strong>in</strong> account<strong>in</strong>g<br />
records and prepare annual<br />
f<strong>in</strong>ancial statements <strong>in</strong><br />
accordance with <strong>Taiwan</strong><br />
Generally Accepted Account<strong>in</strong>g<br />
Pr<strong>in</strong>ciples (GAAP), which<br />
largely follow International<br />
F<strong>in</strong>ancial Report<strong>in</strong>g Standards<br />
(IFRS) and US GAAP. <strong>Taiwan</strong><br />
requires f<strong>in</strong>ancial statement<br />
audits for any company with<br />
paid-<strong>in</strong> capital exceed<strong>in</strong>g<br />
NT$30 million.<br />
Account<strong>in</strong>g Books<br />
and Records<br />
Account<strong>in</strong>g Period<br />
Bus<strong>in</strong>esses generally<br />
use the 1 January to<br />
31 December calendar year<br />
as their account<strong>in</strong>g year,<br />
which is the same as the<br />
fiscal year for tax purposes.<br />
However, a company may,<br />
with permission, adopt<br />
a non-calendar year-end.<br />
Bookkeep<strong>in</strong>g Currency<br />
Account<strong>in</strong>g books must<br />
be denom<strong>in</strong>ated <strong>in</strong> the local<br />
currency (New <strong>Taiwan</strong> dollar,<br />
NT$). If accounts are kept<br />
<strong>in</strong> a foreign currency due to<br />
<strong>bus<strong>in</strong>ess</strong> needs, such currency<br />
must be translated <strong>in</strong>to the<br />
local currency <strong>in</strong> the company’s<br />
clos<strong>in</strong>g f<strong>in</strong>ancial statements<br />
Bookkeep<strong>in</strong>g Language<br />
All account<strong>in</strong>g books,<br />
documents and f<strong>in</strong>ancial<br />
statements prepared by<br />
a company should be <strong>in</strong><br />
Ch<strong>in</strong>ese, but may also<br />
be written concurrently<br />
<strong>in</strong> a foreign language.<br />
Account<strong>in</strong>g Basis<br />
Bus<strong>in</strong>ess entities must<br />
follow the accrual basis<br />
of account<strong>in</strong>g <strong>in</strong> perform<strong>in</strong>g<br />
recognition, measurement<br />
and report<strong>in</strong>g for account<strong>in</strong>g<br />
purposes. All <strong>in</strong>come realised<br />
and expenses <strong>in</strong>curred or<br />
attributable to the current<br />
period should be recognised<br />
as <strong>in</strong>come or expenses <strong>in</strong> the<br />
current period regardless of<br />
when the <strong>in</strong>come is received<br />
or expenses are paid.<br />
Account<strong>in</strong>g Books<br />
Companies are required<br />
to ma<strong>in</strong>ta<strong>in</strong> account<strong>in</strong>g<br />
records and prepare annual<br />
f<strong>in</strong>ancial statements <strong>in</strong><br />
accordance with <strong>Taiwan</strong><br />
GAAP. They must keep<br />
journals, a general ledger<br />
and subsidiary ledgers,<br />
as well as appropriate<br />
memorandum records.<br />
Computerised account<strong>in</strong>g<br />
systems, if utilised, can be<br />
regarded as the company’s<br />
account<strong>in</strong>g records.<br />
F<strong>in</strong>ancial Statements<br />
Basic f<strong>in</strong>ancial statements<br />
such as balance sheet,<br />
<strong>in</strong>come statement (profit<br />
and loss account), cash<br />
flow statement, statement<br />
of changes <strong>in</strong> owners’<br />
equity and notes to f<strong>in</strong>ancial<br />
statements, along with<br />
comparative data for the<br />
previous year, are all required.<br />
Report<strong>in</strong>g Format<br />
The format of f<strong>in</strong>ancial<br />
statements is set forth <strong>in</strong><br />
the Statements of F<strong>in</strong>ancial<br />
Account<strong>in</strong>g Standards<br />
issued by <strong>Taiwan</strong>’s<br />
account<strong>in</strong>g standard-sett<strong>in</strong>g<br />
body, the Account<strong>in</strong>g Research<br />
and Development Foundation<br />
(ARDF). Public companies<br />
are also required to follow<br />
the format and guidance<br />
prescribed by the Securities<br />
and Futures Bureau (SFB)<br />
of the F<strong>in</strong>ancial Supervisory<br />
Commission (FSC).<br />
Preservation of Books<br />
and Records<br />
All account<strong>in</strong>g records<br />
must be kept for at<br />
least five years, and<br />
all account<strong>in</strong>g books<br />
and f<strong>in</strong>ancial statements<br />
must be kept for at least<br />
ten years after the completion<br />
of annual clos<strong>in</strong>g procedures.
30<br />
Audit Requirements<br />
Private companies are<br />
required to have their annual<br />
f<strong>in</strong>ancial statements audited<br />
and certified by a <strong>Taiwan</strong>licenced<br />
certified public<br />
accountant (CPA) if their<br />
paid-<strong>in</strong> capital is NT$30<br />
million or more. Public<br />
companies and f<strong>in</strong>ancial<br />
<strong>in</strong>stitutions must also have<br />
their f<strong>in</strong>ancial statements<br />
audited and certified by a<br />
CPA, as well as meet other<br />
report<strong>in</strong>g requirements.<br />
Public companies are<br />
required to have their annual<br />
f<strong>in</strong>ancial statements audited<br />
and certified by a CPA with<strong>in</strong><br />
four months follow<strong>in</strong>g the<br />
close of each fiscal year.<br />
They must also have their<br />
semi-annual f<strong>in</strong>ancial<br />
statements audited and<br />
certified by a CPA with<strong>in</strong><br />
two months after the close<br />
of each fiscal half year. In<br />
addition, their first and third<br />
quarter f<strong>in</strong>ancial reports must<br />
be reviewed by a CPA with<strong>in</strong><br />
one month after the end of the<br />
first and third fiscal quarters.<br />
<strong>Taiwan</strong>’s Account<strong>in</strong>g<br />
Profession<br />
The National Federation of<br />
Certified Public Accountants<br />
Associations (NFCPAA)<br />
represents the account<strong>in</strong>g<br />
profession <strong>in</strong> <strong>Taiwan</strong>. It<br />
oversees the education of<br />
accountants and acts as<br />
a communication channel<br />
between the profession and<br />
the government.<br />
Practic<strong>in</strong>g CPAs must register<br />
with at least one of three CPA<br />
Associations (represent<strong>in</strong>g<br />
Taipei City, Kaohsiung City<br />
and <strong>Taiwan</strong> Prov<strong>in</strong>ce), which<br />
operate under the umbrella of<br />
NFCPAA.<br />
Auditor Independence<br />
and Audit<strong>in</strong>g Standards<br />
The ‘Regulations Govern<strong>in</strong>g<br />
Audit<strong>in</strong>g and Certification<br />
of F<strong>in</strong>ancial Statements by<br />
Certified Public Accountants,’<br />
cover <strong>in</strong>dependence matters,<br />
report<strong>in</strong>g and disclosure<br />
requirements, suggested<br />
audit procedures, and other<br />
general requirements related<br />
to the review of <strong>in</strong>ternal control<br />
systems. Independent auditors<br />
must exam<strong>in</strong>e the f<strong>in</strong>ancial<br />
statements <strong>in</strong> accordance<br />
with current audit<strong>in</strong>g and<br />
certification rules, as well as<br />
the Statements of Audit<strong>in</strong>g<br />
Standards issued by the ARDF.<br />
In general, audit<strong>in</strong>g standards<br />
and procedures <strong>in</strong> <strong>Taiwan</strong> are<br />
similar to the International<br />
Standards on Audit<strong>in</strong>g and<br />
US Statements on Audit<strong>in</strong>g<br />
Standards.<br />
IFRS Adoption <strong>in</strong> <strong>Taiwan</strong><br />
The FSC announced <strong>in</strong> May<br />
2009 that <strong>Taiwan</strong> would<br />
fully adopt IFRS start<strong>in</strong>g<br />
from 2013 <strong>in</strong> two phases:<br />
Phase I: Listed companies<br />
and f<strong>in</strong>ancial <strong>in</strong>stitutions<br />
supervised by the FSC, except<br />
for credit cooperatives, credit<br />
card companies, and <strong>in</strong>surance<br />
<strong>in</strong>termediaries, will be required<br />
to adopt IFRS start<strong>in</strong>g <strong>in</strong> 2013,<br />
with 2012 IFRS comparative<br />
data. Early adoption <strong>in</strong> 2012<br />
is optional for companies that<br />
have already issued securities<br />
overseas, or have registered an<br />
overseas securities issuance<br />
with the FSC, or have a market<br />
capitalisation of more than<br />
NT$10 billion.<br />
Phase 2: Unlisted public<br />
companies, credit cooperatives<br />
and credit card companies<br />
will have a two-year grace<br />
period and will not have<br />
to adopt IFRS report<strong>in</strong>g<br />
until 2015, with 2014 IFRS<br />
comparative data. Early<br />
adoption start<strong>in</strong>g <strong>in</strong> 2013<br />
is optional.<br />
Report<strong>in</strong>g requirements for<br />
private companies, <strong>in</strong>clud<strong>in</strong>g<br />
branches and subsidiaries<br />
of foreign companies, have<br />
not yet been decided. Several<br />
options are under discussion<br />
by the FSC’s IFRS adoption<br />
taskforce, <strong>in</strong>clud<strong>in</strong>g current<br />
GAAP, IFRS for SMEs and<br />
voluntary IFRS report<strong>in</strong>g.<br />
Human Resources<br />
and Employment Law<br />
Worker protection policies<br />
<strong>in</strong> <strong>Taiwan</strong>, encompass<strong>in</strong>g<br />
labour <strong>in</strong>surance, health<br />
<strong>in</strong>surance, pension and<br />
term<strong>in</strong>ation policies,<br />
are broadly similar to<br />
those found <strong>in</strong> many<br />
developed countries.<br />
Labour-Related<br />
Health Insurance<br />
Labour Insurance<br />
The Labour Insurance<br />
Act basically requires<br />
that, for companies with<br />
five or more employees,<br />
all employees must<br />
be <strong>in</strong>sured under the<br />
government-run labour<br />
<strong>in</strong>surance programme.<br />
Companies with fewer<br />
than five employees<br />
may also apply for labour<br />
<strong>in</strong>surance coverage.<br />
There are two types<br />
of labour <strong>in</strong>surance:<br />
1. Ord<strong>in</strong>ary risk <strong>in</strong>surance,<br />
with six k<strong>in</strong>ds of benefits<br />
(maternity, <strong>in</strong>jury and<br />
sickness, unemployment,<br />
old age and death benefits.<br />
2. Occupational risk <strong>in</strong>surance,<br />
with four k<strong>in</strong>ds of benefits<br />
(<strong>in</strong>jury and sickness, disability<br />
and death).<br />
Labour <strong>in</strong>surance is<br />
compulsory, with coverage<br />
extended to all local and<br />
foreign workers, <strong>in</strong>clud<strong>in</strong>g<br />
executive and adm<strong>in</strong>istrative<br />
staff, except the ‘responsible<br />
persons’ (typically the<br />
owners) of enterprises.<br />
In other words, those<br />
who are employed by,<br />
and receive wages from,<br />
an employer are entitled<br />
to coverage. Employers<br />
actually perform<strong>in</strong>g work<br />
may voluntarily jo<strong>in</strong> the labour<br />
<strong>in</strong>surance programme.<br />
National Health Insurance<br />
<strong>Taiwan</strong>’s National Health<br />
Insurance programme<br />
is designed to provide<br />
comprehensive medical<br />
services for the prevention<br />
and treatment of illness and<br />
<strong>in</strong>jury, and for childbear<strong>in</strong>g.<br />
It is essentially compulsory<br />
and universal, with coverage<br />
given to all citizens who have<br />
resided <strong>in</strong> <strong>Taiwan</strong> for at least<br />
four months, and to foreign<br />
employees (together with<br />
their dependants) with Alien<br />
Residence Certificate.<br />
Pensions<br />
Two pension schemes are<br />
currently <strong>in</strong> effect <strong>in</strong> <strong>Taiwan</strong>,<br />
with an older scheme under<br />
the Labour Standards Act (LSA)<br />
be<strong>in</strong>g phased out <strong>in</strong> favour of<br />
a new scheme, launched <strong>in</strong> July<br />
2005, under the Labour Pension<br />
Act (LPA). Employees who<br />
began their employment with<br />
an enterprise after 1 July 2005<br />
are all covered under the new<br />
pension scheme, which is<br />
a def<strong>in</strong>ed contribution plan<br />
where employers make<br />
monthly contributions<br />
to employees’ <strong>in</strong>dividual<br />
pension accounts.<br />
An employee who is<br />
60 years old or older<br />
with more than 15 years<br />
of service is entitled to<br />
monthly pension payments.<br />
An employee with less than<br />
15 years of service should<br />
take a lump-sum pension<br />
payment of the pr<strong>in</strong>cipal<br />
and accrued dividends<br />
<strong>in</strong> their pension account.
32<br />
Labour Regulations<br />
Wages and Salaries<br />
Wages may not be less than<br />
the statutory m<strong>in</strong>imum wage,<br />
which is reviewed annually by<br />
the Council of Labour Affairs<br />
(CLA). The statutory m<strong>in</strong>imum<br />
level of pay is currently set at<br />
NT$17,880 (about US$600)<br />
per month, or NT$98<br />
(US$3.30) per hour.<br />
Equal pay is also required for<br />
men and women for work of<br />
equal value.<br />
Retirement<br />
An employer can compel<br />
an employee to retire only<br />
if one of the follow<strong>in</strong>g<br />
conditions holds:<br />
1. The employee is age 65<br />
or older. However, the<br />
employer may request the<br />
concerned authorities to lower<br />
the compulsory retirement<br />
age if the work performed by<br />
the employee is dangerous<br />
or physically demand<strong>in</strong>g.<br />
The m<strong>in</strong>imum retirement age<br />
allowed <strong>in</strong> such cases is 55.<br />
2. Some mental or physical<br />
condition makes it impossible<br />
for the employee to undertake<br />
the work assigned.<br />
Special Leave<br />
Employees are entitled to take<br />
leave with full pay for marriage<br />
(up to eight days), funerals,<br />
medical care and recovery from<br />
occupational accidents, or<br />
legally required public service.<br />
The follow<strong>in</strong>g types of special<br />
leave are not granted at<br />
full pay:<br />
1. Ord<strong>in</strong>ary sickness and <strong>in</strong>jury<br />
leave that does not exceed<br />
30 days with<strong>in</strong> one year must<br />
be paid at 50% of the ord<strong>in</strong>ary<br />
wage. Leave for sickness<br />
or <strong>in</strong>jury, other than from<br />
occupational accidents,<br />
is as follows:<br />
• Sick leave exclud<strong>in</strong>g<br />
hospitalisation leave<br />
may not exceed 30<br />
days with<strong>in</strong> one year.<br />
• Hospitalisation leave<br />
may not exceed one<br />
year every two years.<br />
• The total of hospitalised<br />
and non-hospitalised sick<br />
leave may not exceed one<br />
year every two years.<br />
2. Female employees may<br />
request menstruation leave,<br />
<strong>in</strong>corporated <strong>in</strong>to sickness<br />
leave, for one day per month.<br />
Days of menstruation leave<br />
are <strong>in</strong>cluded <strong>in</strong> sick leave and<br />
the wage dur<strong>in</strong>g menstruation<br />
leave is to be calculated <strong>in</strong> the<br />
same manner as sick leave.<br />
An employee may ask for<br />
normal leave to settle personal<br />
affairs. Normal leave without<br />
pay may not exceed 14 days<br />
with<strong>in</strong> one year.<br />
Other Types of Leave<br />
• Maternity leave – eight weeks<br />
at full pay if employed for more<br />
than six months, at half pay if<br />
employed less than six months.<br />
In the case of a miscarriage,<br />
the leave taken will depend on<br />
how long she was pregnant<br />
before the miscarriage;<br />
• Paternity leave – three<br />
days at full pay;<br />
• Unpaid parental leave –<br />
after one year of service,<br />
an employee may apply<br />
for unpaid parental leave<br />
to care for children under<br />
three years of age; the<br />
duration of this leave cannot<br />
exceed two years; and<br />
• Family leave – an employee<br />
work<strong>in</strong>g for an employer with<br />
five or more employees may<br />
request up to seven days of<br />
family leave per year, treated<br />
as normal leave, to care for a<br />
family member who is suffer<strong>in</strong>g<br />
serious illness or who must<br />
handle major events.
Hours worked<br />
Rules on work<strong>in</strong>g hours<br />
are provided under the LSA.<br />
The normal work<strong>in</strong>g hours<br />
for an employee are eight<br />
hours a day, up to 84 hours<br />
every two weeks. Employees<br />
are entitled to breaks of 30<br />
m<strong>in</strong>utes for every four hours<br />
of work.<br />
Children under 15 years<br />
of age are not allowed to<br />
work, while children between<br />
15 and 16 years of age may<br />
work (with consent from<br />
legal guardians) up to eight<br />
hours a day.<br />
Employers are not allowed<br />
to have female employees<br />
work between ten o’clock<br />
<strong>in</strong> the even<strong>in</strong>g and six o’clock<br />
the follow<strong>in</strong>g morn<strong>in</strong>g except<br />
under certa<strong>in</strong> conditions.<br />
Exceptions to the rules<br />
specified above are made,<br />
subject to the prior approval<br />
of the authorities, for<br />
supervisory/managerial<br />
personnel and authorised<br />
specialists, and for monitor<strong>in</strong>g<br />
or <strong>in</strong>termittent jobs.<br />
Paid holidays and vacations<br />
In addition to Sundays off,<br />
employees are entitled to<br />
time off on all national holidays.<br />
Employees are entitled to<br />
special annual leave on the<br />
follow<strong>in</strong>g basis:<br />
Years of Service Days Annual Leave<br />
1-
36<br />
Trade<br />
Competition and<br />
Anti-trust Policy<br />
Free competition is<br />
encouraged under the<br />
rules of the Fair Trade Act,<br />
which governs monopolistic<br />
enterprises, mergers and<br />
acquisitions and any<br />
concerted action that<br />
may limit competition.<br />
Mergers and Acquisitions<br />
The government encourages<br />
the merger or consolidation of<br />
two or more companies if this<br />
will improve their operations<br />
and efficiency. The F<strong>in</strong>ancial<br />
Institution Mergers Act and the<br />
F<strong>in</strong>ancial Hold<strong>in</strong>g Company Act<br />
govern consolidation among<br />
f<strong>in</strong>ancial <strong>in</strong>stitutions. For<br />
companies <strong>in</strong> other <strong>in</strong>dustries,<br />
the Bus<strong>in</strong>ess Mergers and<br />
Acquisitions Act provide the<br />
legal framework and also<br />
certa<strong>in</strong> benefits to encourage<br />
mergers, acquisitions and sp<strong>in</strong>off<br />
activities.<br />
Intellectual Property Rights<br />
In <strong>Taiwan</strong>, IPR regulations<br />
protect patents, trademarks,<br />
copyrights, <strong>in</strong>dustrial designs,<br />
trade secrets, <strong>in</strong>dications<br />
of geographic orig<strong>in</strong>, and<br />
<strong>in</strong>tegrated circuit layouts.<br />
Intellectual property rights<br />
granted outside <strong>Taiwan</strong> do<br />
not necessarily guarantee<br />
protection with<strong>in</strong> the territory,<br />
and foreign <strong>in</strong>vestors are<br />
strongly advised to seek<br />
broader protection through<br />
the MOEA’s <strong>Taiwan</strong> Intellectual<br />
Property Office, which<br />
coord<strong>in</strong>ates and adm<strong>in</strong>isters<br />
<strong>Taiwan</strong>’s IPR policies.<br />
Concerted Action<br />
Enterprises are prohibited from<br />
engag<strong>in</strong>g <strong>in</strong> any concerted<br />
action with another unless:<br />
(a) It is beneficial to the<br />
economy and <strong>in</strong> the public<br />
<strong>in</strong>terest;<br />
(b) An application to the Fair<br />
Trade Commission (FTC) for<br />
such concerted action has<br />
been approved; and<br />
(c) It is one of a limited number<br />
of types listed <strong>in</strong> the Fair Trade<br />
Act, such as jo<strong>in</strong>t R&D, jo<strong>in</strong>t<br />
importation, etc.<br />
Fair Competition<br />
Pric<strong>in</strong>g is to be determ<strong>in</strong>ed<br />
through market mechanisms,<br />
and <strong>in</strong> pr<strong>in</strong>ciple, <strong>in</strong>terference<br />
with free competition is not<br />
allowed.<br />
Foreign Exchange Controls<br />
<strong>Taiwan</strong> has substantially<br />
liberalised its foreign<br />
exchange controls. All foreign<br />
exchange transactions are<br />
adm<strong>in</strong>istered by the Central<br />
Bank of the Republic of Ch<strong>in</strong>a<br />
(<strong>Taiwan</strong>), which imposes a<br />
limit of US$50 million and<br />
US$5 million per year for<br />
<strong>bus<strong>in</strong>ess</strong> entities and resident<br />
<strong>in</strong>dividuals, respectively, on<br />
any foreign exchange transfer,<br />
<strong>in</strong>ward or outward, other than<br />
trad<strong>in</strong>g or service revenue.<br />
Companies and <strong>in</strong>dividuals<br />
are required to report certa<strong>in</strong><br />
foreign exchange transactions<br />
to the central bank.
38<br />
Bank<strong>in</strong>g <strong>in</strong> <strong>Taiwan</strong><br />
Overbanked Environment<br />
Currently, <strong>Taiwan</strong> has almost<br />
400 depository <strong>in</strong>stitutions<br />
operat<strong>in</strong>g <strong>in</strong> <strong>Taiwan</strong>; <strong>in</strong>clud<strong>in</strong>g<br />
39 local banks, 28 foreign<br />
banks, 26 credit cooperatives,<br />
302 credit departments of<br />
farmers, and fishermen’s<br />
associations and one postal<br />
sav<strong>in</strong>gs bank. These f<strong>in</strong>ancial<br />
<strong>in</strong>stitutions, along with<br />
numerous trust and <strong>in</strong>vestment<br />
companies, securities f<strong>in</strong>ance<br />
corporations, non-life <strong>in</strong>surance<br />
corporations, bills f<strong>in</strong>ance<br />
companies and others compete<br />
to cater to the f<strong>in</strong>ancial needs<br />
of <strong>Taiwan</strong>’s population of 23<br />
million. Therefore, it would not<br />
be an exaggeration to state<br />
that <strong>Taiwan</strong>’s f<strong>in</strong>ancial services<br />
<strong>in</strong>dustry is saturated. F<strong>in</strong>d<strong>in</strong>g<br />
the right bank and operation<br />
model can thus be very<br />
challeng<strong>in</strong>g.<br />
Account Types<br />
In <strong>Taiwan</strong>, the most common<br />
account types are as follows:<br />
Type Features<br />
Bus<strong>in</strong>ess and Bank<strong>in</strong>g<br />
<strong>Taiwan</strong>’s currency, New <strong>Taiwan</strong><br />
dollar (NT$), is not fully<br />
circulated or convertible <strong>in</strong><br />
global markets. Therefore,<br />
all entities wish<strong>in</strong>g to conduct<br />
transactions denom<strong>in</strong>ated<br />
<strong>in</strong> NT$ must open onshore<br />
accounts. To qualify for onshore<br />
accounts, entities must register<br />
with the <strong>Taiwan</strong> government.<br />
There are many different<br />
options for a company to<br />
establish a presence <strong>in</strong> <strong>Taiwan</strong>.<br />
These <strong>in</strong>clude branch offices,<br />
subsidiaries, representative<br />
offices and more, depend<strong>in</strong>g<br />
on the specific <strong>bus<strong>in</strong>ess</strong> needs<br />
(Please refer to the ‘Conduct<strong>in</strong>g<br />
Bus<strong>in</strong>ess <strong>in</strong> <strong>Taiwan</strong>’ section for<br />
details). Your decision will have<br />
implications on your <strong>bus<strong>in</strong>ess</strong><br />
scope, legal responsibilities<br />
and taxes.<br />
Sav<strong>in</strong>gs Account The <strong>in</strong>itial start<strong>in</strong>g po<strong>in</strong>t of your bank<strong>in</strong>g relationship.<br />
Payment and transfers – your most liquid assets.<br />
Current Account Cheques for day-to-day payments (overdraft facility<br />
available depend<strong>in</strong>g on credit stand<strong>in</strong>g).<br />
Time Deposits Safe return with higher <strong>in</strong>terest rate. Wide range<br />
of currencies and tenors.<br />
Offshore Bank<strong>in</strong>g Units<br />
Companies that are not<br />
<strong>Taiwan</strong>-registered can establish<br />
Offshore Bank<strong>in</strong>g Unit (OBU)<br />
accounts, if they wish to<br />
operate <strong>in</strong> foreign currencies<br />
only. The primary advantage of<br />
OBU accounts is that <strong>bus<strong>in</strong>ess</strong><br />
owners can enjoy additional<br />
flexibility for prudent tax<br />
mitigation. Despite its<br />
well known flexibility, however,<br />
OBU accounts still face several<br />
restrictions. For example, no<br />
cash bank withdrawals are<br />
allowed. Customers first<br />
need to wire the money <strong>in</strong>to<br />
a Domestic Bank<strong>in</strong>g Unit (DBU)<br />
account and then withdraw it<br />
from there. In summary, OBU<br />
entities ma<strong>in</strong>ly deal with virtual<br />
transactions only.<br />
Foreign Exchange Declaration<br />
All foreign exchange<br />
transactions over NT$500,000<br />
(or equivalent) must be declared<br />
to the <strong>Taiwan</strong>’s Central Bank<br />
for monitor<strong>in</strong>g purposes.<br />
Information such as the exact<br />
amount and nature and purpose<br />
of such transactions needs to<br />
be provided. Companies and<br />
<strong>in</strong>dividuals wish<strong>in</strong>g to exchange<br />
an aggregate amount exceed<strong>in</strong>g<br />
US$50 million and US$5 million<br />
with<strong>in</strong> a year, respectively, must<br />
apply for prior permission<br />
to the Central Bank.<br />
Bank<strong>in</strong>g Authority<br />
<strong>Taiwan</strong>’s foreign exchange<br />
policy is a managed float,<br />
which means that the exchange<br />
rate will fluctuate freely under<br />
the <strong>in</strong>fluence of market forces<br />
but is still bounded by a band<br />
monitored by the Central Bank.<br />
The latter also uses various<br />
<strong>in</strong>struments to implement<br />
monetary policies.<br />
ECFA and F<strong>in</strong>ancial<br />
Services MOU<br />
<strong>Taiwan</strong>’s bank<strong>in</strong>g and f<strong>in</strong>ancial<br />
services <strong>in</strong>dustry, as a whole,<br />
is about to embark on a<br />
challeng<strong>in</strong>g journey as<br />
governments from <strong>Taiwan</strong><br />
and ma<strong>in</strong>land Ch<strong>in</strong>a are<br />
loosen<strong>in</strong>g restrictions for<br />
<strong>in</strong>vestment across the Strait.<br />
Banks from either side are vy<strong>in</strong>g<br />
for opportunities to expand due<br />
to the extraord<strong>in</strong>ary potential<br />
<strong>in</strong> the region.
40<br />
<strong>HSBC</strong> <strong>in</strong> <strong>Taiwan</strong><br />
Overview<br />
<strong>HSBC</strong> Bank (<strong>Taiwan</strong>) Limited<br />
started operations <strong>in</strong> <strong>Taiwan</strong><br />
on 1 May 2010 as a locally<br />
<strong>in</strong>corporated entity of The<br />
Hongkong and Shanghai<br />
Bank<strong>in</strong>g Corporation Limited.<br />
The Hongkong and Shanghai<br />
Bank<strong>in</strong>g Corporation Limited<br />
is the found<strong>in</strong>g member of<br />
the <strong>HSBC</strong> Group, which is<br />
headquartered <strong>in</strong> London.<br />
<strong>HSBC</strong> (<strong>Taiwan</strong>) plays a key<br />
role <strong>in</strong> <strong>HSBC</strong>’s Greater Ch<strong>in</strong>a<br />
<strong>bus<strong>in</strong>ess</strong>. Headquartered <strong>in</strong><br />
Taipei, it serves the f<strong>in</strong>ancial<br />
and wealth management<br />
needs of an <strong>in</strong>ternational<br />
customer base and provides<br />
a complete range of bank<strong>in</strong>g<br />
f<strong>in</strong>ancial services for those<br />
with cross border needs.<br />
The current network of <strong>HSBC</strong><br />
(<strong>Taiwan</strong>) comprises 42 outlets,<br />
<strong>in</strong>clud<strong>in</strong>g 27 branches <strong>in</strong> the<br />
Greater Taipei area.<br />
<strong>HSBC</strong>’s presence <strong>in</strong> <strong>Taiwan</strong><br />
dates back to 1885 when<br />
The Hongkong and Shanghai<br />
Bank<strong>in</strong>g Corporation Limited<br />
appo<strong>in</strong>ted an agent <strong>in</strong> Tamsui.<br />
A full-service branch was<br />
established <strong>in</strong> Taipei <strong>in</strong> 1984<br />
and the <strong>bus<strong>in</strong>ess</strong> has expanded<br />
through a comb<strong>in</strong>ation of<br />
acquisition and organic growth<br />
to become one of the lead<strong>in</strong>g<br />
f<strong>in</strong>ancial services groups<br />
<strong>in</strong> <strong>Taiwan</strong>.<br />
<strong>HSBC</strong> Group is one of the<br />
world’s largest bank<strong>in</strong>g and<br />
f<strong>in</strong>ancial services organisations,<br />
with an <strong>in</strong>ternational network<br />
cover<strong>in</strong>g 87 countries and<br />
territories and assets of<br />
US$2,691 billion at<br />
30 June 2011.<br />
Awards for Excellence<br />
• Best PCM Bank <strong>in</strong> <strong>Taiwan</strong><br />
2008-2010 by Euromoney.<br />
• Best Sub-Custodian <strong>in</strong> <strong>Taiwan</strong><br />
2008 by Asset Magaz<strong>in</strong>e<br />
• Top-rated Sub-Custodian Award<br />
by Global Custodian, 1997-2008.<br />
• World’s Best Sub-Custodian<br />
Banks by Global F<strong>in</strong>ance,<br />
2005-2009.<br />
• Direct won the 2009<br />
F<strong>in</strong>ancial Insight Innovation<br />
Award (FIIA) for its Innovation<br />
<strong>in</strong> Onl<strong>in</strong>e Insurance.<br />
Corporate Susta<strong>in</strong>ability<br />
For <strong>HSBC</strong>, Corporate<br />
Susta<strong>in</strong>ability is about br<strong>in</strong>g<strong>in</strong>g<br />
social and environmental<br />
issues together with f<strong>in</strong>ancial<br />
performance to ma<strong>in</strong>ta<strong>in</strong> and<br />
grow a successful <strong>bus<strong>in</strong>ess</strong> for<br />
the benefit of our stakeholders.<br />
– We apply clear policies and<br />
processes to manage potential<br />
social and environmental risk <strong>in</strong><br />
our lend<strong>in</strong>g and other f<strong>in</strong>ancial<br />
activities <strong>in</strong> sensitive sectors.<br />
– We help our clients to seize<br />
the opportunities presented<br />
by the shift to a low-carbon<br />
economy.<br />
– We try to reduce our own<br />
environmental footpr<strong>in</strong>t<br />
and share good practice<br />
on this with our clients<br />
and other stakeholders.<br />
– We focus our community<br />
<strong>in</strong>vestment (philanthropic<br />
activities) on education<br />
and the environment.<br />
Our education programmes<br />
help to lift people out of<br />
poverty, build f<strong>in</strong>ancial<br />
literacy and promote<br />
environmental awareness.<br />
In <strong>Taiwan</strong>, besides its long-<br />
term sponsorship of Guandu<br />
Nature Park, <strong>HSBC</strong> launched<br />
a well-organised staff<br />
volunteer programme <strong>in</strong><br />
2005 encourag<strong>in</strong>g staff<br />
<strong>in</strong>volvement <strong>in</strong> a wide<br />
variety of environmental<br />
conservation and community<br />
service <strong>in</strong>itiatives.<br />
Key Bus<strong>in</strong>ess Development<br />
1984 Taipei Branch opened. Mult<strong>in</strong>ational Corporate Bus<strong>in</strong>ess<br />
<strong>in</strong>troduced<br />
1988 <strong>HSBC</strong> Securities <strong>Taiwan</strong> established<br />
1989 Kaohsiung Branch opened. Credit Card Acquir<strong>in</strong>g <strong>in</strong>troduced<br />
1991 Custody and Clear<strong>in</strong>g <strong>in</strong>troduced<br />
1993 Local Corporate Bus<strong>in</strong>ess launched<br />
1994 Taichung Branch opened<br />
1995 Credit Card Issu<strong>in</strong>g <strong>in</strong>troduced<br />
1996 Ta<strong>in</strong>an Branch opened<br />
1997 AssetVantage, Mortgages, and PowerVantage launched<br />
1998 Panchiao Branch opened<br />
1999 Taoyuan Branch opened. Insurance Brokerage launched<br />
2000 Chienkuo Branch opened. Syndicated Loan Bus<strong>in</strong>ess <strong>in</strong>troduced<br />
2001 <strong>HSBC</strong> Asset Management (<strong>Taiwan</strong>) Limited established<br />
Assumed Republic National Bank of New York, later<br />
<strong>in</strong>tegrated with <strong>HSBC</strong> Republic. Tienmu Branch opened<br />
2002 onl<strong>in</strong>e@hsbc launched. <strong>HSBC</strong> Premier <strong>in</strong>troduced<br />
2003 Smart Mortgage <strong>in</strong>troduced<br />
Nang Kang Central Process<strong>in</strong>g Centre established<br />
2004 Taipei Branch relocated<br />
2005 Agreed with Global Payments Inc. to establish a jo<strong>in</strong>t venture<br />
Global Payments Asia Pacific. Limited <strong>Taiwan</strong> Branch<br />
2006 Launched <strong>HSBC</strong> Direct, <strong>Taiwan</strong>’s first direct bank<strong>in</strong>g services<br />
2007 Acquired Chailease Credit Services Co., Ltd. and established<br />
<strong>HSBC</strong> Factors <strong>Taiwan</strong> Limited. Established <strong>HSBC</strong> Life<br />
(International) Limited <strong>Taiwan</strong> Branch. Announced the acquisition<br />
of the assets, liabilities and operations of The Ch<strong>in</strong>ese Bank<br />
2008 Completed the acquisition of the <strong>bus<strong>in</strong>ess</strong> and operations<br />
of The Ch<strong>in</strong>ese Bank. <strong>HSBC</strong>’s islandwide branch network has<br />
<strong>in</strong>creased from 8 to 34.<br />
2009 Obta<strong>in</strong>ed approval to set up a local subsidiary<br />
2010 <strong>HSBC</strong> Bank (<strong>Taiwan</strong>) Limited established
42<br />
Country Overview<br />
Capital city<br />
Area and population<br />
Language<br />
Currency<br />
International diall<strong>in</strong>g code<br />
National Holidays (2011)<br />
Bus<strong>in</strong>ess hours – general<br />
Bus<strong>in</strong>ess hours – bank<strong>in</strong>g<br />
Stock exchange<br />
Political structure*<br />
* Source: 2010, Government Information Office<br />
Taipei<br />
Area (<strong>Taiwan</strong> and associated islands):<br />
36,191 square kilometres<br />
Population:<br />
23.18 million (June 2011)<br />
Official: Mandar<strong>in</strong> Ch<strong>in</strong>ese;<br />
Others: <strong>Taiwan</strong>ese, Hakka, Austronesian languages, English<br />
New <strong>Taiwan</strong> Dollar (NT$)<br />
+886<br />
1 January Found<strong>in</strong>g Day of the ROC<br />
2 – 5 February Ch<strong>in</strong>ese New Year<br />
7 February Ch<strong>in</strong>ese New Year Holiday<br />
28 February Peace Memorial Day<br />
4 April Children’s Day<br />
5 April Tomb Sweep<strong>in</strong>g Day<br />
6 June Dragon Boat Festival<br />
12 September Mid-Autumn Festival<br />
10 October National Day<br />
(Source: 2010 Central Personnel Adm<strong>in</strong>istration)<br />
Monday – Friday 9:00-18:00<br />
(Source: 2010, Tourism Bureau)<br />
Monday – Friday 9:00-18:00<br />
(Source: 2010, Tourism Bureau)<br />
<strong>Taiwan</strong> Stock Exchange<br />
Multi-party democracy
44<br />
Contacts<br />
Richard Watanabe, Partner<br />
General L<strong>in</strong>e: +886 2 2729 6666<br />
Direct L<strong>in</strong>e: +886 2 2729 6704<br />
Email: richard.watanabe@tw.pwc.com<br />
http://www.pwc.com/gx/en/<br />
worldwide-tax-summaries<br />
Website: www.hsbc.com.tw<br />
Phone: +886-2-8072-3993<br />
Head Office: 14F, No. 333,<br />
Keelung Road, Sec. 1,<br />
Taipei City. <strong>Taiwan</strong>, R.O.C.<br />
1st Edition: December 2010<br />
2nd Edition: August 2011<br />
Copyright<br />
Copyright 2011. All rights reserved.<br />
‘PwC’ and ‘PricewaterhouseCoopers’<br />
refer to the network of member<br />
firms of PricewaterhouseCoopers<br />
International Limited (PwCIL), or,<br />
as the context requires, <strong>in</strong>dividual<br />
member firms of the PwC network.<br />
Each member firm is a separate legal<br />
entity and does not act as agent of<br />
PwCIL or any other member firm.<br />
PwCIL does not provide any services<br />
to clients. PwCIL is not responsible or<br />
liable for the acts or omissions of any<br />
of its member firms nor can it control<br />
the exercise of their professional<br />
judgment or b<strong>in</strong>d them <strong>in</strong> any way.<br />
No member firm is responsible or<br />
liable for the acts or omissions of any<br />
other member firm nor can it control<br />
the exercise of another member firm’s<br />
professional judgment or b<strong>in</strong>d another<br />
member firm or PwCIL <strong>in</strong> any way.