Why do business in Taiwan?
Any entrepreneur aiming to break into the Asian market should seriously consider Taiwan as a base. The authorities of this nation are welcoming to overseas investors, always keen to attract industry expertise and create new jobs for locals.
As a result, Taiwan offers limited bureaucracy and low business tax rates for anybody seeking to open a new business. Taiwan also boasts a favourable geographic location, offering simple transport links to other major Asian and Australasian nations, in addition to a skilled, dedicated and hardworking labour force.
CST (GMT +8)
World Bank Ease of Doing Business Ranking (1-190)
Tax rates 2020
How to set up payroll in Taiwan
It is comparatively fast and simple to set up a new business entity in Taiwan, provided you have all relevant visas and work permits. Ensure that you have a local address and bank account in place and choose your company name. It may also be beneficial to enlist the services of a local agency to aid with the set-up of a business entity.
Your business will likely need Foreign Investment Approval, provided by the Investment Commission of the Ministry of Economic Affairs. This is rarely declined though, as Taiwan is generally very welcoming to overseas businesses – especially if they are creating jobs for the local labour force.
Once you are ready to register your business, contact the Ministry of Economic Affairs and get the ball rolling. This will involve a range of forms, which may be written in Mandarin. This is why it is advisable to gain support. The MEA will not make you attend these meetings in person. You can assign Power of Attorney over your business affairs to an associate in Taiwan and permit them to act in your stead.
When the time comes to make new hires – usually up to 14 weeks from the first steps to opening a new business – you will be welcome to bring in overseas staff. This may impact the minimum capital you are asked to provide though, and you’ll need to provide evidence that the local workforce could not fill the roles to gain visas and work permits.
All new staff will need to be registered with the relevant authorities. This means ensuring they receive social security benefits in addition to making employee contributions, and course, paying income tax. The income tax rate in Taiwan is broken into 5 income levels.
- Salary below 540,000 Taiwan Dollars (TWD$ – sometimes referred to as New Taiwan Dollars, or NT$) – 5%
- Salary between TWD$540,001 and TWD$1,210,000 – 12%
- Salary between TWD$1,210,001 and TWD$2,242,000 – 20%
- Salary between TWD$2,242,001 and TWD$4,530,000 – 30%
- Salary of TW$4,531,001 or higher – 40%
The financial year in Taiwan follows the calendar year. All tax returns must be filed and payments made by the end of the following June.
Taiwan employment law and HR considerations
The Labour Standards Act of Taiwan, last updated in 2021, is the driving force behind all employment law in the country. Be aware that different cities and localities may have different rules and regulations surrounding working conditions. Overall, however, the LSA should be considered the gold standard of Taiwanese working conditions.
Mandatory benefits in Taiwan are comparatively light, especially compared to other Asian nations such as South Korea. It only costs around 1.07 times an employee’s annual salary to meet social security demands, which total around 14% of an employee’s income. These funds will finance:
- Payments into the New Labour Pension System
- Payments to the Bureau of Labour Insurance, which finances employee sickness in Taiwan
- Payments into the National Health Insurance scheme, as Taiwan operates a public health system akin to the NHS
Employees will be entitled to a minimum of 3 days of personal holiday once they have completed three months of service. This allocation rises incrementally to 7 days (2 years of service), 10 days (3 years of service), 14 days (5 years of service), 15 days (10 years of service), and one day per additional year until a cap of 30 days is reached.
Sick leave is payable at half-pay for up to 30 days in any calendar year, or a full year in the event of hospitalisation. Parental leave is applicable for any employee with more than 6 months of service – maternity leave is offered at 8 weeks on full pay, and paternity leave for 5 days. If an employee has amassed less than 6 months of service, parental leave is issued at half-pay.
Many employers also offer additional benefits, such as leaves of absence for personal reasons, support for any mental health concerns (including stress) and more elaborate insurance policies.
Setting up a subsidiary entity in Taiwan
The most popular business model for SMEs in Taiwan is to open a limited liability company. The laws of the country have recently changed, so this can now be completed from afar. You’ll simply need to grant Power of Attorney to a Taiwanese national to act in your stead. They can handle all the legal ramifications of opening the business.
Choose the location of your business carefully, as local governments hold a great deal of power in Taiwan. Different cities will have varying rules and regulations, so do a little due diligence. Taichung, Taoyuan and Taipei City are widely considered the most business-friendly locations for SMEs in Taiwan.
If you have a limited liability company, you can operate as a 100% foreign-owned business with minimal restrictions. You’ll need to pay a handful of fees up-front though, and there will be a range of annual upkeep fees to retain your business permissions. It will likely be up to 14 weeks before you can start trading and make new hires.
Public companies are rare in Taiwan, but you could consider a partnership. In this instance, you will need at least two shareholders in the business, one of whom needs to be a resident. This individual will hold legal and financial liability for the business affairs of the partnership, so ensure that all parties are happy with this arrangement. If you do open a public company, you’ll need at least two directors and hold an annual AGM.
An alternative approach is to open a branch of your overseas business. The tax implications are the same – a standard corporate tax rate of 20% applies to all business structures in Taiwan. If opening a branch and looking to populate the staffing team with overseas hires, you’ll need minimum start-up capital of TW$5 million (around £125,000).
English is a commonly taught second language in Taiwan, so you may be able to trade exclusively in your native tongue. However, do consider that the national language of Taiwan is Mandarin Chinese. It is advisable to learn at least a little of this dialect – or partner up with a local that speaks the language. Most formal business documents in Taiwan will be printed in Mandarin.
Handshakes are a common greeting in Taiwan, usually softer and less firm than in the west. Do not think that an associate is being rude if they fail to make eye contact during these preliminary salutations. In Taiwan, if it is common for locals to look down as a sign of respect. If male and greeting a female counterpart, allow her to extend her hand for shaking first.
When addressing potential business partners, focus more on age than hierarchical seniority. The oldest person in the room, regardless of their corporate rank, should be addressed first. Avoid using first names unless invited and treat business cards with respect. Always have plenty of business cards on your person, and when presented with one, make a show of studying – and complementing – it before putting it away.
Communication is not always direct in Taiwan, so do not take a brusque, rushed, “time is money” approach to negotiations. State your case clearly and directly to avoid any misunderstandings but be prepared to discuss the nuances in a great deal of detail. Listen carefully, too. Important details are often buried among small talk in Taiwan.
Finally, expect to be entertained. In Taiwan, business and friendship often go hand in hand. By forging a personal relationship with trading partners, Taiwanese business executives increase their sense of trust. Always accept an invitation to dinner, whether for business or pleasure, and dress formally. Punctuality is also key at times in Taiwan.
Setting up in Taiwan FAQs
• Limited liability company
• Limited partnership (minimum of 2 partners, at least one of whom is a local resident that retains liability for financial and legal affairs of the entity)
• Branch of an overseas business
Wherever possible, businesses will start an LLC in Taiwan. This will have preferential tax implications, as well as acting as a separate legal entity.
A new venture will be ready to start trading and making hires in Taiwan anywhere from 10 to 14 weeks, depending on the complexity of the business structure.
Once social security taxes and employee benefits are taken into consideration, expect to pay around 1.07 times an employee’s annual salary in Taiwan.
Officially, the minimum share capital for a limited liability company in Taiwan is TWD$1, though a business will also need substantial sums deposited into a local bank account to register their business. Investors looking to purchase paid-up capital are subject to a minimum share of TWD$1,000,000.
Yes, you will need a local bank account for your business to trade in Taiwan. If you cannot do this in person, assign a representative with Power of Attorney to arrange this.
The average working day in Taiwan is from 8am to 5pm, 5 days per week. Taiwanese law restricts employees to an 8-hour working day without paid overtime. Most businesses in Taiwan stick quite strictly to these working hours.
Private insurance policies to supplement government-mandated social security in Taiwan is a very popular benefit. Mental health support is also considered important in Taiwan and is thus often factored into a benefits package. Subsidised transport, such as a car allowance, and personal health benefits are also commonplace.
Dismissal at will is forbidden under the auspices of the Taiwan Labour Standards Act. It does not need to be complicated to terminate an employee, but you’ll need a valid reason. According to the LSA, these valid reasons include:
• The employee gained employment based on fraudulent or misleading qualifications
• The employee is unable to perform the basic tasks required for the role
• The employee acted in a violent or insulting manner in the workplace
• The employee is incarcerated following criminal activity
• The employee committed an act of gross negligence or insubordination that breached their contract
• The employee wilfully damaged company property
• The employee wilfully revealed company secrets to a competitor with the intent to harm
• The employee misses 3 consecutive days of work, or 6 days in a calendar month, without good reason
• The business is experiencing financial hardship or undergoing a restructure that necessitates redundancy
A notice period, or equivalent severance pay if agreed by the employee, will also be required. This will be anywhere between 10 and 30 days, depending on how long the employee has been in your service.
Annual leave entitlement in Taiwan is issued on a sliding scale, based on length of service.
• 6 months to 1 year – 3 days
• Up to 2 years of service – 7 days
• Up to 3 years of service – 10 days
• Up to 5 years of service – 14 days
• Up to 10 years of service – 15 days
After an employee completed 10 years of service, they gain an additional day of holiday for each year until the cap of 30 days is reached after 25 years. Taiwan also observes 12 public holidays every calendar year.
You will be welcome to open a branch of your business in Taiwan and will be subject to the standard corporate tax rate of 20%. The UK and Taiwan have a double tax treaty in place, so you will not be taxed twice for your business income in Taiwan.
Employees in Taiwan must hold a passport issued by this nation. Any overseas national will need a visa to enter Taiwan, alongside a visa and a work permit. If you plan to live in Taiwan while running your business will also need an Alien Resident Certificate (ARC). Thankfully, the authorities in Taiwan are comparatively open to granting these documents.
As discussed, anybody looking to stay in Taiwan for longer than 90 days will require an ARC to work. This will be issued by the Taiwan National Immigration Agency and will be valid for up to 3 years at a time.
If looking to set up a business in Thailand, you should apply for an entrepreneur visa from the Investment Commission of the Ministry of Economic Affairs.
If you wish to bring an overseas employee into your business, they will also need a work permit from the Workforce Development Agency of the Ministry of Labour – and, obviously, a visa to enter and remain in Taiwan.
Expect to pay the following fees to gain the right to legally work in Taiwan:
• ARC (if applicable) – TWD$1,000 (around GBP£25)
• Entrepreneur visa – between TWD$4,000 (GBP£100) and TWD$8,000 (GBP£400)
• Entry visa to Taiwan – around £50 when issued from the UK