Investing in Asia Pacific 2015: Taiwan
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Audit | Tax | Advisory
All lasting business is built on friendship.
Alfred A. Montapert
TABLE OF CONTENTS
5
Introduction
7
About Crowe Horwath International
8
Establishing the business entity
10
Tax information
11
IPO quick facts
14
Human resource requirements
15
Withdrawal procedures
Investing in Asia Pacific
with Crowe Horwath International
INTRODUCTION
Welcome to the Crowe Horwath International “Investing in Asia Pacific
2015: Taiwan” guidebook.
This guide forms a part of the “Investing in Asia Pacific 2015” series and
provides a quick reference for those interested in investing in Taiwan.
While it is not exhaustive, this guide aims to answer some of the key
questions that may arise. When specific issues arise in practice, it will
often be necessary to consider the relevant laws and regulations and to
obtain appropriate professional advice.
The guidebook will cover five main topics as follows:
Establishing the business entity
Tax information
IPO quick facts
Human resource requirements
Withdrawal procedures
5
Business is in itself a power.
Garet Garrett
ABOUT CROWE HORWATH
INTERNATIONAL
The Crowe Horwath network consists of more than 200 independent
accounting and advisory services firms and in over 120 countries
around the world.
Crowe Horwath International member firms are known for their local
knowledge, expertise, and experience balanced by an international
reputation for the highest quality in audit, tax, advisory and risk
services. They are unified through a shared commitment for
impeccable quality service, highly integrated service delivery
processes and a common set of core values and management
philosophies that guide their decisions daily.
This unique combination of talent provides Crowe Horwath
International the worldwide capabilities of a highly integrated network
to deliver value to multinational clients doing business across
borders.
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TAIWAN
Establishing the business entity
Contact
TEL: +886 255 576 886
Mail: ilo.tw@crowehorwath.tw
1. Formation and costs
Company
a. Formation
Four (4) corporate forms are available: an unlimited liability company, an unlimited company with
limited liability shareholders, a limited liability company, or a company limited by shares. In practice,
a company limited by shares and a limited liability company are the favorable two forms for foreign
investors. To incorporate a company in Taiwan, notarization of the foreign investor’s identification
documents is necessary.
If the manufacturing function is considered required, it might take at least two (2) months to
complete the registration; if not, it might take 45 days in average to complete the whole process after
having notarized documents from the investor.
Certain sectors such as banking are regulated with minimum capital; and in such areas, special
operating-approval may be required; also, the threshold for employing an expatriate is set as 5
million. In addition to those registered within specific sectors and/or those will have an employment
with an expatriate there’s no statutory minimum capital requirement; generally, the capital shall be
sufficient to cover the preparation costs of setting up the company. In addition, office shall be
registered at qualified office-locations or areas only.
b. Cost
One-time administration fee is stipulated for incorporating a company; however, no administration
charge is stipulated after establishment unless an amendment or update towards company
registration profile is made thereafter.
Branch
a. Formation
Same as for company.
Representative Office
a. Formation
A representative shall be designated to perform the concerned legal actions (such as price
negotiation, quotation-offering, tender-participation and signing procurement agreement) within
Taiwan, and if the representative needs to be stationed in the R.O.C., he shall establish a
representative office by filing the after-notarization foreign company registration documents to the
Authority. In such a form, no income-generating business activities would be allowed. Normally, it
would take ten (10) working days to complete the filing after having notarized documents from the
investor (only business recognized by the Authority as legally established foreign companies may
set up a representative office in Taiwan). No specific requirement for the office address.
Cost
No administration fee is stipulated for establishing a representative office.
2. Investment incentives
Company
Ten (10)-year loss carry-forward (tax certification or audit is required).
Investment credit for specific or approved research & development projects/activities.
Branch
Ten (10)-year loss carry-forward (tax certification or audit is required).
3. Foreign ownership restrictions
Company
Foreigners are prohibited from running the business stated in the Forbidden List (Negative List); for
example, activities relating to public utilities such as water supply and electricity.
Branch
Same as for company.
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Investing in Asia Pacific 2015
4. Work permits and visas
Company
The permits of work visa would be given to expatriates and the manager-in-register based on the
minimum revenue threshold stipulated for every industry or business; and also, few qualifications of
the expatriate should be met to get the permission.
TAIWAN
Besides, if a company wants to hire foreign expatriates to work in Taiwan in its first year of
operation, the minimum capital to be registered is TWD 5 million.
Branch
Same as for company.
Representative office
The permission would be given to the representative only.
5. Accounting standards and audit requirements
Company
Accounting standards
PIEs are required to fully adopt IFRSs in either 2013 or 2015; and non-public entities would adopt
IFRS-SMEs in 2016.
Audit requirements
a. Tax audit
Net sales and non-operating income are in excess of TWD 100 million.
Banks, credit cooperatives, insurance, investment trust companies, short-term bill and
finance companies, capital leasing companies and companies engaged in securities and
futures and public companies.
Have filed a consolidated income tax return.
b. Statutory (financial) audit
Capital-in-Register over TWD 30,000,000.
Bank-loan amounting over TWD 30,000,000.
Branch
Same as for company.
6. Residential directors / promoters requirements
Company
If limited company is incorporated:
shareholder: one (1), either individual or legal entity
director: one (1), no residential requirement
If (share) limited liability company is incorporated,
shareholder: one (1) legal entity or two (2) individuals
director & supervisor: three (3) directors and one (1) supervisor, no residential requirement
Branch
One individual is required to be registered as branch-representative and manager.
Representative Office
One individual is required to be registered as representative.
7. Foreign ownership over tangible assets
Company
The restriction is set by country individually and is normally limited to business-purpose property;
that is, residential-purpose property is prohibited.
Each acquisition should be investigated and approved by the Authority individually.
Branch
Same as for company.
8. Country quirks
Company
PRC investors were permitted to make direct investments in Taiwan since July 2009 after having
adequate approval from the Authority; which is subject to different documentation and requirements
case by case.
Branch
Same as for company.
Representative office
Same as for company.
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Investing in Asia Pacific 2015
TAIWAN
Tax information
1. Tax rates on corporate income
17%.
2. Other taxes
Value Added Tax (VAT)
5% in sales and purchases occurred within the territory of Taiwan.
Other taxes
10% surtax on undistributed earnings (not applicable to branch).
20% withholding on distributed earnings (not applicable to branch).
3. Branch income
Not subject to withholding tax while distributing earnings to head office; however, subject to 17%
corporate income tax; and also, 5% VAT would incur when generating sales.
4. Income determination
Except for certain exempt items, income from all sources (business income, interest, royalties, and
capital gains realized from property sales) is subject to income tax. A company’s taxable income is
derived by adjusting non-taxable income, non-deductible expenses, allowable provisions, losses
carried forward and so on from accounting income.
5. Deductions
Except for certain non-deductible expenses (normally non-qualified (not substantiated by adequate
and acceptable documents) expenses and costs, corporate income taxes paid, certain costs
incurred with the income taxed on a final withholding tax basis and allowable provisions), all the
costs and expenses are deductible.
6. Group taxation policies
Transfer pricing documentation is required.
7. Tax incentives
Inward investment:
Merge and acquisition transactions that meet certain criteria qualify for tax benefit including
exemption from deed tax, stamp duty, securities transaction tax, VAT and deferral of land value
increment tax.
Capital investment:
Companies can claim tax credits for up to 15% of qualified research & development (R&D)
expenses, with the maximum amount of tax credit capped at 30% of the tax payable in the year the
expenses are incurred. Any unutilized R&D credit will be forfeited and cannot be carried back or
carried forward.
Investors located in prescribed areas:
Export processing zones, science-based industrial parks and free-trade zones.
Establishing operation headquarters, logistic and distribution centers within Taiwan:
For headquarters, few types of income (headquarters’ management income, royalty income, gain
from disposal of investment) are exempt from corporate income tax; while for logistic and
distribution centers, income generated from qualified sales and delivery are exempt from corporate
income tax.
8. Withholding tax
Dividends
Rental
Interest
Commissions
Royalties
Technical fee
Professional fees
Resident company(%)
Resident individual(%)
Non resident company /
individual(%)
N/A
N/A(1)
10
N/A(1)
N/A(1)
N/A(1)
N/A(1)
N/A
10
10
10
10
10
10
20
20
15,20
20
20
0, 2, 3, 20
20
N/A(1): statutory invoice is required
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Investing in Asia Pacific 2015
9. Tax administration
1. VAT filing and payment: a bi-monthly VAT filing shall be completed by the 15th day of the odd
month for the two (2) preceding months; while the tax payment shall be made before VAT filing
2. Withholding processing: withholding tax shall be submitted to the Authority and the withholding
certificate shall be issued within ten (10) days after the payment is made if the receiver is a
non-resident; whereas the tax withheld is due in the 10th day of next month and the issuance
of annual withholding certificate is due on January 31 of the following year.
3. Corporate income tax return: annually filing is stipulated and is due in the fifth month after the
end of tax year; however, tax is paid on a self-assessment basis in two (2) installments: income
tax equal to either 50% of the tax liability declared for the previous year or taxable income
generated during the first six (6) months of the current year during 1 September and 30
September, while the second payment is due upon the filing of annual tax return.
TAIWAN
10. Taxable incomes for non-residential companies and individuals
Taiwan-sourced income only for non-residential companies.
Taiwan-sourced income only for non-residential individual stays in Taiwan less than 90 days during a
tax year; Taiwan-sourced income and proportional non-Taiwan sourced income for non-residential
individual stays in Taiwan within 183 days.
IPO quick facts
1. Bourses in the country
a. Taiwan Stock Exchange (TWSE)
b. Over-the-counter GreTai Securities Market (GTSM)
2. Admission requirements
A. Primary listing
Taiwan Stock Exchange (TWSE)
a. Company size
Paid-in capital or shareholder’s equity of at lease TWD 600 million or market capitalization over
TWD 1,600 million.
b. Trading record
The applying foreign users or any of its controlled companies shall have three (3) years or
more of trading records; where the applying foreign issuer is an investment holding company,
the trading record may be based on the actual number of years of operation of its subsidiaries.
c. Public shareholding requirement
At least 1,000 shareholders, and where insiders of the foreign issuer and juristic persons own
over 50% of the shareholding, not less than 500 shareholders other than such insider own at
least 20% of the total issued shares (or not less than 10 million shares).
d. Qualitative requirements
1. Either an audit committee( which shall comprise all the independent directors and shall not
less than three (3) persons) or supervisors (at least three (3) persons).
2. Cumulative pre-tax earnings of at least NTD250 million over the latest three (3) fiscal years,
with at least TWD 120 million in the latest fiscal year, and no cumulative deficit.
e. Others
At least six (6)-month after filing a consultancy contract with underwriters, or registering as an
emerging stock on the GTSM.
Over-the-counter GreTai Securities Market (GTSM)
a. Company size
Shareholder’s equity of at lease TWD 100 million.
b. Trading record
Two (2) years or more; where the applying foreign issuer is an investment holding company,
the trading record may be based on the actual number of years of operation of its subsidiaries.
c. Public shareholding requirement
Where insiders of the foreign issuer and juristic persons own over 50% of the shareholding, no
less than 300 shareholders other than such insider own at least 20% of the total issued shares
(or not less than 10 million shares).
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Investing in Asia Pacific 2015
TAIWAN
d. Qualitative requirements
Consolidated income before tax of at least TWD 4 million in the latest fiscal year. Furthermore,
the ratio of income before tax to shareholders’ equity must meet one of the following
requirements (not taking into account the effects of net minority interest income (or loss)):
at least 4% for the latest two (2) fiscal years.
for each of the latest two (2) fiscal years is 3% or highermost recent fiscal year is higher.
that of the average of the latest two (2) fiscal years is 3% or higher, and profitability in the
most recent fiscal year is higher that of the preceding fiscal year.
e. Others
At least six (6) months after filing a consultancy contract with underwriters, or registering as an
emerging stock on the GTSM.
B. Secondary listing
Taiwan Stock Exchange (TWSE)
a. Company size
Shareholders’ equity of at least TWD 600 million.
b. Trading record
The registered shares, or securities representing its shares, issued by the foreign issuer in
accordance with the laws of its home country, have been listed on one of the stock exchanges
or securities markets (only those approved by Taiwan competent authority) for at least six (6)
months.
c. Public shareholding requirement
Excluding insiders and juristic persons who hold over 50% of total shares:
The number of registered holders of Taiwan Depository Receipts (TDR) in Taiwan must be
at least 300 persons or more;
The total number of shares held by these holders must be at least 20% of the total number
of issued shares or at least TWD 10 million shares.
d. Qualitative requirements
No cumulative deficit for the latest fiscal year and meet one of the following criteria,
The income before tax for the latest fiscal year represents not less than 6% of the
shareholders’ equity as shown in the issuer’s final accounts; or
The ratio of income before tax to shareholder’s equity for each of the latest two (2) fiscal
years is 3% or higher, or the average is 3% or higher, and the profitability in the latest fiscal
year is better year-on-year than in the preceding year; or
The income before tax for the latest two (2) fiscal years are both TWD 250 million or more.
e. Others
Local holders of the stock are not restricted from selling the stock on foreign stock
exchanges or securities markets.
The rights and obligations of stockholders are identical to those for the same class of stock
listed on other stock exchanges or securities markets.
Over-the-counter GreTai Securities Market (GTSM)
a. Company size
Shareholders’ equity of at least TWD 200 million.
b. Trading record
Same as TWSE TDR.
c. Public shareholding requirement
Same as TWSE TDR.
d. Qualitative requirements
No cumulative deficit for the latest fiscal year and meet one of the following criteria,
The income before tax for the latest fiscal year represents not less than 4% of the
shareholders’ equity as shown in the issuer’s final accounts; or
The ratio of income before tax to shareholder’s equity for each of the latest two (2) fiscal
years is 2% or higher, or the average is 2% or higher, and the profitability in the latest fiscal
year is better year-on-year than in the preceding year; or
The income before tax for the latest 2 fiscal years are both TWD 4 million or more.
e. Others
Same as TWSE TDR.
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3. Specific requirements for specific industries
For those TDRs categorized as technology, profitability threshold is set differently:
Crowe Horwath International
Investing in Asia Pacific 2015
TWSE TDRs
TAIWAN
1. Shareholders’ equity shall not be less than (Paid-in-capital plus Capital Surplus) multiplying
second (2nd) of third (3rd);
2. Issuers must have sufficient working capital for twelve (12) months after listing (More than 50%
of abovementioned working capital must be generated from operating cash flow)
Furthermore, shareholders’ equity for the most recent period must be TWD 300 million or more.
GTSM TDRs
A foreign issuer that has obtained an appraisal opinion from a professional institution engaged by
the Industrial Development Bureau of the Ministry of Economic Affairs, or engaged by the GTSM,
stating that such an issuer is a technology enterprise and that is has successfully developed a
product or technology with market potential may be exempted from the profitability restrictions.
4. Typical issuance size
Primary listing:
At least meet the public shareholding requirement.
Secondary listing (TDRs):
TWSE TDR:20 million units or more, or total with a market value of TWD 300 million or more GTSM
TDR:10 million units or more, or total with a market value of TWD 100 million or more.
5. Moratorium imposed
Evaluated as not qualified for listing application by underwriter; or listing application is rejected by
Review Committee of TWSE/GTSM or is then rejected by the Competent Authority.
6. Requirements for the appointment of a resident / local director and board composition
Requirement for directors(primary listing only).
TWSE
At least five (5) board members and at least two (2) independent non-executive directors, at least
one (1) of whom must be domiciled in Taiwan.
GTSM
At least three (3) independent directors, which must account for at least 1/5 of the total number of
director seats. At least one (1) of the independent directors shall be domiciled in Taiwan.
7. Methods of offer and restrictions
It’s mandatory that the foreign issuers being under consultation contract with underwriters.
8. Timeline
Primary listing:
Self-assessment of internal control system and/ or restructure plan conducted by the company
Contract an underwriter for consultancy
(three (3) months (additional three (3)-month extension
is allowed) Conduct Public Issuance
Fill in the listing application form
(at least six (6) weeks)
Reviewed by Review Committee of TWSE/GTSM
one month)approved by the Board of
TWSE/GTSM
(two (2) to three (3) weeks) Approval from the Competent Authority or Financial
Supervisor Commission
(two (2) weeks) Get approval for capital-incremental plan
(one (1)
week) Listing.
Secondary listing:
Fill in the listing application form
(ten (10) business days) Approval letter from TWSE/GTSM &
(12 business days)Approval letter from Central Bank
(within seven (7) business days) File an
effective registration with the Competent Authority or Financial Supervisor Commission
(three (3)
months (additional three (3)-month extension is allowed) Conduct Public Issuance
(within three
(3) days) Submit the chart of dispersion of shareholding and schedule the listing date
(three (3)
days prior to listing) Apply for Listing.
9. Approving authorities
Primary listing:
Review Committee of TWSE or GTSM.
Financial Supervisory Commission.
Secondary listing:
Central Bank (approval letter for the foreign currency).
Review Committee of TWSE or GTSM.
Financial Supervisory Commission.
10. Estimated cost involved
Contract an underwriter/investment bank for consultancy; engage an auditor/ lawyer.
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Investing in Asia Pacific 2015
TAIWAN
11. Restriction on secondary listing or dual listing
The registered shares, or securities representing its shares, issued by the foreign issuer in
accordance with the laws of its home country, shall have been listed on one of the stock exchanges
or securities markets approved by Taiwan competent authority:
NYSE Euronext(US); American Stock Exchange(US); NASDAQ(US); London Stock Exchange(UK); Deutsche Borse AG
(Germany); Italian Stock Exchange(Italy); Toronto Stock Exchange(Canada); Australian Securities Exchanges (Australia);
Tokyo Stock Exchange(Japan); Osaka Securities Exchange(Japan); Stock Exchange of Singapore(Singapore); Kuala
Lumpur Stock Exchange(Malaysia); Stock Exchange of Thailand(Thailand); Johnnesburg Stock Exchange(South Africa);
Hong Kong Exchanges and Clearing Limited(HK); Korea Exchange(Korea); others with special approval.
12. Language required for:
a. Prospectus: Chinese
b. Annual reports: Chinese
c. Audit reports: Chinese
13. Audit opinion required for
a. IPO
Primary listing: Two (2) qualified CPAs from qualified firm to sign the audit opinion; and also,
an unqualified opinion on internal control system shall be issued within three (3) months after
the balance sheet date / most recent three (3) fiscal years audited consolidated financial
report (if the application date is within the 4th, 7th and 10th month after the balance sheet
date, the audit report for Q1, half-year and Q3 shall be submitted additionally). Secondary
listing: Two (2) qualified CPAs from qualified firm to sign the review opinion for the GAAP
differences / most recent three (3) fiscal years consolidated financial report (if the application
date is after August 31, half-year consolidated report for the current year is required).
b. After IPO
Two (2) qualified CPAs from qualified firm to sign the audit (or review) opinion.
14. Requirements of accounting auditors to be appointed
Foreign auditors are not allowed.
15. Delisting standards from bourses
Extraordinary resolution of shareholders
Supervisor Committee).
(Approval from the Competent Authority (Financial
Human resource requirements
1. Special labor standards to take heed of
Statutory minimum level of pay:
Statutory minimum level of pay: currently set at TWD 19,273 per month / TWD 115 per hour (TWD
20,008 per month / TWD120 per hour, effectively July 1, 2015) and shall be equal pay for man and
woman; reviewed periodically.
Working hours:
Generally, may not exceed eight (8) hours a day and 84 hours within any 2-week period; 30-minute
break shall entitle to worker for every 4-hour working period; overtime is limited to four (4) working
hours a day and 46 hours a month. In addition, children under 15 year-old is not allowed to work, while
those between 16 and 17 are allowed to work eight (8) hours a day without overtime.
Other topics regarding sex discrimination and harassment as well as labor’s health and safety
are addressed in the labor standards as well.
2. Social welfare: insurance, pension, etc
Labor and health insurance:
mandatory contribution based on every employee’s filed salary and dependents.
Pension:
mandatory: 6% contribution of every employee’s filed salary.
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3. Requirements for retirement benefits
Companies are free to establish a retirement system for employees other than the mandatory
defined contribution plan set by the government. Otherwise, the benefit would be paid through
every employee’s individual pension account via government’s mandatory system upon his
retirement.
Crowe Horwath International
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4. Legal annual leave and public holidays
Public holidays:
Employees are allowed time off on public holidays; and normally, most companies follow the official
government holiday schedule issued annually.
TAIWAN
Leaves:
holiday and annual leave (7-day paid vacation after 1-2 year(s) continuous service, 10-day paid
Vacation after 3-5 years continuous service, 14-day paid vacation for employees work over five (5)
years; up to 30-day paid vacation for those work over ten (10) years); marriage (up to 8-day paid
vacation) and funeral leave (depends on the relationship to the deceased); maternity leave and
childcare.
5. Brief information on labour unions
It’s not mandatory to set a labor union within a company; normally, labor union is set at
industrial-level; for example, CPA union.
6. Country quirks
If it’s normal in the industry to work overtime, the employer may require a written agreement or
consent letter from the employees while recruitment.
Withdrawal procedures
1. Company: legal procedures required for liquidation
1. Cancel company registration to clear company data maintained by the Authority.
2. Apply to court for the cancellation of Taiwan legal identification to avoid any contingent
liabilities (or lawsuit filed by someone) incurred thereafter; few mandatory criteria have to be
met in the process of court’s investigation.
2. Company: tax requirements
Complete liquidation tax filing to cancel the Company’s tax identification number.
3. Branch: legal procedures required for closing branch
Cancel company registration to clear company data maintained by the Authority.
4. Branch: tax requirements
Complete liquidation tax filing to cancel the Company’s tax identification number.
5. Representative office: legal procedures required for closing office
File office-closing documents to the Authority, which may take ten (10) business days or so.
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