Basic business structure in Taiwan

Once you have already understood Taiwan’s business environment, it’s time to put structure to your enterprise and register it. Learn how to hire yourself, your co-founders, and employees. Follow the rules and have a hassle-free setup for your business.

Define the type of business entity you want to set up

According to accounting firm FDI China, the most common types of foreign entity registrations are the Branch and the Subsidiary (Limited Liability Company and Company Limited by Shares). Below are the agency’s definitions and insights on each type of entity. Some of the points were reworded and rearranged for clarity. We’ve also included some insights, where appropriate, from the ‘Doing Business in Taiwan’ document by business adviser Grant Thornton, Taiwan.

Branch:

A Branch structure is not considered as a legal entity. It operates on behalf of the parent company, meaning that the net profit after income tax payment can be retained to the parent company without additional income taxation. In addition, a Branch entity appoints an individual as its agent for litigious and non-litigious matters, and a branch manager.

FDI China’s tip: We recommend to our clients to register a branch when the intention is to operate in regulated industries such as banking and financial services.

Requirements and benefits for setting up a branch

• -Company Name: Translate parent company’s name for inspection
• -No minimum capital requirements
• -Permission for business / import and export
• -Direct issuance of sales invoice to the client by your branch
• -Payment of expenditures and inventory purchasing
• -Enterprise income tax: 17%
• -Business bank account required
• -Physical office required

“While many foreigners choose to invest in Taiwan via branch offices of foreign companies for tax reasons (branches are exempt from withholding tax on repatriated income), anyone seeking to open a branch in Taiwan should take precautions to limit the assets housed in the branch’s foreign head office,” Grant Thornton, Taiwan.

Subsidiary: Limited Liability Company (LLC)

A Limited Liability Company (LLC) structure is a separate legal entity and independent domestic company. In Taiwan, an LLC has after-tax (17%) operating income, which can be wired out to the parent company by paying 20% withholding tax. In addition, this type of company must have at least one shareholder and director.

FDI China’s tip: We recommend to our clients to register a Limited Liability Company (LLC) in Taiwan for foreign investors due to its flexibility and reduced administrative requirements. Multinationals usually set up this type of business structure.

Requirements and benefits for setting up an LLC

• -Company Name: need to register a new name in Taiwan
• -No minimum capital requirements
• -Permission for business / import and export
• -Statutory audit / annual tax required
• -Enterprise Income tax on distributed earnings: 20%
• -Enterprise income tax: 17%
• -Business bank account required
• -Physical office required

Subsidiary: Company Limited by Shares (CLS)

A Company Limited by Shares structure is a separate legal entity and independent domestic company. Unlike the Limited Liability Company (LLC), this entity is limited by shares; meaning that it is the shareholders’ obligation to pay the company for the shares they own. In addition, it needs to be formed by two or more shareholders and at least three directors.

Requirements and benefits for setting up a CLS

• -Company Name: need to register a new name in Taiwan
• -No minimum capital requirements
• -Permission for business / import and export
• -Statutory audit / annual tax required
• -Enterprise Income tax on distributed earnings: 20%
• -Enterprise income tax: 17%
• -Business bank account required
• -Physical office required

Difference between the CLSs and LLCs

CLS must have at least two shareholders. This type of corporation must have at least three directors, but it does not have a maximum number of shareholders. For LLCs, having one shareholder is sufficient, but the maximum number of shareholders is only 50.

There is no minimum capital requirement for CLS and LLCs unless the entity is involved in an industry with a required minimum capital set by the competent authority or if it is going to employ a foreigner to work in Taiwan.

Representative office vs Sole partner

Meanwhile there are other business entity types in which you can register your company: a representative office and a sole partner.

A representative office is a separate legal entity representing a foreign company in Taiwan. This business solution is known as an easy and inexpensive method to establish a legal entity in the country. This is ideal for foreign businesses which do not intend to conduct actual business in Taiwan but want to source data and acquire goods from the country. This is also suitable for startups and businesses that offer offshore trade or consultancy services.

The Statute for Investment by Foreign Nationals (SIFN) also permits foreigners to invest in Taiwan on their own or through partnerships with one or more people. These partnerships, however, are limited. They are not allowed to hire foreigners as workers and all partners are required to submit a personal income tax return. A limited partnership in Taiwan is considered a tax-transparent entity but it is not subject to corporate income tax. Whether it is a limited company or a company limited by shares, there is no minimum capital requirement for both limited partnerships and sole proprietorships.