Essential tips for establishing a business in Taiwan

Unlocking business opportunities in Taiwan: A guide for foreign businesses and entrepreneurs

5 min read

Taiwan, with its vibrant economy and strategic location in Asia, presents a compelling opportunity for foreign entrepreneurs. Whether you are eyeing the sizable technical talent pool, friendly business environment or low operational costs, Taiwan has a lot to offer. We explore the key aspects of setting up a business in Taiwan, providing valuable insights for a smooth and successful establishment.

For small teams of around six or fewer people, leveraging a third-party company is a cost-effective solution. This approach ensures compliance and payroll management, allowing you to focus on your core business activities. Employer of Record service providers, such as Welcome to Taiwan, can facilitate this process, offering immediate hiring options and assuring Taiwanese employees of their labor rights protection under local laws.

Options for setting up your business

For larger teams or those seeking greater autonomy, setting up your own entity is a viable choice. This involves navigating the complexities of branch, subsidiary, or representative office structures. Each option has its considerations, from double taxation issues to qualification for subsidies and grants. While a subsidiary or branch may be suitable, a representative office offers simplicity but restricts revenue generation within Taiwan. All three options require a so-called ‘responsible person’ – this is the person who will perform key functions for the business (such as opening a bank account) and who bears legal liability for the business.

It's crucial to navigate the visa requirements for you and your employees. Taiwan offers several visa options. Information on visas can be found on the Bureau of Consular Affairs, Ministry of Foreign Affairs website.

Taiwan also implements a Gold Card, which is part of a comprehensive government initiative to attract high-skilled foreign workers to Taiwan. More information can be found on the Gold Card website.

Option 1: Utilizing an Employer of Record

Option 2: Establishing your own entity

low-angle photography of four high-rise buildings

1. Responsible Person: A crucial aspect is the appointment of a responsible person, representing the company and handling various administrative functions. This person cannot be employed by the Taiwanese government and an age threshold applies.

2. Minimum Paid-in Capital: Depending on your chosen setup, meeting the minimum paid-in capital requirements is essential for obtaining work visas and issuing visas to foreign employees.

3. Advantages: Establishing your own entity provides flexibility, potential government subsidies, and the ability to enter into joint ventures.

Key considerations for setting up your own entity

person using laptop on white wooden table

Navigating Taiwan's legal landscape involves understanding the differences between a branch, subsidiary, and representative office. Each structure has its own set of requirements, from Ministry of Economic Affairs (MOEAIC) approval to income tax filing obligations. Legal liability varies, making it important to assess the structure that aligns with your business goals.

Companies in Taiwan are generally subject to Corporate Income Tax at 20%. However, small and medium-sized enterprises (SMEs) may be eligible for a reduced tax rate. There is also a 5% Value Added Tax (VAT) on the sale of goods and services.

Full information on business tax can be found at the National Taxation Bureau. Business taxation registration status can be viewed on the Ministry of Finance eTax Portal.

Various support programs are available from the government, such as those listed by the Small and Medium Enterprise and Startup Administration in the Ministry of Economic Affairs.

Understanding legal and administrative aspects

Time required for business setup in Taiwan

Regardless of the chosen setup, anticipate a minimum 5-12 week timeframe for processing applications. This duration accounts for government processes, documentation fulfillment, and additional tasks such as opening bank accounts and recruiting staff.

Choosing the right office space is an important step in your business journey. Taipei, for example, offers a range of options, with costs varying by district and building grade. Understanding terms like "pings" (approximately 3.3 sq-m or 35.6 sq-ft) and factoring in common areas are essential for budgeting.

Locals like to communicate locations based on nearby MRT stations. Having a business located close to a MRT station or major transport hub is an important consideration. Typically, a new business would need to file their business location and land zone use with the Taipei City Office of Commerce.

Understanding rental costs, deposit policies, and additional expenses like building fees and utilities is vital. Negotiating the fit-out of the office space and clarifying tax responsibilities with the landlord ensure a smooth leasing process. Landlords generally rent out offices ‘as-seen.’

Selecting an office space in Taiwan

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Building a network with local businesses and industry associations can be invaluable. Local Chambers of Commerce, such as the American Chamber of Commerce in Taiwan (AmCham) and the British Chamber of Commerce, are good starting points. The Taiwan External Trade Development Council provides a schedule of fairs, events and conferences.

Business networks

Taiwan's tax system includes corporate tax, VAT, and payroll taxes. National Health Insurance is applicable to all employees. The company pays 60% of an employee’s annual premium. Labor insurance is typically 7.5% to 13% and all employers are required to contribute into a pension plan overseen by the Bureau of Labor Insurance.

To open an official bank account, a company would typically need: a company registration approval certificate, business tax registration approval, location lease, company chop (stamp), and a preparatory bank account. Identity documents of the responsible person will also need to be provided.

Preparing for payroll and tax compliance

Beyond the initial setup, entrepreneurs should be aware of operational challenges and business support options, including:

R&D Incentives: Explore opportunities for low-interest loans and tax credits for participating in industrial R&D programs.
Foreign Exchange and Remittance: Understand the rules and limits for converting and transferring direct investment funds.
Contracts and Dispute Settlement: Familiarize yourself with Taiwan's legal framework for resolving disputes, contract enforcement, and property ownership.

Building and managing your team

unknown persons holding red paper lantern outdoors

In terms of recruitment, it's important to understand the local workforce dynamics, including factors like job security, reputation, and the importance of family influence. When managing staff, effective communication, understanding hierarchical structures, and motivating young employees are key elements in successful management.

While English is widely spoken in business environments, having staff members proficient in Mandarin can be advantageous. Consider providing language training for key team members to enhance communication and collaboration with local counterparts.

Taiwan, with its dynamic business environment and strategic advantages, offers a promising destination for foreign entrepreneurs. By navigating the legal landscape, understanding cultural nuances, and strategically setting up your business, you can unlock the full potential of this thriving market. Whether you opt for an Employer of Record or establish your own entity, careful planning and adherence to local regulations will pave the way for a successful business venture in Taiwan.