Foreign participation in companies is regulated in Taiwan by the Foreign Investment Act, and potential foreign founders have to obtain the approval by the Foreign Investment Commission and the Ministry of Economy of Taiwan before starting their activities in that country. In the variety of legal and organisational forms of companies permitted to be established by the law in Taiwan, foreign investors may be interested in such as:

• Limited Company
• Company Limited by Shares
• Foreign Company Branch

Limited Company

Limited Company may be established by one member (physical or legal person, resident or non-resident of Taiwan) and is characterised as follows:

• minimum charter capital is $NT 500’000 (US$1 is approximately $NT 32);
• if the charter capital exceeds NT$200 million and Taiwanese residents hold the major part of the company's capital, the company has to be registered as a public company. If the major part or the entire capital of the company is held by foreigners, this requirement of registration as a public company is not applicable;
• company members may not freely transfer their shares to third parties;
• company may be managed by one director (no more than 3 directors);
• directors are not required to be residents of Taiwan.

Company Limited by Shares

Company Limited by Shares is established by at least two shareholders – physical persons, or by one shareholder – a legal entity (resident or non-resident of Taiwan) and characterized as follows:

• minimum charter capital is $NT500’000;
• if the charter capital exceeds NT$200 million and Taiwanese residents hold the major part of the company's capital, the company has to be registered as a public company. If the major part or the entire capital of the company is held by foreigners, this requirement of registration as a public company is not applicable;
• shareholders may freely transfer their shares one year from the date of the establishing of the company;
• if Taiwanese residents hold the majority of the company's capital, 10% -15% of shares should be always reserved for free float to be purchased by the company’s shareholders and employees. If the major part or the entire capital of the company is held by foreigners, this requirement of reserving shares is not applicable;
• company is managed by the Board composed of at least three directors and one supervisor who represents shareholders’ interests on the Board;
• The Board elects the chairman who is responsible for company’s daily operations;
• at least half of the Board members need to be residents of Taiwan;
• directors may not take decisions by telephone or through an attorney in Taiwan, and all Board decisions need to be evidenced by directors' personal signatures.

Foreign Company Branch

Foreign Company Branch is an independent legal entity in Taiwan, however, the parent company is liable for the branch’s debts and obligations. To open a branch, the parent company has to obtain the approval by the Ministry of Economy of Taiwan and to register the branch with the local Bureau of Economic Development for obtaining the license. The branch name has to include the parent company’s name translated into Chinese.

The branch manager may be a foreign citizen if he/she obtains a work permit and a residence permit in Taiwan.

Those wishing to establish a business in Taiwan should be aware that obtaining the permits from the Government authorities to establish a local business takes a lot of time. For example, it takes approximately 60 days to register a branch, and up to five months to register a company with foreign investments.

Financial Statements and Taxes

All companies in Taiwan are required to maintain accounting records and to file annual financial statements certified by a local auditor.

Corporate tax rates in Taiwan vary from 0% (if the company's profit is no more than NT$50’000) up to 25% (if the company's profit is more than NT$100’000). Taiwanese companies pay taxes from their global income at three levels – Federal, Provincial (City) and Prefectorial (Municipal). However, if a company carries out its business activities outside Taiwan and, having generated a profit there, has paid a tax, the tax paid will be taken into account in calculating the tax to be paid in Taiwan.

A foreign company branch in Taiwan pays tax at source of income in Taiwan only.

Dividend tax is withheld at source.

VAT in Taiwan varies from 1% - on financial, insurance, brokerage services and securities, and up to 5% - on reinsurance services.

All Taiwanese companies pay payroll tax.

Companies registered in special scientific and industrial zones and making investments in high technology, have significant tax benefits.

Taiwan is not a tax heaven or offshore jurisdiction, and a concept of Taiwan tax exempt company (and/or Taiwan international business company (IBC), offshore company, trust, foundation etc. registration) does not exist in Taiwan as such. A company formation in Taiwan could be arranged with a professional registered agent providing incorporation, virtual office and other corporate services in Taiwan. To set up a company in Taiwan is possible by correspondence, but to open a bank account in Taiwan will, most probably, require a personal visit.

Taiwan Double Taxation Agreements

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