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Doing business in Taiwan

This publication is

a joint project with



Executive summary 4

Foreword 6

Introduction - Doing business in Taiwan 8

Conducting Business in Taiwan 12

Taxation in Taiwan 14

Audit and Accountancy 29

Human Resources and Employment Law 31

Trade 36

Banking in Taiwan 38

HSBC in Taiwan 40

Country overview 42

Contacts 44

Disclaimer

This document is issued by HSBC

Bank (Taiwan) Company Limited (the

‘Bank’) in Taiwan. It is not intended

as an offer or solicitation for business

to anyone in any jurisdiction. It is not

intended for distribution to anyone

located in or resident in jurisdictions

which restrict the distribution of this

document. It shall not be copied,

reproduced, transmitted or further

distributed by any recipient.

The information contained in this

document is of a general nature

only. It is not meant to be

comprehensive and does not

constitute nancial, legal, tax

or other professional advice. You

should not act upon the information

contained in this publication without

obtaining specic professional

advice. This document is produced

by the Bank together with

PricewaterhouseCoopers (‘PwC’).

Whilst every care has been taken

in preparing this document,

neither the Bank nor PwC makes

any guarantee, representation or

warranty (express or implied) as

to its accuracy or completeness,

and under no circumstances willthe Bank or PwC be liable for any

loss caused by reliance on any

opinion or statement made in this

document. Except as specically

indicated, the expressions of opinion

are those of the Bank and/or PwC

only and are subject to change

without notice.

The materials contained in this

publication were assembled in

November 2010 and were based

on the law enforceable and

information available at that time.

Contents



Located in the heart of the

Asia Pacic region, Taiwan is

a strategic platform connecting

some of the largest economies,

including US, Japan and

China. Based on International

Monetary Fund statistics,

Taiwan is currently the 26th

largest economy in the world,

and consistently scores very

highly in global competitiveness

rankings by leading economic

organisations such as the World

Economic Forum (placingTaiwan 12th among the 133

world economies covered

in 2009).

This general guide highlights

some of the areas that

investors should be aware of

when doing business in Taiwan,

although professional advice

may be required in specic

circumstances. Below are a

few competitive advantages

for investors conducting their

business in Taiwan:

• Attractive incentives are offered

by the government to make

Taiwan more investor-friendly,

with foreign investors enjoying

the same rights and privileges

as local investors.

• The reduced corporate income

tax rate, from 25% to 17%,

applies to the tax year 2010

and onwards.

• Personal taxation depends

on the individual’s length of

stay in Taiwan and whether

they are domiciled in Taiwan.

• Recently, the government

has been promoting the

development of six emerging

industries (biotechnology,

medicine and health care,

culture and creativity, tourism,

green energy and high-end

agriculture) and four ‘intelligent’

industries (cloud computing,smart electric vehicles, smart

green building and patent

commercialisation), and offering

new incentives to attract

domestic and foreign private-

sector investment in these

target sectors.

• The improvement in relations

with China, the signing of

the Economic Cooperation

Framework Agreement (‘ECFA’)

between China and Taiwan,

continued deregulation and

streamlined procedures for

setting up operations on the

island, along with a series of

tax reforms, have made Taiwan

a more attractive place for

business investment.

Executive summary

4



The global focus on emerging

markets is greater than ever.

This is particularly true of the

Greater China region, in which

Taiwan is a key constituent.

As the world’s leading emerging

markets bank, HSBC is the

ideal partner to enable your

business to achieve full

potential in this exciting area.

HSBC has been in Taiwan

since 1984.

We now have 40 brancheslocated across the Island and

will expand this to 47 branches

by the end of 2011. As a sign

of our long-term commitment

to Taiwan, HSBC locally

incorporated on the 1st of May

2010 and HSBC Bank (Taiwan)

Limited is now a wholly-owned

subsidiary of the HSBC Group.

HSBC Group has been doing

business in the Greater China

region since 1865.

We have a comprehensive

network across Asia Pacic

with major presences in Hong

Kong SAR and mainland China.

Looking further aeld to other

major emerging markets, HSBC

is well established in both the

Middle East and Latin America,

both of which have increasingly

important links with the Greater

China region and Taiwan.

The purpose of ‘Doing Business

in Taiwan’ is to help you gainvaluable insights into the Taiwan

market and unlock its very

signicant potential. The guide

has been co-written by HSBC

and PricewaterhouseCoopers

(‘PwC’). Like HSBC, PwC has

a strong global network and

understanding of the Greater

China region.Together we

possess a wealth of experience

to support your ambitions in

this market.

On behalf of HSBC, I hope that

you nd this guide useful and

that we have a chance to be

your business partner in Taiwan

and beyond.

ForewordJohn Li President & CEO

HSBC Bank (Taiwan) Limited

6



Taiwan is one of the world’s

trading powerhouses and offers

one of the most favourable

environments for investment

in Asia.

Industrial Structure

Taiwan currently is the 26th

largest economy in the world,

according to International

Monetary Fund statistics,

and consistently scores very

highly in global competitivenessrankings by leading economic

organisations such as the World

Economic Forum (placing

Taiwan 12th among the 133

world economies covered

in 2009).

Since the 1950s, Taiwan

has evolved from an agrarian

economy based on rice and

sugar to one focused on

capital- and technology-

intensive industries, as

well as creative industries.

Agriculture now constitutes

just 1-2% of gross domestic

product, down from 35% in

1952, while manufacturing

and services account for

30% and 69% respectively.

Taiwan is now one of the

world’s largest manufacturers

of computer-related products,

and has become a leading

global producer of

semiconductors and liquid

crystal display (LCD) products.

In the late 1980s, facing rising

costs, Taiwan’s manufacturing

industries began to move

their production bases

overseas. Initially, most

relocated to countries in

South East Asia, but after

Taiwan’s government be gan

to ease restrictions on

economic ties with the People’s

Republic of China in the early

1990s, China became the

investment location of choice.

High-tech rms have since

joined more labour-intensive

industries in shifting capacity

to China, encouraged in partby the Taiwan government’s

gradual easing of restrictions

on technology transfers

to the mainland.

Not withstanding the industrial

migration to China, Taiwan

remains an important hub

for high-tech sector activities.

Production of higher-end

goods such as semiconductors

and LCDs has largely remained

in Taiwan, as have local rms’

R&D facilities. The government

has also encouraged

multinational companies

to establish their regional

R&D centres on the island.

In addition to the high-tech

sector, the Taiwan government

has successfully encouraged

the growth of a domestic

petrochemicals industry.

Other important industries

include cars (mostly auto

electronics, components

and assembly), steel, textiles,

plastics and machinery.

More recently, the

government has been

promoting the development

of six emerging industries

(biotechnology, medicine

and health care, culture and

creativity, tourism, green energy

and high-end agriculture) and

four ‘intelligent’ industries

(cloud computing, smart electric

vehicles, smart green building

and patent commercialisation),

and offering new incentives

to attract domestic and foreignprivate-sector investment

in these target sectors.

International Trade

Foreign trade has been

the engine of Taiwan’s rapid

economic growth since the

1960s. The economy remains

export oriented, so much so

that Taiwan depends on an open

world trade regime and remains

vulnerable to downturns in

the global economy. In 2009,

Taiwan was ranked the world’s

18th largest trading entity,

according to the World Trade

Organisation (WTO). Bilateral

economic relationships with

other countries have beneted

from Taiwan’s membership of

the WTO (since January 2002,

under the title of ‘The Separate

Customs Territory of Taiwan,

Penghu, Kinmen and Matsu’) by

further deepening its integration

into the global economy and

opening up its domestic

market to foreign investment,

products and services.

IntroductionDoing business in Taiwan

8



In January 2009, Taiwan

ofcially joined the WTO’s

Government Procurement

Agreement, which now grants

foreign contractors access

to procurement opportunities,

such as the ‘i-Taiwan 12

Projects’ – the ‘i’ indicating

an emphasis on investment

and infrastructure – which

the government launched in

2009 to stimulate the island’s

recession-hit economy.

Foreign Investment

Taiwan welcomes foreign

direct investment, except

in a limited number of

industries involving national

security and environmental

protection. Liberalisation has

reduced the ‘negative’ list

for investment by foreigners

and overseas Chinese – which

can be found at www.moeaic.

gov.tw – to less than 1% of

manufacturing categories

and less than 5% of service

industries. Also, most foreign

ownership limits have been

removed, though several

restrictions still remain

on mainland Chinese

investment into Taiwan.

The improvement in

relations with China,

continued deregulation

and streamlined procedures

for setting up operations

on the island, along with a

series of tax reforms, have

made Taiwan a more attractive

place for business investment.

Its 2009 ranking in the

World Bank’s ‘Ease of Doing

Business’ index jumped 15

places to 46th place among

the 183 territories covered.

The government also offers

various attractive incentives

to make Taiwan more

investor-friendly, with

foreign investors enjoying

the same rights and privileges

as local investors. Theseincentives are generally in

the form of tax breaks aimed

at encouraging investors

to step up their capital

investment R&D and human

resource cultivation in Taiwan.

Most of the tax breaks

were previously offered

under the Statute for Upgrading

Industries, which expired at

the end of 2009. This law has

since been replaced by a new

Statute for Industrial Innovation,

which retains tax breaks for

investments in R&D and

innovation. Additional incentives

are available under the Statute

for Investment by Foreign

Nationals/Overseas Chinese,

the Business Mergers and

Acquisitions Act, the Financial

Institutions Merger Act and

other laws and regulations.

PrincipalGovernment Agencies

For companies looking to do

business or invest in Taiwan,

the main regulatory agencies

and their areas of jurisdiction

are as follows:

Ministry o Economic Aairs

The MOEA is responsible

for issuing business laws

and regulations. Four of its

most important agencies for

investors are the Department

of Commerce, Department

of Investment Services, the

Investment Commission, and the

Industrial Development Bureau:

• Department o Commerce

reviews applications for

company registration, includingthe establishment of branch

ofces and subsidiaries of

foreign-owned entities.

• Department o Investment

Services promotes and

facilitates foreign investment

in Taiwan, and also acts as a

coordinator between investors

and all agencies involved in

the investment process.

• Investment Commission

is responsible for matters

relating to the screening and

approval of inward investment

and technical cooperation

by foreigners and overseas

Chinese, as well as outward

investment from Taiwan.

• Industrial Development

Bureau is responsible for

promoting industry upgrading

and providing comprehensive

assistance to investors to

overcome investment obstacles.

Bureau o Foreign Trade

The BOFT is an agency of the

MOEA charged with executing

trade policies and promoting

trade. It is responsible for

regulations covering all import

and export activities, and for

supervising the import and

export of controlled items.

Taiwan Intellectual

Property Ofce

The TIPO is an agency

of the MOEA and deals

with patent, trademark and

copyright matters, as well

as the enforcement ofintellectual property rights.

Financial Supervisory

Commission

The FSC is an independent,

cabinet-level authority charged

with the supervision and

examination of the banking,

securities and insurance

industries, as well as nancial

holding companies. The FSC

comprises four bureaus:

Monetary Affairs, Securities

and Futures, Insurance

and Examination.

Ministry o Finance

The MOF is responsible

for the administration of

taxation, customs and the

national treasury, as well

as the management of state

property. The Taxation Agency

is an administrative authority

directly subordinate to the

MOF and is in charge of

taxation matters, including

tax auditing. Five tax collection

agencies are also under the

supervision of the MOF.

Fair Trade Commission

The FTC is in charge of

competition policy and fair

trade law. It also investigates

and handles various activities

that may impede competition,

such as monopolies, mergers,

and restraints on competition

or unfair trade practices.

Food and Drug

Administration

Taiwan’s FDA was formally

inaugurated on 1 January 2010and integrates four existing

agencies under the cabinet-

level Department of Health.

The FDA’s responsibilities

cover the licensing and

inspection of food and

pharmaceutical products

in Taiwan.

Environmental

Protection Administration

The EPA is the agency

responsible for protecting

and conserving the natural

environment in Taiwan.

It sets pollution control

regulations and carries

out various programmes

to monitor and protect

the environment.

Council or Labour Aairs

The CLA is in charge of

administering labour policies

and regulations covering labour

rights, labour security, labour

insurance, work quality, and

so on. It is also responsible

for issuing work permits for

foreign professionals.

10



Foreign investors that need

to have a physical presence

in Taiwan may choose

between a company, branch,

representative ofce or job-site

ofce at the formation stage:

Company (subsidiary)

A company is an incorporated

entity with a legal status

separate and distinct from

its owners that allows

it to sue and be sued inits own name. Taiwan’s

Company Law provides

for four organisational forms:

• Unlimited company:

A company organised by

two or more shareholders

who bear unlimited joint

and several liability for

the discharge of the

company’s obligations;

• Unlimited company with

limited liability shareholders:

A company organised by

one or more shareholders

of limited liability. Shareholders

with unlimited liability bear

unlimited joint and several

liabilities for the obligations

of the company, while

shareholders with limited

liability may be held liable

up to the amount of capital

each has subscribed;

• Limited company: A company

organised by one or more

shareholders, with the liability

of shareholders limited to the

respective amounts of capital

they have subscribed; and

• Company limited by shares:

A company organised by two

or more shareholders, or one

governmental or corporate

shareholder, with the liability

of shareholders limited to the

amount of share capital eachhas subscribed.

Except in certain restricted

industries, foreign investors

are generally allowed to set

up companies in any of the

above classes after obtaining

approval from the Ministry of

Economic Affairs’ Investment

Commission, (MOEAIC). Any

company that receives approval

from the MOEAIC is called a

Foreign Investment Approved

(FIA) company.

Branch

A foreign company may

open a branch ofce to

do business in Taiwan after

obtaining recognition from

the Ministry of Economic

Affairs (MOEA) and completing

the procedures for branch

ofce registration. To receive

recognition, a foreign company

must have its incorporation

registered in its own country

and conduct its businessoperations there. There is

no minimum working capital

requirement if the branch’s

activities relate to international

trade, but a foreign company’s

head ofce must remit

sufcient funds for the operation

of the branch. It must also

appoint a litigious and non-

litigious representative and

a branch manager, who may

be the same person and may

be either a Taiwan citizen

or a foreign national.

Conducting business in TaiwanRepresentative Ofce

The option of a representative

ofce is available to foreign

companies that do not

intend to transact business

in Taiwan, but intend to

conduct limited acts of a legal

nature relating to their business.

If a foreign company needs

its representative to reside

in Taiwan most of the time,

it can apply to the MOEA to

establish a representativeofce. A representative acts

as the company’s legal agent

for such matters as obtaining

quotations, concluding

purchase contracts and

procuring goods.

Job-site Ofce

A foreign enterprise

intending to contract long-term

construction work in Taiwan

may nd it preferable to set

up a local job-site ofce. A

job-site ofce need only apply

for business registration, not

corporate registration, and is

allowed to make purchases

and issue government uniform

invoices (GUIs). However,

it has the usual tax-withholding

obligation and must pay

business tax (i.e., value-added

tax, or VAT) and income tax.

Forms of business

12



Taxable

Income

Tax

Rate

Up to

NT$120,000

0%

NT$120,000

and over

17%

Taxation in TaiwanCorporation Tax

Scope and Rates

Taiwan’s income ta x system

consists of individual income

tax and prot-seeking

enterprise income tax

(corporate income tax).

The term ‘prot-seeking

enterprise’ refers to any entity

that engages in prot-seeking

activities, including companies,

sole proprietorships,

partnerships and other forms

of business organisations.

Any company operating

within the territory of Taiwan

must pay income tax, except

where exemptions are

provided. A company’s tax

status determines how and

at what rate the income tax

is levied. The tax status of

corporate taxpayers is divided

into three categories:

• A resident enterprise that

has its head ofce located

in Taiwan (including the locally

incorporated subsidiaries

of foreign companies) –

subject to income tax

on its worldwide income.

• A non-resident foreign

enterprise with its head

ofce outside Taiwan but

a permanent establishment

(PE) in Taiwan (such as

a branch ofce) – subject

to income tax only on its

Taiwan-source income.

• A non-resident foreign enterprise

with no PE in Taiwan – subject

to withholding tax at source.

Under Taiwan tax law, the PE

concept refers to a xed place

of business or a business agent.

Corporate Income Tax Rates

On 28 May 2 010, Taiwan’s

Legislative Yuan (parliament)

amended the Income Tax

Act to reduce the corporate

income tax rate to 17% from

20%, having previously cut

the rate from 25% a year earlier.

The reduced tax rate applies

to the tax year 2010 and onward.

The additional cut was made

in response to the elimination

of several tax incentives under

the Statute for Industrial

Innovation, which was ratied

by the Legislative Yuan on

16 April 2010.

In addition to normal tax

calculations, Taiwan resident

companies and foreign

companies with a PE in Taiwan

are subject to a separate

alternative minimum tax

calculation under the Income

Basic Tax Act.

14



Taxable Corporate Income

Non-deductible Items

Expenses and losses unrelated

to the business operations of

a company are not deductible.

Unrealised expenses and

losses may not be claimed

as tax deductible items

except in the case of

allowances for inventory

devaluation, provisions for

employee pension reserves,

employee retirement funds,

labour pension reserves,allowances for doubtful

accounts and provisions

for foreign investment losses,

as specied in the Income

Tax Act and other related laws,

or where specially approved

by the MOF.

In order to qualify for tax

deductibility, provisions

and allowances must be

recorded on the books

based on relevant laws;

that is, these provisions

cannot be made off the

books for tax purposes only.

Capital Gains

Taiwan does not impose

a separate capital gains tax,

as all gains, unless specically

exempt by law, are assessed

as ordinary income and subject

to income tax. Gains from

the sale of land and securities

and futures transactions

are exempt from income

tax, while losses therefrom

are not tax deductible.

• Royalties paid to a foreign

company for the use of its

patents, trademarks or

technical know-how in order

to introduce new production

technology or products,

improve product quality,

or reduce production costs,

subject to special approval;

• Certain technical service

fees received by foreign

entities, subject to

government approval; and

• Business income obtained

within Taiwan by a foreign

company engaged in

international transportation,

provided reciprocal treatment

is granted to Taiwan

transportation enterprises.

Deductions

In general, expenses or losses

incurred in the normal course

of business are tax deductible,

except where these are not

substantiated by adequate and

acceptable documents.

Note however, that Taiwan

resident companies and foreign

companies with a PE in Taiwan

are required to include any

gains arising from securities

and futures transactions in

their alternative minimum tax

calculation in accordance with

the provisions of the Income

Basic Tax Act.

Gains from land sales are

subject to land value increment

tax at rates ranging from20% to 40%, while proceeds

from securities and futures

transactions are subject

to securities transaction

tax and futures transaction

tax at rates of 0.1%-0.3%

and 0.0000125%-0.6%,

respectively.

Dividends

Taiwan operates an imputation

tax system to avoid double

taxation of dividends by

allowing shareholders to

claim credits for taxes paid

on dividends received at the

corporate and individual levels.

Treatment of Dividends

For Taiwan corporate

shareholders, dividends

received from local investee

companies are not included

in their taxable income.

However, they must record

any imputation tax credit

distributed by other Taiwan

companies along with the

dividends in a shareholder-

imputed credit account.

Taxable Income

The taxable income of a

prot-seeking enterprise is

net income, which is dened as

gross annual income after the

deduction of costs, expenses,

losses and taxes. Except for

certain exempt items, income

from all sources is subject to

corporate income tax. Article

8 of the Income Tax Act and

related guidelines dene the

types of income that shouldbe regarded as Taiwan-sourced.

To determine a company’s

taxable income, its accounting

income is adjusted by taking

into account non-taxable

income, non-deductible

expenses and allowable

provisions, and losses

carried forward.

Non-Taxable Income

Corporate taxpayers in

Taiwan are subject to a single

assessment on all income

received. Exceptions to this

rule include the following

income items, as detailedin the Income Tax Act and

related laws:

• Proceeds from land sales;

• Income from securities

and futures transactions;

• Dividends received by

a Taiwan company from

another local company;

Any dividends paid by

such a corporate shareholder

to its resident individual

shareholders would, in turn,

carry the underlying tax credit

for corporate tax paid by

its subsidiary.

For resident individual

shareholders, dividend

income is not subject to

withholding tax. The gross

dividend received is included

in an individual’s taxableincome, and the associated

imputation tax credit (for the

underlying corporate tax paid

by the company distributing

the dividend) can be used to

offset their individual income

tax liability. Any excess

credit is refundable to

individual shareholders.

For foreign shareholders,

cash or share dividends

distributed by a resident

company in Taiwan are subject

to 20% withholding tax if no tax

treaty protection is available.

Undistributed Earnings

A 10% prot retention surtax

may be imposed on any part

of a resident company’s current

year prot (after taxes and

statutory reserves) that

is not distributed as dividends

in the following year. This

rule also applies to the

Taiwan subsidiaries of foreign

companies.

The prot retention surtax paidby the company may be used

by a resident individual

shareholder to offset the

shareholder’s tax liabilities

once the company distributes

dividends from the

corresponding undistributed

earnings in subsequent years.

Please note that the credit

for the prot retention surtax

against the dividend withholding

tax is not a dollar-to-dollar

credit but calculated based

on a prescribed formula.

Non-resident shareholders

may credit the 10% surtax

against the dividendwithholding tax once the

company distributes dividends

from the corresponding retained

earnings in subsequent years.

16



Type of

Income

Resident

Individuals(%)

Resident

Enterprises(%)

Non-resident

individuals andenterprises (%)

Dividends N/A N/A 20

Commissions 10 101

20

Rentals 10 101

20

Interest 10 10 15,202

Royalties 10 101

0,203

Technical service

fees

10 N/A 3,204,5

Prizes/Awards

6

10, 20 10 20

ProfessionalFees

10 N/A 20

Withholding Taxes

A foreign company with no

PE in Taiwan is subject to

withholding tax at source

on its Taiwan-source income.

Withholding tax rates on

dividends, interest and royalties

may be reduced if the recipient

is a tax resident of a tax treaty

country and the relevant treaty

provides for a reduced rate.

A Taiwan branch of a foreign

company may remit after-taxprots to its head ofce

without further Taiwan tax.

Withholding taxes on wages,

commissions, rentals, interest

paid to non-nancial institutions,

royalties, cash awards and

professional fees must be paid

to the tax authority within ten

days after the close of the month

in which the payment was made.

The withholders should prepare

withholding certicates and

submit them to the tax collection

ofce for verication by the end

of January of the following year.

According to MOF guidelinesissued in September 2009,

a foreign enterprise with no

PE in Taiwan is subject to

withholding tax if it receives

Taiwan-source income from

service fees, rental income,

business prots, awards/

grants and other income.

However, the enterprise may

appoint a tax agent in Taiwan

to claim a tax deduction for

costs and expenses incurred

(supported by evidentiar y

documents), and it may apply

for a tax refund within ve years

from the payment date.

Alternative Minimum Tax


calculations under the Income

Tax Act, Taiwan imposes a

so called alternative minimum

tax (AMT) under the Income

Basic Tax Act, effective from

1 January 2006. T here are

two AMT systems, one forcompanies and one

for individuals.

The AMT applies to all Taiwan

resident companies, as well

as foreign companies with

a PE in Taiwan, if they earn

certain income that is tax

exempt or enjoy certain tax

incentives, or if their annual

basic income (that is, income

subject to AMT) exceeds

NT$2 million.

1. Commissions, rentals and royalties

received by resident enterprises

that issue unied invoices are

exempt from withholding tax.

2. For non-resident enterprises, a 15%

withholding tax applies to interest

income derived from short-term

bills, securitised certicates, corporate

bonds, government bonds or nancial

debentures, as well as interest

derived from repurchase transactions

involving these bonds or certicates.

The rate in all other cases is 20%,

unless reduced under a tax treaty.

3. Royalties received by foreign

enterprises that are specially

approved in advance by the

government are exempt from

income tax.

4. A 3% withholding tax rule may

be applicable if approved by the

tax authority.

5. Technical service fees received

by foreign enterprises in relation

to the construction of factories

for manufacturing, and approved

by the government are exempt

from income tax.

6. For prizes or payment from

contests and games won by

chance, the withholding tax rate

is 10% for resident individuals

and enterprises and 20% for non-resident individuals and enterprises.

However, cash awards less than

NT$2,000 from lottery tickets

issued by the government are

not subject to withholding tax.

The following are not

subject to AMT:

• Sole proprietors

and partnerships;

• Non-prot organisations;

• Government-owned

enterprises;

• Enterprises with no PE

in Taiwan; and

• Businesses in liquidation

or declared insolvent.

If the regular taxable income

is greater than the AMT taxable

income, no special action is

required. If the AMT taxable

income is greater than the

regular taxable income,

taxpayers have to calculate

and pay AMT based on the

following formulae:

• Income subject to AMT

= Regular taxable income

+ add-back items;

• AMT = (Income subject to

AMT – NT$2 million) x 10%.

Tax Administration

The tax year in Taiwan runs

from 1 January to 31

December; companies must

obtain prior approval to adopt

a scal year other than thecalendar year. Tax payments

are led on a self-

assessment basis.

All Taiwan resident companies,

as well as foreign companies

with a PE in Taiwan, must le

annual returns with the tax

authority no later than ve

months after the end of the

tax year. Penalties are imposed

for late ling and failure to le

a return, and interest is charged

on delayed payments.

Tax Returns

Corporate taxpayers must lereturns using one of the

following prescribed forms:

• Ordinary return – used by all

types of prot-seeking

enterprises; or

• Blue return – used by

enterprises with good ling

records, subject to prior

approval.

Group companies qualifying

under the Business Mergers

& Acquisitions Act, and

nancial holding companies

as dened by the Financial

Holding Company Act, can

le a combined return for

the parent and its rst tier

subsidiaries. Consolidated

returns are not permitted

for other enterprises.

Consequently, the losses of

one afliate cannot be used

to offset the prots of another.

As a general rule, lossesincurred by a prot-seeking

enterprise in an accounting

year may not be carried

forward. However, companies

which keep a complete set of

accounting books and records,

use blue returns, or have their

returns examined and certied

by a certied public accountant

(CPA), may carry losses

forward for a period of up

to 10 years. Losses cannot

be carried back.

Certication

Submission of audited nancial

statements with tax returns isneither required nor customary

That said, certain enterprises

must have their income tax

returns examined and certied

by a qualied CPA, including:

• Banks, credit cooperatives,

insurance companies,

investment trust companies,

short-term bill and nance

companies, capital leasing

companies, and companies

engaged in securities

and futures trading;

18



Additional tax incentives are

available under the Statute for

Investment by Foreign Nationals/

Overseas Chinese, the Business

Mergers and Acquisitions

Act, the Financial Institutions

Merger Act and other laws

and regulations

Double Taxation Relief

Foreign Tax Credit

Taiwan companies (includingthe Taiwan subsidiaries

of foreign companies) are

subject to income tax on

their worldwide income,

regardless of whether that

income was derived inside

or outside Taiwan.

Taiwan uses the credit

method (unilaterally) to avoid

the double taxation of income.

Foreign taxes paid on foreign

source income may be

credited against a company’s

total Taiwan income tax

liability. However, the credit

is limited to the amount of

Taiwan income tax derivedfrom foreign source income.

Double TaxationAgreements

In addition to Taiwan’s domestic

arrangements that provide

relief from international double

taxation, Taiwan has entered

into bilateral double taxation

treaties with 19 countries as

of the end of 2010. These

treaties generally follow the

Organisation for Economic

Co-operation and Development

(OECD) model and theircontents are summarised in

the table on the next page.

Transfer Pricing

Taiwan has transfer pricing

rules requiring that transactions

between related parties be

conducted on arm’s length

terms. The ‘Regulations

Governing Assessment

of Prot-Seeking Enterprise

Income Tax on Non-Arm’s

Length Transfer Pricing’ were

issued in December 2004 and

are in line with OECD transfer

pricing guidelines.

• Public companies;

• Companies that have received

approval for corporate income

tax exemption in accordance

with the Statute for

Encouragement of Investment

and other relevant laws, and

have annual net sales and

non-operating income

in excess of NT$50 million;

• Companies that have led

a consolidated income taxreturn in accordance with


Acquisitions Act or the Financial

Holding Company Act; and

• Companies other than those

listed above whose annual net

sales and non-operating income

are in excess of NT$100 million.

Payment

Tax is paid on a self-

assessment basis in two

instalments. A company

must pay provisional income

tax equal to 50% of the

tax liability declared for theprevious year between

1 and 30 September. However,

if the taxpayer meets certain

requirements, it can opt to pay

the provisional tax based on

its taxable income for the

rst six months of the current

tax year. The second payment

is made when ling the annual

return. The return is then

reviewed by the tax authority

and a nal assessment is issued.

Penalties are imposed for late

ling and failure to le a return.

The taxpayer is also required

to pay interest on any unpaid

taxes from the original due

date to the date of payment.

The interest charge is based

on the prevailing one-year time

deposit interest rate set by

the Directorate General of the

Postal Remittances & Savings

Bank each year. The charge

may be waived if the amount

is under NT$1,500.

Assessments

The tax authority is allowed

to examine tax returns,

accounting books and

supporting documents.

After a tax audit has been

completed, the tax authority

may request the taxpayer

to explain any questionable

items and present additional

supporting documents. If the

tax authority comes up with

a different assessment, it will

issue a formal assessment notice

to the taxpayer, who then can

opt to pay the tax as assessedor follow the appeal procedures

provided under the relevant

tax provisions.

Tax Incentives

Investment incentives for

eligible direct investors are

generally in the form of tax

breaks aimed at encouraging

them to step up their capital

investment, R&D and human

resource cultivation in Taiwan.

Certain tax incentives are

provided to investors if they

are located in prescribed

areas such as science parks,economic processing zones,

free trade zones and so on.

Other tax credits are granted

to qualifying companies that

invest in specic businesses

or industries being promoted

by the government.

Most tax breaks were previously

offered under the Statute for

Upgrading Industries, which

expired at the end of 2009.

This law has since been

replaced by a new Statute

for Industrial Innovation (SII),

which retains tax breaks for

investments in R&D. Under

the SII, R&D credits areavailable up to 15% of qualied

R&D expenses incurred, with

the maximum amount of

tax credit capped at 30%

of the tax payable for the

year in which the expenses

are incurred. The unutilised

R&D credits will be forfeited,

and cannot be carried back

or carried forward.



Country Dividends (%) Interest (%) Royalties (%)

Australia 10,151

10 12.5

Belgium 10 101

10

Denmark 10 101

10

Gambia 10 10 10

Hungary 10 10 10

Indonesia 10 10 10

Israel 10 7,102

10

Macedonia 10 10 10

Malaysia3 12.5 10 10

Netherlands 10 10 10

New Zealand 15 10 10

Paraguay 5 10 10

Senegal 10 15 12.5

Singapore4

NA 15

South Africa 5,155

10 10

Swaziland 10 10 10

Sweden 10 10 10

United Kingdom 10 10 10

Vietnam 15 10 15

Withholding Taxes Under Double Taxation Agreements

(as of 31 December 2010)

Scope and Rates

Individual income tax is

levied on the Taiwan-source

income of both resident and

non-resident individuals,

unless exempt under the

provisions of the Income

Tax Act and other laws. Income

received for services rendered

in Taiwan is considered to be

Taiwan-source income subject

to tax regardless of whether

such income is paid by a local

or an offshore employer.

Starting from 1 January 2010,

the alternative minimum tax,

based on the Income Basic Tax

Act, will apply to the overseas

income of resident individuals,

including qualifying expatriates.

An individual is considered

resident in Taiwan for income

tax purposes if:

• Domiciled or ordinarily residing

in Taiwan; or

• Not domiciled but residing in

Taiwan for 183 days or more

in a taxable year.

Foreigners who reside in

Taiwan for less than 183 days

are considered non-residents,

and in general, their Taiwan-

source income is subject

to withholding tax at source.

For non-resident individuals

staying in Taiwan for 90

days or less in a taxable

year, there is no tax payable

if their compensation is

paid by an entity registered

outside of Taiwan.

Personal Income Tax

1. 10% for shareholders that are

companies (other than partnerships)

with at least a 25% shareholding.

2. 7% of the gross amount of the

interest arising in a territory and paid

on any loan of whatever kind granted

by a bank of the other territory.

3. The withholding tax rate on

technical service fee payments

is reduced to 7.5%.

4. The total tax burden of corporate

income tax and dividend tax must

not exceed 40% of the total prots

of the company.

5. 5% for shareholders with at

least a 10% shareholding.

22



Personal Income Tax Rates

(as of 1 January 2010)

Filing Obligations

Taiwan’s tax year runs from

1 January to 31 December.Individual taxpayers are required

to report all their Taiwan-source

income, irrespective of the

payment location of such

income, and to le an annual

return with the tax authority

by 31 May of the following year,

with no extensions allowed.

For resident individuals, a

consolidated personal income

tax return must be led with

respect to Taiwan-source

income. Married couples must

Non-resident Resident

Length of stay Less than

183 days

183 days or more

Personal

exemption

No Yes

Deductions No Yes

Tax rates In general 15%-

20%, depending

on income type

Progressive tax rates for 2010 tax year:

Net Taxable Income

(NT$)

Tax Rate

(%)

Progressive Difference

(NT$)

0-500,000 5 0

500,001-1,130,000 12 35,000

1,130,001-2,260,000 20 125,400

2,260,001-4,230,000 30 351,400

4,230,001 or higher 40 774,400

le joint returns if both spouses

have resided in Taiwan for more

than 183 days in a taxable year.

However, a spouse can optto calculate taxes due on that

spouse’s wages and salary

separately. The income of

any dependants for whom the

taxpayer has claimed a personal

exemption must also be

included in the joint tax return.

Non-residents who stay in

Taiwan for 90 days or less

in a year are not required

to le income tax returns,

although tax is withheld by

employers on any compensation

paid in Taiwan. Income tax is

withheld on locally paid salaries.

Any additional tax due must be

paid at the time of ling.

Taxable Personal Income

Taxable income includes salaries

or wages (and any allowances,

bonuses or similar

compensation), professional

fees, rental income from

property in Taiwan, dividends,

interest and royalties derived

from sources in Taiwan. Awards

and prizes are also subject to

income tax.

A foreigner who is present

in Taiwan for more than 90

days is taxed on salary,

bonuses and commissions

earned for work done in Taiwan,

regardless of where payment

is made, but is not taxed on

compensation for services

performed outside Taiwan.

Expatriates working in

Taiwan are also taxed on

fringe benets such as

housing, living, educationand transportation allowances.

Fringe benets to individual

taxpayers in the form of cash

allowances are all taxable

regardless of the nature of

the benets. Fringe benets

provided directly by the

employer without cash payment

to the employee are also taxed

unless the recruitment of a

foreign employee satises

certain criteria for special

tax incentives applied to

foreign professionals.

Capital Gains

Taiwan does not imposea separate capital gains tax,

as all gains, unless specically

exempt by law, are assessed as

ordinary income and subject to

income tax. Gains from the sale

of land and qualied securities

transactions are currently

exempt from income tax.

Note however, that resident

individuals must include any

gains attributable to sales of

unlisted shares in Taiwan

in their alternative minimum

tax calculation.24



Deduction item Deduction amount Supporting documents

Single taxpayer NT$76,000 None.

Married, ling jointly NT$152,000 Copy of marriage certicate.

Standard deductions (as of 1 January 2010)

Deduction item Maximum deduction Supporting documents

Charitable donations Limited to donat ions to Taiwan-

registered non-prot organisations and

20% of annual gross taxable income

Original receipts.

Life insurance premiums Limited to NT$24,000 for each

person per year

Original receipts.

Medical and

maternity expenses

No limit Original receipts issued by

a qualied hospital or clinic.

Calamity losses No limit Certicate issued by local

tax ofce.

Interest paid on loansfor the purchase of an

owner-occupied

residence in Taiwan*

Limited to NT$300,000for a tax ling unit

• Interest payment receipt.• Title deed.

• Documents evidencing the residence

was owner-occupied in the tax year.

Rental expense for

the lease of a self-use

residence in Taiwan*

Limited to NT$120,000

for a tax ling unit

• Rental contract with the name of the

taxpayer as lessee.

• Rental payment receipt issued by thelandlord.

• Documents evidencing the residence was

for self-use in the tax year.

Itemised deductions (as of 1 January 2010)

Exemption

amount

Supporting

documents

Taxpayer NT$82,000 None.

Spouse NT$82,000 Copy of marriage certicate.

Dependants not

over 20 years of age

N T$82 ,000 C opy o f b ir th ce rt ica te .

Dependants over

20 years of age

and studying in anapproved college or

university

N T$82 ,000 1. Copy of bir th ce rt ica te .

2. Copy of tuition receipt and

valid student ID.

Dependants over60 years of age

NT$82,000 1. Copy of the b ir th cert icateof the taxpayer/spouse.

2. Document certifying the

parent is supported by thetaxpayer/spouse.

Dependants over70 years of age

NT$123,000 1. Copy of the b ir th cer ticateof the taxpayer/spouse.

2. Document certifying the

parent is supported by thetaxpayer/spouse.

3. Documents evidencing

the parent’s livingarrangements.

Dividends

For resident individuals,

dividends received are not

subject to withholding tax.

The gross dividend received

is included in an individual’s

taxable income, and the

associated imputation tax

credit (for the tax paid by

the company distributing

the dividend) can be used to

offset their income tax liability.

Any excess credit is refundableto resident individuals.

For non-resident individuals,

dividends received are subject

to 20% withholding tax.

Exemptions and Deductions

Certain exemptions and

deductions are available for

a resident individual taxpayer,

their spouse and dependants.

A resident taxpayer may elect

to claim either the standard

deduction or itemised

deductions, in addition

to other special deductions.

Non-resident individualsare not entitled to personal

exemptions and deductions.

* Either ‘interest paid on loans’ or ‘rental expense’ is to be claimed.

A taxpayer can claim either the standard deduction or itemised deductions, depending on whichever gives a higher total deduction amount.

There is no ceiling on the itemised deduction total.

26



Businesses are required

to maintain accounting

records and prepare annual

nancial statements in

accordance with Taiwan

Generally Accepted Accounting

Principles (GAAP), which

largely follow International

Financial Reporting Standards

(IFRS) and US GAAP. Taiwan

requires nancial statement

audits for any company with

paid-in capital exceeding

NT$30 million.

Accounting Booksand Records Accounting Period

Businesses generally

use the 1 January to

31 December calendar year

as their accounting year,

which is the same as the

scal year for tax purposes.

However, a company may,

with permission, adopt

a non-calendar year-end.

Bookkeeping Currency

Accounting books must

be denominated in the local

currency (New Taiwan dollar,

NT$). If accounts are kept

in a foreign currency due to

business needs, such currency

must be translated into the

local currency in the company’s

closing nancial statements

Audit and Accountancy

Bookkeeping Language

All accounting books,

documents and nancial

statements prepared by

a company should be in

Chinese, but may also

be written concurrently

in a foreign language.

Accounting Basis

Business entities must

follow the accrual basisof accounting in performing

recognition, measurement

and reporting for accounting

purposes. All income realised

and expenses incurred or

attributable to the current

period should be recognised

as income or expenses in the

current period regardless of

when the income is received

or expenses are paid.

Accounting Books

Companies are required

to maintain accounting

records and prepare annual

nancial statements inaccordance with Taiwan

GAAP. They must keep

journals, a general ledger

and subsidiary ledgers,

as well as appropriate

memorandum records.

Computerised accounting

systems, if utilised, can be

regarded as the company’s

accounting records.

Financial Statements

Basic nancial statements

such as balance sheet,

income statement (prot

and loss account), cash

ow statement, statement

of changes in owners’

equity and notes to nancial

statements, along with

comparative data for the

previous year, are all required.

Reporting Format

The format of nancial

statements is set forth in

the Statements of Financial

Accounting Standards

issued by Taiwan’s

accounting standard-setting

body, the Accounting Research

and Development Foundation

(ARDF). Public companies

are also required to follow

the format and guidance

prescribed by the Securities

and Futures Bureau (SFB)

of the Financial Supervisory

Commission (FSC).

Preservation of Booksand Records

All accounting records

must be kept for at

least ve years, and

all accounting books

and nancial statements

must be kept for at least

ten years after the completion

of annual closing procedures.

Deduction

item

Maximum

deduction

Supporting documents

Salaries and wages Limited to NT$104,000,or actual salary/wages

received, per person,

whichever is lower

None.

Property transaction

losses

Limited to property

transaction gains for

the same year. Anyresidual balance may

be carried forward for

three years

• Certicate issued

by local tax ofce.

• Purchase and salescontracts showing

the purchase and

sales price, and otherrelevant documentation

detailing the related

costs and expensesincurred.

Savings and

investment

Limited to NT$270,000

per tax ling unit

None.

Disability

(mental or physical)

NT$104,000 per

taxpayer, spouseand dependant,

if handicapped

Copy of a psychiatrist’s

diagnosis certicateor copy of Disability

Identication.

Dependant childtuition

NT$25,000 perdependant child

if studying in an

approved college

or university

Student certicate ortuition receipts issued

by the dependant child’s

college or university.

Special deductions (as of 1 January 2010)

Alternative Minimum Tax


calculations under the Income

Tax Act, Taiwan imposes a

so-called alternative minimum

tax (AMT) on individuals who

are tax residents in Taiwan

(including expatriates who stay

in Taiwan for 183 days or more

in a tax year). Effective from

1 January 2010, the overseas

income of resident individuals is

included in the AMT calculation.

Resident taxpayers with AMT

taxable income of more than

NT$6 million may be subject to

AMT at the current rate of 20%.

Under the Income Basic Tax Act,

a taxpayer must calculate the

amount of AMT due on income

subject to AMT after adding back

certain items and compare the

result with the regular income tax

amount. If the AMT tax payable

is greater than the regular income

tax payable, the taxpayer has to

calculate and pay AMT based on

the following formulae:

• Income subject to AMT = Regular

taxable income + add-back

items;

• AMT = (Income subject to AMT– NT$6 million) x 20%.

The add-back items include

qualied insurance benets,

capital gains from unlisted

securities, non-cash charitable

contributions, the excess of

market value over par value

of stock dividends granted to

employees, and foreign-source

income totalling NT$1 million

or more.

Except for overseas income,

the other items have been

included in the AMT since

1 January 2006. Although the

inclusion of foreign-sourceincome will increase the AMT

burden, any foreign taxes

paid on such income may be

credited against AMT payable,

with certain limitations.

28



Audit requirements

Private companies are

required to have their annual

nancial statements audited

and certied by a Taiwan-

licenced certied public

accountant (CPA) if their

paid-in capital is NT$ 30

million or more. Public

companies and nancial

institutions must also have

their nancial statements

audited and certied by aCPA, as well as meet other

reporting requirements.

Public companies are

required to have their annual

nancial statements audited

and certied by a CPA within

four months following the

close of each scal year.

They must also have their

semi-annual nancial

statements audited and

certied by a CPA within

two months after the close

of each scal half year. In

addition, their rst and third

quarter nancial reports must

be reviewed by a CPA withinone month after the end of the

rst and third scal quarters.

Taiwan’s AccountingProfession

The SFB is responsible for

supervising public companies

and the audit work of

Taiwan-licenced CPAs,

while the ARDF is responsible

for formulating guidelines

on accounting principles and

auditing standards. The major

professional accounting bodies

in Taiwan include the National

Federation of Certied Public

Accountants Associations,

the Taipei City CPA Association,

the Kaohsiung City CPA

Association and the Taiwan

Provincial CPA Association.

Auditor Independenceand Auditing Standards

The Ministry of EconomicAffairs and the FSC have

issued ‘Regulations Governing

Auditing and Certication of

Financial Statements by

Certied Public Accountants,’

which cover certain regulations

on independence, reporting

and disclosure requirements,

suggested audit procedures,

and other general requirements

related to the review of internal

control systems. Independent

auditors must examine

the nancial statements

in accordance with current

auditing and certication rules,

as well as the Statements of

Auditing Standards issued bythe ARDF. In general, auditing

standards and procedures

in Taiwan are similar to the

International Standards on

Auditing and US Statements

on Auditing Standards.

IFRS Adoption in Taiwan

The FSC announced in May

2009 that Taiwan would

fully adopt IFRS starting

from 2013 in two phases:

Phase I: Listed companies

and nancial institutions

supervised by the FSC, except

for credit cooperatives, credit

card companies, and insurance

intermediaries, will be required

to adopt IFRS starting in 2013,with 2012 IFRS comparative

data. Early adoption in 2012

is optional for companies that

have already issued securities

overseas, or have registered an

overseas securities issuance

with the FSC, or have a market

capitalisation of more than

NT$10 billion.

Phase 2: Unlisted public

companies, credit cooperatives

and credit card companies

will have a two-year grace

period and will not have

to adopt IFRS reporting

until 2015, with 2014 IFRS

comparative data. Earlyadoption starting in 2013

is optional.

Reporting requirements for

private companies, including

branches and subsidiaries

of foreign companies, have

not yet been decided. Several

options are under discussion

by the FSC’s IFRS adoption

taskforce, including current

GAAP, IFRS for SMEs and

voluntary IFRS reporting.

Worker protection policies

in Taiwan, encompassing

labour insurance, health

insurance, pension and

termination policies, are

broadly similar to those

found in many developed

countries, if not quite as

restrictive in some cases.

Labour-RelatedHealth Insurance

Labour Insurance

The Labour Insurance

Act basically requires

that, for companies with

ve or more employees,

all employees must

be insured under the

government-run labour

insurance programme.

Companies with fewer

than ve employees

may also apply for labour

insurance coverage.

There are two types

of labour insurance:

1. Ordinary injury insurance,

including maternity

benets for female workers

and the wives of insured

male workers, injury and

sickness benets (other

than medical expenses),

medical care benets,

disability benets, and

old age and death benets.

Human Resourcesand Employment Law

2.Occupational injury insurance,

including work-related injury

and sickness benets,

disability benets and death

benets.

Labour insurance is

compulsory, with coverage

extended to all local and

foreign workers, including

executive and administrative

staff, except the ‘responsible

persons’ (typically the

owners) of enterprises.In other words, those

who are employed by,

and receive wages from,

an employer are entitled

to coverage. Employers

actually performing work

may voluntarily join the labour

insurance programme.

National Health Insurance

Taiwan’s National Health

Insurance programme

is designed to provide

comprehensive medical

services for the prevention

and treatment of illness and

injury, and for childbearing.It is essentially compulsory

and universal, with coverage

given to all citizens who have

resided in Taiwan for at least

four months, and to foreign

employees (together with

their dependants) who do

not have Taiwan citizenship

but do have an Alien

Residence Certicate.

Pensions

Two pension schemes are

currently in effect in Taiwan,

with an older scheme under

the Labour Standards Act (LSA)

being phased out in favour of

a new scheme, launched in July

2005, under the Labour Pension

Act (LPA). Employees who

began their employment with

an enterprise after 1 July 2005

are all covered under the new

pension scheme, which isa dened contribution plan

where employers make

monthly contributions

to employees’ individual

pension accounts.

An employee who is

60 years old or older

with more than 15 years

of service is entitled to

monthly pension payments.

An employee with less than

15 years of service should

take a lump-sum pension

payment of the principal

and accrued dividends

in their pension account.

30



Wages and Salaries

Wages may not be less than

the statutory minimum wage,

and must be paid at least

twice a month except where

otherwise agreed to by the

parties in an oral agreement

or labour contract, or where

wages are paid in advance

on a monthly basis. Employers

are prohibited from docking

wages as a disciplinary

penalty or indemnity.

Retirement

An employer can compel

an employee to retire only

if one of the following

conditions holds:

1.The employee is age 65

or older. However, the

employer may request the

concerned authorities to lower

the compulsory retirement

age if the work performed by

the employee is dangerous

or physically demanding.

The minimum retirement age

allowed in such cases is 55.

2.Some mental or physical

condition makes it impossible

for the employee to undertake

the work assigned.

Special Leave

Employees are entitled to

take leave with full pay for

weddings (up to eight days),

funerals, work-related medical

care and/or recovery, or legally

required public service.

Employers cannot reduce

the eligibility of an employee

for attendance bonuses

(if any) simply because the

employee has taken leave

for those purposes. The

following types of special

leave are not granted at

full pay:

1. Ordinary sickness and injury

leave that does not exceed

30 days within one year must

be paid at 50% of the ordinary

wage. Leave for sickness

or injury, other than from

occupational accidents,

is as follows:

• Sick leave excluding

hospitalisation leave

may not exceed 30

days within one year.

• Hospitalisation leave

may not exceed one

year every two years.

• The total of hospitalised

and non-hospitalised sick

leave may not exceed oneyear every two years.

2. Female employees may

request menstruation leave,

incorporated into sickness

leave, for one day per month.

Days of menstruation leave

are included in sick leave and

the wage during menstruation

leave is to be calculated in the

same manner as sick leave.

An employee may ask for

normal leave to settle personal

affairs. Normal leave without

pay may not exceed 14 days

within one year.

Other Types of Leave

• Maternity leave – eight weeks

at full pay if employed for six

months, at half pay if employed

less than six months. Maternity

leave of up to four weeks

may be taken in the case

of a miscarriage;

• Paternity leave – three

days at full pay;

• Unpaid parental leave –

after one year of service,

an employee may apply

for unpaid parental leave

to care for children under

three years of age; the

duration of this leave cannot

exceed two years; and

• Family leave – an employee

working for an employer with

ve or more employees may

request up to seven days offamily leave per year, treated

as normal leave, to care for a

family member who is suffering

serious illness or who must

handle major events.

Labour Regulations

32



Hours worked

Rules on working hours

are provided under the LSA.

The normal working hours

for an employee are eight

hours a day, up to 84 hours

every two weeks. Employees

are entitled to breaks of 30

minutes for every four hours

of work.

Children under 15 years

of age are not allowed to

work, while children between

15 and 16 years of age may

work (with consent from

legal guardians) up to eight

hours a day.

Employers are not allowed

to have female employees

work between ten o’clock

in the evening and six o’clock

the following morning except

under certain conditions.

Exceptions to the rules

specied above are made,

subject to the prior approval

of the authorities, for

supervisory/managerialpersonnel and authorised

specialists, and for monitoring

or intermittent jobs.

Paid holidays and vacations

In addition to Sundays off,

employees are entitled to

time off on all national holidays.

Employees are entitled to

special annual leave on the

following basis:

Termination of Employment

• Suspension or transfer

of business operations;

• Operating loss or substantial

contraction in business;

• Business operations suspended

for more than one month due

to force majeure;

• Substantial change in business

nature which requires a

reduction of workers and the

particular workers cannot be

assigned to another suitable

position; and

• A worker incapable of

undertaking the assigned work.

Under the abovecircumstances, an employer

is required by the LSA to give

a worker 10 days’ advance

notice of dismissal if the worker

has been employed more

than three months but less

Years of Service Days Annual Leave

1-<3 7

3-<5 10

5-<10 14

Over 10 15-30*

*14 plus one day for each service

year over 10 years of service;

maximum of 30 days per year.

than one year; twenty days’

notice if employed more than

one year but less than three

years; and 30 days’ notice

if employed for more than

three years. Also, under the

above circumstances, an

employer may terminate a

labour contract immediately

by paying wages for the

period of advance notice.

For employees who come

under the new pension

scheme, severance pay

is calculated at half the

monthly average wage for

each year of service. Severance

pay for a period of service

of less than one year is to be

calculated proportionately, and

total severance pay is not to

exceed six times the monthly

average wage. Differentconditions apply for employees

under the old pension system.

See the LPA and related laws

for further details.

For layoffs, different restrictions

apply depending on the number

of employees employed and the

number of intended layoffs.

The specic rules are given

in the Protective Act for Mass

Redundancy of Employees.



36

Competition andAnti-trust Policy

Free competition is

encouraged under the

rules of the Fair Trade Act,

which governs monopolistic

enterprises, mergers and

acquisitions and any

concerted action that

may limit competition.

Mergers and Acquisitions

The government encourages

the merger or consolidation of

two or more companies if this

will improve their operations

and efciency. The Financial

Institution Mergers Act and the

Financial Holding Company Act

govern consolidation among

nancial institutions. For

companies in other industries,


Acquisitions Act provide the

legal framework and also

certain benets to encourage

mergers, acquisitions and spin-

off activities.

Intellectual Property Rights

In Taiwan, IPR regulations

protect patents, trademarks,

copyrights, industrial designs,

trade secrets, indications

of geographic origin, and

integrated circuit layouts.

Intellectual property rights

granted outside Taiwan do

not necessarily guarantee

protection within the territory,

and foreign inventors are

strongly advised to seek

broader protection through

the MOEA’s Taiwan Intellectual

Property Ofce, which

coordinates and administers

Taiwan’s IPR policies.

Concerted action

Enterprises are prohibited from

engaging in any concerted

action with another unless:

(a) It is benecial to the

economy and in the public

interest;

(b) An application to the Fair

Trade Commission (FTC) for

such concerted action has

been approved; and

(c) It is one of a limited number

of types listed in the Fair Trade

Act, such as joint R&D, joint

importation, etc.

Fair competition

Pricing is to be determined

through market mechanisms,

and in principle, interference

with free competition is not

allowed.

Foreign exchange controls

Taiwan has substantially

liberalised its foreign

exchange controls. All foreign

exchange transactions are

administered by the Central

Bank of the Republic of China

(Taiwan), which imposes a

limit of US$50 million and

US$5 million per year for

business entities and resident

individuals, respectively, on

any foreign exchange transfer,

inward or outward, other than

trading or service revenue.

Companies and individuals

are required to report certain

foreign exchange transactions

to the central bank.

Trade



Banking in TaiwanOverbanked Environment

Type Features

Savings Account The initial starting point of your banking relationship.

Payment and transfers – your most liquid ass ets.

Current Account Cheques for day-to-day payments (overdraft facility

available depending on credit standing).

Time Deposits Safe return with higher interest rate. Wide range

of currencies and tenors.

Offshore Banking Units

Companies that are not

Taiwan-registered can establish

Offshore Banking Unit (OBU)

accounts, if they wish to

operate in foreign currencies

only. The primary advantage of

OBU accounts is that business

owners can enjoy additional

exibility for prudent tax

mitigation. Despite its

well known exibility, however,

OBU accounts still face several

restrictions. For example, no

cash bank withdrawals are

allowed. Customers rst

need to wire the money into

a Domestic Banking Unit (DBU)

account and then withdraw it

from there. In summary, OBU

entities mainly deal with virtual

transactions only.

Foreign Exchange Declaration

All foreign exchange

transactions over NT$500,000

(or equivalent) must be declared

to the Taiwan’s Central Bank

for monitoring purposes.

Information such as the exactamount and nature and purpose

of such transactions needs to

be provided. Companies and

individuals wishing to exchange

an aggregate amount exceeding

US$50 million and US$5 million

within a year, respectively, must

apply for prior permission

to the Central Bank.

As of December 2009, there

were over 396 depository

institutions operating in

Taiwan; including 37 local

banks, 32 foreign banks, 26

credit cooperatives, 300 credit

departments of farmers, and

shermen’s associations and

one postal savings bank. These

nancial institutions, along with

numerous trust and investment

companies, securities nance

corporations, non-life insurance

corporations, bills nance

companies and others compete

to cater to the nancial needs

of Taiwan’s population of

23 million. Therefore, it would

not be an exaggeration to

state that Taiwan’s nancial

services industry is saturated.

Finding the right bank and

operation model can thus

be very challenging.

Account types

In Taiwan, the most common

account types are as follows:

Banking Authority

Taiwan’s foreign exchange

policy is a managed oat,

which means that the exchange

rate will uctuate freely under

the inuence of market forces

but is still bounded by a band

monitored by the Central Bank.

The latter also uses various

instruments to implement

monetary policies.

ECFA and FinancialServices MOU

Taiwan’s banking and nancial

services industry, as a whole,

is about to embark on a

challenging journey as

governments from Taiwan

and mainland China are

loosening restrictions for

investment across the Strait.

Banks from either side are vying

for opportunities to expand d ue

to the extraordinary potential

in the region.

Business and Banking

Taiwan’s currency, New Taiwan

dollar (NT$), is not fully

circulated or convertible in

global markets. Therefore,

all entities wishing to conduct

transactions denominated

in NT$ must open onshore

accounts. To qualify for onshore

accounts, entities must register

with the Taiwan government.

There are many dif ferent

options for a company to

establish a presence in Taiwan.

These include branch ofces,

subsidiaries, representative

ofces and more, depending

on the specic business needs

(Please refer to the ‘Business

in Taiwan’ section for details).

Your decision will have

implications on your business

scope, legal responsibilities

and taxes.

38



HSBC Bank ( Taiwan) Limited

started operations in Taiwan

on 1 May 2010 as a locally

incorporated entity of The

Hongkong and Shanghai

Banking Corporation Limited.

The Hongkong and Shanghai

Banking Corporation Limited

is the founding member of

the HSBC Group, which is

headquartered in London.

HSBC (Taiwan) plays a key

role in HSBC’s Greater China

business. Headquartered in

Taipei, it serves the nancial

and wealth management

needs of an international

customer base and provides

a complete range of banking

nancial services for those

with cross border needs.

The current network of HSBC

(Taiwan) comprises 40 outlets,

including 24 branches in the

Greater Taipei area.

HSBC’s presence in Taiwan

dates back to 1885 when

The Hongkong and Shanghai

Banking Corporation Limitedappointed an agent in Tamsui.

A full-service branch was

established in Taipei in 1984

and the business has expanded

through a combination of

acquisition and organic growth

to become one of the leading

nancial services groups

in Taiwan.

HSBC Group is one of the

world’s largest banking and

nancial services organisations

with over 8,000 ofces in

87 countries and territories

at 31 December 2010.

Awards for Excellence

• Best PCM Bank in Taiwan

2008-2009 by Euromoney.

• Best Sub- Custodian in Taiwan

2008 by Asset Magazine

• Top-rated Sub-Custodian Award

by Global Custodian, 1997-2008.

• World’s Best Sub-Custodian

Banks by Global Finance,

2005-2009.

• Direct won the 2009

Financial Insight Innovation

Award (FIIA) for its Innovation

in Online Insurance.

Corporate Sustainability

For HSBC, Corporate

Sustainability is about bringing

social and environmentalissues together with nancial

performance to maintain and

grow a successful business for

the benet of our stakeholders.

– We apply clear policies and

processes to manage potential

social and environmental risk in

our lending and other fnancial

activities in sensitive sectors.

HSBC in TaiwanOverview

Key Business Development

1984 Taipei Branch opened. Multinational Corporate Businessintroduced

1988 HSBC Securities Taiwan established

1989 Kaohsiung Branch opened. Credit Card Acquiring introduced

1991 Custody and Clearing introduced

1993 Local Corporate Business launched

1994 Taichung Branch opened

1995 Credit Card Issuing introduced

1996 Tainan Branch opened

1997 AssetVantage, Mortgages, and PowerVantage launched

1998 Panchiao Branch opened

1999 Taoyuan Branch opened. Insurance Brokerage launched

2000 Chienkuo Branch opened. Syndicated Loan Business introduced

2001 HSBC Asset Management (Taiwan) Limited establishedAssumed Republic National Bank of New York, laterintegrated with HSBC Republic. Tienmu Branch opened

2002 online@hsbc launched. HSBC Premier introduced

2003 Smart Mortgage introducedNang Kang Central Processing Centre established

2004 Taipei Branch relocated

2005 Agreed with Global Payments Inc. to establish a joint ventureGlobal Payments Asia Pacic. Limited Taiwan Branch

2006 Launched HSBC Direct, Taiwan’s rst direct banking ser vices

2007 Acquired Chailease Credit Services Co., Ltd. and establishedHSBC Factors Taiwan Limited. Established HSBC Life(International) Limited Taiwan Branch. Announced the acquisitionof the assets, liabilities and operations of The Chinese Bank

2008 Completed the acquisition of the business and operationsof The Chinese Bank. HSBC’s islandwide branch network hasincreased from 8 to 34.

2009 Obtained approval to set up a local subsidiary

2010 HSBC Bank (Taiwan) Limited established

– We help our clients to seize

the opportunities presented

by the shit to a low-carbon

economy.

– We try to reduce our own

environmental ootprint

and share good practice

on this with our clients

and other stakeholders.

– We ocus our community

investment (philanthropic

activities) on education

and the environment.

Our education programmes

help to lift people out of

poverty, build nancial

literacy and promote

environmental awareness.

In Taiwan, besides its long-

term sponsorship of Guandu

Nature Park, HSBC launched

a well-organised staff

volunteer programme in

2005 encouraging staff

involvement in a wide

variety of environmental

conservation and community

service initiatives.

40



Country overview

Capital city

Area and population

Language

Currency

International dialling code

National Holidays (2011)

Business hours – general

Business hours – banking

Stock exchange

Political structure*

Taipei

Area (Taiwan and associated islands):

36,191 square kilometres

Population:

23.16 million (December 2010)

Ofcial: Mandarin Chinese;

Others: Taiwanese, Hakka, Austronesian languages, English

New Taiwan Dollar (NT$)

+886

Monday – Friday 9:00-18:00(Source: 2010, Tourism Bureau)

Monday – Friday 9:00-18:00

(Source: 2010, Tourism Bureau)

Taiwan Stock Exchange

Multi-party democracy

January 1 Founding Day of the ROC

February 2 – 5 Chinese New Year

February 7 Chinese New Year Holiday

February 28 Peace Memorial Day

April 4 Children’s Day

April 5 Tomb Sweeping Day

June 6 Dragon Boat Festival

September 12 Mid-Autumn Festival

October 10 National Day

(Source: 2010 Central Personnel Administration)

*Source: 2010, Government Information Ofce

42



Contacts

Richard Watanabe, Partner

General Line: +886 2 2729 6666

Direct Line: +886 2 2729 6704

Email: [email protected]

http://www.pwc.com/gx/en/

worldwide-tax-summaries

44

Website: www.hsbc.com.tw

Phone: +886-2-8072-3993

Head Ofce: 14F, No. 333,

Keelung Road, Sec. 1,

Taipei City. Taiwan, R.O.C.

1st Edition: December 2010

Copyright

Copyright 2010. All rights reserved.

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