Taiwan with a population of 23 million and few natural resources, has become a high-tech power-house boasting the world’s nineteenth-largest economy in the past 20 century. It is a major trad- ing partner of the United States, and ranks among our top ten export markets for both agricul- tural and non-agricultural products. Per capita GDP and household disposable income rank among the highest in Asia, making Taiwan an attractive consumer goods market despite its relatively small population.
Taiwan's economy has gradually shifted from labor-intensive industries to capital and technology-intensive industries over the last few decades. In 2004 the industrial sector contributed 29.54 percent to Taiwan's GDP. However, the percentage of Taiwan's workforce employed in the sector rose to 35.2 percent while the manufacturing sector, including high-tech industries, accounted for over 86 percent of Taiwan's total industrial production.
Taiwan's thriving service sector, particularly in the financial and stock market areas, has attracted many young people in recent years. In 1988, the service sector surpassed the manufacturing sector in attracting more of the total work force. By the end of 2003, over 57.90 percent of the island's 9.57 million employed persons were working in the service sector.
The growth of knowledge-intensive industries is increasing demand for highly specialized technical and managerial personnel. To ensure that Taiwan's workforce meets these challenges, educational and training policies and measures are being implemented throughout Taiwan to cultivate local talent for these industries. In addition to continued enhancement of programs at science and technology universities, new programs for professional degrees and certifications are being established by both educational organizations and professional associations. The government also continues to implement programs to bring back Taiwanese scientists and researchers and to attract high caliber international talent, especially for local R&D centers. Raising the level of English instruction and certifying English competence is also seen as major educational initiatives to make sure that Taiwan's workforce meets the needs of companies engaged in international business.
-Business Investment Risk
According to the BERI (Business Environment Risk Intelligence) Report, Taiwan Ranks 5th in the World for Business Environment, 3rd in the Asia.
Business Environment Risk Intelligence’s Business Environment Risk Report contains three major ranking indicators to evaluate a country's business environment: the Operations Risk Index, Political Risk Index, and Remittance and Repatriation Factor Index. The report is seen by multinational companies as an indicator of profitability and investment risk in various countries. BERI released their first Business Environment Risk Report for 2005, in which Taiwan tied with Norway for 5th place with a Profit Opportunity Recommendation score of 72. Taiwan's score and ranking remain the same from the last report, placing behind only Switzerland, Singapore, the Netherlands, and Japan in the global rankings.
Taiwan once again received a 1A rating in the report, indicating that it is a low-risk country suitable for investment. According to the report, BERI believes that the risk of a military threat from China is decreasing, with society showing signs of stability. The report also noted that investors continue to hold confidence in Taiwan, with Foreign Direct Investment expected to continue growing.
Taiwan ranked 3rd globally in the Operations Risk Index, and 2nd amongst Asian nations, trailing behind Singapore and placing ahead of Japan and Malaysia. BERI believes that Taiwan's operations risk continues to stabilize; according to the American Legacy Foundation, Taiwan's economy is the 27th freest in the world and with continued reforms, its international image will improve.
The following are the most commonly established entities for foreign investment in Taiwan:
1. Company ( Subsidiary)
2. Branch Office
3. Representative Office
4. Sole Proprietorship
Of note, joint ventures are not juridical entities in Taiwan.Deciding which type of business entity to establish in Taiwan should be made with reference to the scope and activities of the proposed business and the legal and taxation implications for investors.
A Taiwan-based law and/or accounting firm may be helpful in determining the best option for your investment project.
Branch offices and companies (subsidiaries) are most commonly formed as either a limited company or a company limited by shares. A limited company is a company organized by more than 1 shareholder; each shareholder is liable for the company in an amount that is limited to the amount of contributed capital. A company limited by shares is a company organized by more than 2 persons or 1 legal entity as shareholders with the total capital of the company being divided into shares and each shareholder being liable for the company in the amount of the shares subscribed.
Note on application language and documentation verification: All applications must be completed in Chinese and documentation written in a foreign language (i.e. not Chinese) should attach a Chinese translation. In some instances, documentation in English may be accepted. Notarization and/or verification of documents by the Taiwan, ROC consulate in the applicant's home country is also often required. Such requirements are indicated in the procedures described below.
Securities investment fund companies and securities investment advisory/management firms can establish businesses entities in Taiwan but must apply for special permits requiring detailed infor- mation regarding the proposed business. To obtain such a permit, the business must meet shareholding, management, and capitalization requirements.
Foreign nationals planning on visiting or residing in Taiwan should apply for a visa for based on the length of stay and reason for visiting or residing in Taiwan. Foreign nationals who wish to visit Taiwan for shorter stays and who do not intend to take up employment should review the visa information on Visa-free Entry, Landing Visas and Visitor Visas included in the Shorter Stays section below.
Foreign executives and staff planning to work in Taiwan, on the other hand, must obtain permission to work in the form of a "work permit" before undertaking employment and taking up residence in Taiwan. Foreign executives and staff who are married to ROC nationals are subject to different immigration and work rules. And, finally, the dependents of foreign nationals legally residing and/or working in Taiwan are also subject to a different set of immigration and work rules. The Longer Stays section below addresses residency and work permit applications as related to these three situations. Please note, however, the information provided herein applies primarily to work permits and residency visas for foreign executives and professional or technical staff and not for foreign nationals being hired under approved guest worker programs.
Being the responsible person of a sole proprietorship does not automatically confer a foreign national with the right to reside or work in Taiwan, as such rights are contingent upon the investment amount and/or immigration status of the foreign national. Please refer to the section Visas, Residency and Work Permits for more information.
-Business Tax (VAT)
Regarding business tax, most of the business entities are subject to value-added tax (VAT) of 5% on the gross turnover except for financial institutions. The VAT does not result in an actual tax burden to the enterprises. As for customs duties, the average normal and effective tariff rates have been gradually reduced on a yearly basis following Taiwan's admission to the WTO.
-Business Income Tax
The max marginal Income Tax rate of companies is 17%. Especially for companies in high-tech industries, the effective tax rate was much lower than 17% because of available tax incentives. Besides income tax, other major taxes for com-panies are business tax, customs duty and commodity tax on certain goods.
The amount of basic tax of an enterprise shall be the amount of basic income as calculated in accordance with the Income Tax Law, with a deduction of NT$2,000,000, and then multiplied by the basic tax rate of 10 %.
Beginning from the year 1998, if there is any surplus earnings of the then current year not distributed by a profit-seeking enterprise, an additional profit-seeking income tax shall be levied at the rate of ten percent on such undistributed surplus earnings. The term "undistributed sur-
plus earnings" referred to the amount of income after tax in accordance with the Commercial Accounting Act, less some adjustment items. In the case where the Ｓfinancial statements in the current year of an enterprise were duly audited and certified by a certified public accountant, shall be based on the amount which was assessed by such certified public accountant.
Foreign nationals are subject to 20 % of income tax withheld upon payment, except for those who stay in Taiwan for over 183 days per year. For those stay over 183 days, it is required to file for Personal Income Tax Return with marginal tax rate from 6% to 40%.