Taiwan is one of the most favorable nations to start a subsidiary business. The country has a robust and highly developed market economy that excels across many industries like automobiles, electronics, etc. Taiwan is the 18th largest country in the world regarding purchasing power parity. Hence, scaling up different kinds of industries is quite easy in Taiwan.
Taiwan earned its identity as the world’s most technologically advanced computer microchip maker globally. Hence, if you plan to set up a technology business, there is no better country than Taiwan. The country’s GDP stands at $828.6 billion, and the country ranks 21st in terms of GDP.
The country has an educated workforce, making it ideal for business expansion. You can easily onboard a workforce from the country who can contribute to scaling up your business.
Read on to learn everything about setting up a subsidiary business in Taiwan.
What are the Types of Subsidiaries in Taiwan?
Before setting up a subsidiary in Taiwan, you must be aware of the type of companies you can incorporate into the country. Let’s look at some of the commonly incorporated company types in Taiwan.
Limited Company
A limited company in Taiwan is one of the most popular types of business.
- The shareholders are only liable for the extent of capital they bring into the company.
- These companies are ideal for small to medium-sized investors who bring in a decent amount of capital to start the business.
- You need at least one natural member to incorporate a limited company.
- Before the transfer of shares, a shareholder must seek the permission of all the shareholders.
Company Limited by Shares
A limited company and a company limited by shares are different concepts in Taiwan. Both of these business types are pretty popular in the country.
- In these businesses, too, the liability of the shareholders is limited to the capital they bring to the company.
- The company must have a status of a legal person.
- When shareholders transfer their shares, they must pay a security transaction tax of 0.3%.
- Unlike a limited company, the shareholders may have multiple voting rights depending on their shareholding pattern.
How to Set Up Subsidiaries in Taiwan?
You must follow a few steps while setting up a subsidiary in Taiwan, which are as follows:
Step 1: Decide on the name of the company
- You must submit an online application to look for a name and reserve it for a business. You can also submit the application to the Department of Commerce of the Ministry of Economic Affairs offline.
- The application is valid for the next six months.
- You must submit the Reservation of Company Name and Business Scope Form to reserve the name.
- The entire process will cost NT$300 if you complete the process offline. The online process costs NT$150.
Step 2: Get approval on foreign investment
- For all foreign subsidiaries, you must take approval from the Investment Commission of MOEA.
- Next, appoint a local agent from Taiwan to submit the application.
- You must get all the documents authenticated by a government agency, and all the documents should be duly translated into the Chinese language.
Step 3: Investigation of investment capital
- The Investment Commission then checks the components of the share capital.
- The commission approves the foreign investment, and the company has to remit the capital.
Step 4: Register the company
- After the shareholders approve the articles of incorporation, the company should be registered in the next 15 days.
- In this step, you must submit all the essential documents, the application form, and the consent letter from the chairperson of the board of directors in this step.
- You must pay 1/4000th of the company’s authorized share capital for registration.
Step 5: Fill up the application for the English name
- Reserve a trading name for the company. This step is only required if your business imports and exports overseas.
- You must submit the application form for import and exporter registration to the MOEA.
Step 6: Submit additional documents
- You must submit all the essential incorporation documents to the country’s tax authority.
- In most cases, the local agent from Taiwan automatically completes the step post the company registration.
Once you complete all the steps stated above, you must also open a commercial bank account in Taiwan for all the day-to-day transactions.
Benefits of Setting Up a Taiwan Subsidiary
There are several benefits of starting a subsidiary business in Taiwan which include:
- Anyone can register a subsidiary in Taiwan, irrespective of their nationality. Hence, there are no restrictions on the nationality of the shareholders.
- Taiwan ranks at the 15th position in the ease of doing business index. Hence, setting up a subsidiary business in Taiwan is simple.
- Taiwan is quite close to China and several other prominent Asian countries. Hence, you can also expand the company and its operations to other nations.
- A subsidiary business in Taiwan can operate independently without the interference of the Government. Hence, you can take control of the structure and the type of company you want to incorporate.
- A subsidiary may be eligible for tax incentives if specific requirements are met under the Taiwanese Act for Industrial Innovation and other statutes.
Documents to Prepare When Opening a Subsidiary in Taiwan
You must submit several documents to incorporate a subsidiary business in Taiwan. Most of these documents include the following:
For Foreign Investment approval
- Form A application
- Approved Reservation of Company Name form
- A document stating the shareholders and their capital contribution
- A Power of Attorney gives the representative authorization to become a corporate investor.
- A Certificate of Incorporation
- Register of shareholders
- A corporate investor’s power of attorney assigning a local representative to handle the foreign investment application procedure
- Passport copy of the representative of the company
Investment Capital examination
- Form C application
- Letter of Approval of foreign investment from the Investment Commission of MOEA
- Inward Remittance Advice copy from the bank
- Foreign Exchange Memorandum copy from the bank
- Copy of a bank passbook
Company registration
- Application form
- Approval letters from different Government Authorities
- Minutes of the Incorporation meeting
- Incorporation Registration Form
- Articles of Incorporation
- Name, address, and other essential details of the shareholders
- Consent letter from the chairman of the board of directors
- An identification card or passport of all the shareholders, directors, and managers
What Business Forms Can Taiwan Subsidiaries Take?
As Taiwan ranks relatively high on the ease of doing business index, the country is flexible regarding the forms a business can take. You can incorporate any legal business and commence your operations in Taiwan legally.
You can incorporate a wholly-owned or partially-owned subsidiary business in Taiwan based on your requirements and financial restrictions. A partially-owned subsidiary business can have multiple foreign shareholders. However, it is essential to appoint a local agent to help you with the incorporation process.
Both limited companies and companies limited by shares are popular in Taiwan. You can choose from these options based on the kind of ownership structure you want to have for your company.
Taiwan Subsidiary Laws
The Taiwan government’s relevant subsidiary requirements must be followed to open a subsidiary there. These include:
- You must collect the certificate of incorporation and register the business with the country’s tax and social security system.
- Onboard all the employees to the social security system.
- You must pay all the company employees in the local currency of Taiwan.
- Pay all the fees and registration charges applicable during the company’s incorporation process.
- Before beginning your business in Taiwan, you should obtain the necessary paperwork from the appropriate authorities, including the company identity number.
- Foreign investors opening a subsidiary business in Taiwan must reach out to the Ministry of Economic Affairs and undergo the process of investment approval.
Post Incorporation Compliance
You must undergo compliance for a foreign subsidiary in Taiwan once your company is duly registered and incorporated. Some of the post-incorporation compliance requirements include the following:
- To conduct a large-scale manufacturing process in the country, you must apply for factory registration in industrial parks.
- You must submit all the supporting documents to the agency of the National Tax Authority of Taiwan.
- You must maintain all the accounting records in line with Taiwan’s Generally Accepted Accounting Principles.
- You must decide on a date and pay all your taxes according to the legal requirements in Taiwan.
- A company limited by shares must mandatorily conduct an annual general meeting for all the shareholders.
Taxes on Subsidiaries in Taiwan
All subsidiary businesses in Taiwan must pay a corporate income tax on the revenue generated from their operations in Taiwan. The corporate income tax in Taiwan stands at 20%. However, resident companies with a taxable income of less than TWD 120,000 are not required to pay any taxes.
If a non-resident company has no fixed place of business and a Taiwan agent, they have to pay a withholding tax on the income from the country. The tax rates may be reduced depending on Taiwan’s treaties with the country where the parent company is situated. Any corporation’s current earnings not dispersed before the end of the following year are subject to an extra 5% profit retention tax.
Tax Incentives for Businesses Opening a Subsidiary in Taiwan
Taiwan has several incentives for subsidiaries in specific areas like export processing zones, free trade zones, etc. Also, if your business works in an area currently being prioritized by the Government, like biotech, you will be eligible for several other tax incentives.
Companies (domestic and foreign) may apply for an exemption from income tax on the proceeds from the sale of goods if they solely carry out preparatory or ancillary activities within Taiwan and engage in, or appoint a free-trade-zone entity to engage in, procurement, importation, storage, or delivery activities within a free-trade-zone.
Other Important Considerations
Establishing a subsidiary business in Taiwan takes a significant amount of time and money. To concentrate on the business expansion, you must travel to Taiwan frequently to complete all the legalities and the procedures of incorporating the business into the country. If your parent firm keeps you busy, you can also delegate the responsibility to another business leader or, if you’d choose, work alongside them.
You must also adhere to your spending plan and finish establishing a subsidiary company in Taiwan. Therefore, make a budget before establishing a foreign subsidiary in Taiwan because it will aid in keeping things under control.
How Multiplier’s Employer of Record Can Help You Hire and Expand in Taiwan
Setting up a subsidiary business in Taiwan can be challenging as you don’t have a good hold of the labor laws and the local ordinances.
Why not take help from a seasoned PEO like Multiplier that can help you overcome the growth barrier? You needn’t worry because Multiplier handles all the formalities needed to enter a new market. Our knowledgeable professionals ensure that Taiwan’s labor laws and conventions are strictly adhered to. With an EOR like Multiplier, you can quickly create international teams and seize new market opportunities.