Doing business in Taiwan - HSBC Global Connections

This publication is
a joint project with
Doing business in Taiwan

Contents
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 34
Banking in Taiwan 36
HSBC in Taiwan 38
Country Overview 40
Contacts 42
Disclaimer
This document is issued by HSBC
Bank (Taiwan) 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 financial, legal, tax
or other professional advice. You
should not act upon the information
contained in this publication without
obtaining specific 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 will
the Bank or PwC be liable for any
loss caused by reliance on any
opinion or statement made in this
document. Except as specifically
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 originally assembled
in November 2010. This guide has
been updated in April 2012 based on
the law enforceable and information
available at that time.

Executive Summary
Located in the heart of the
Asia Pacific region, Taiwan is
a strategic platform connecting
some of the largest economies,
including US, Japan and China.
The World Trade Report 2012
ranks Taiwan as the 18th
largest economy in the world,
and consistently scores very
highly in global competitiveness
rankings by leading economic
organisations such as IMD
World Competitiveness
Yearbook 2011 (Taiwan ranked
8th place among the world’s 46
most competitive economies).
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 specific
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.
• 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 privatesector
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.
• The reduced corporate income
tax rate, from 25% to 17%,
applies to the tax year 2010
and onwards.
4

Foreword
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 achieve full potential
in this exciting area. HSBC has
been in Taiwan since 1984.
We now have 45 branches
located across the Island.
As a sign of our long-term
commitment to Taiwan, HSBC
locally incorporated on 1 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 Pacific
with major presences in Hong
Kong SAR and mainland China.
Looking further afield 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 gain
valuable insights into the Taiwan
market and unlock its very
significant 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 find this guide useful and
that we have a chance to be
your business partner in Taiwan
and beyond.
John Li
President & CEO
HSBC Bank (Taiwan) Limited
6

Introduction
Doing business in Taiwan
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 18th
largest economy in the world,
as reported by the World Trade
Report 2012, and consistently
scores very highly in global
competitiveness rankings by
leading economic organisations
such as the International
Institute for Management
Development (placing Taiwan
6th among 46 world economies
covered in 2012).
Since the 1950s, Taiwan
has evolved from an agrarian
economy based on rice and
sugar to one focused on
capital- and technologyintensive
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 began
to ease restrictions on
cross-strait economic ties
in the early 1990s, China
became the investment
location of choice. High-tech
firms have since joined more
labour-intensive industries
in shifting capacity to China,
encouraged in part by 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 firms’
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 chemicals, 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 foreign
private-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 2012,
Taiwan ranked the world’s
18th largest trading economy,
according to the World Trade
Organisation (WTO). Taiwan
joined the WTO membership
on 1 January 2002 under the
title of ‘The Separate Customs
Territory of Taiwan, Penghu,
Kinmen and Matsu’ which
further deepened Taiwan’s
integration into the global
economy and opened up its
domestic market to foreign
investment, products
and services.
8

In January 20 09, Taiwan
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, while
restrictions on Chinese
investment into Taiwan
are being gradually eased.
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 2012 ranking in the World
Bank’s Ease of Doing Business
Index jumped to 25th 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. These
incentives are generally in
the form of tax credits 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.
Principal
Government Agencies
For companies looking to do
business or invest in Taiwan,
the main regulatory agencies
and their areas of jurisdiction
are as follows:
Ministry of Economic Affairs
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 of Commerce
reviews applications for
company registration, including
the establishment of branch
offices and subsidiaries of
foreign-owned entities.
• Department of 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 of 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 Office
The TIPO is an agency
of the MOEA and deals
with patent, trademark and
copyright matters, as well
as the protection of
intellectual 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 financial
holding companies. The FSC
comprises four bureaus:
Banking, Securities and
Futures, Insurance
and Financial Examination.
Ministry of 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 2010
and integrates four existing
agencies under the cabinetlevel
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 for Labour Affairs
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

Conducting business in Taiwan
Forms of business
Foreign investors may
choose to establish a
business presence in Taiwan
in the form of a company,
branch office, representative
office, job-site office,
partnership or sole
proprietorship.
Company (Subsidiary)
A company is an incorporated
entity with a legal status
separate and distinct from its
owners. 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 each
has 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).
A foreign company that
receives approval from the
MOEAIC is called a Foreign
Investment Approved
(FIA) company.
Branch Office
A foreign company may
open a branch office to
do business in Taiwan after
obtaining recognition from
the Ministry of Economic
Affairs (MOEA) and completing
the procedures for branch
office registration. To receive
recognition, a foreign company
must have its incorporation
registered in its own country
and conduct its business
operations there. There is
no minimum working capital
requirement if the branch’s
activities relate to international
trade, but a foreign company’s
head office must remit
sufficient funds for the operation
of the branch. It must also
appoint a litigious and nonlitigious
representative and
a branch manager, who may
be the same person and may
be either a Taiwan citizen
or a foreign national.
Representative Office
The option of a representative
office 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 representative
office. A representative acts
as the company’s legal agent
for such matters as obtaining
quotations, participate in tenders
and concluding procurement
contracts.
There is no capital requirement
for representative office, but
only businesses recognised by
the MOEA as legally established
companies in a foreign country
may set up a representative
office in Taiwan.
Job-site Office
A foreign enterprise
intending to contract long-term
construction work in Taiwan
may find it preferable to set
up a local job-site office. A
job-site office 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.
Partnerships and
Proprietorships
In accordance with the Statute
for Investment by Foreign
Nationals (SIFN), a foreign
individual may invest in
Taiwan by setting up a general
partnership with one or more
other individuals. All partners
are jointly and severally
liable for the obligations of
the partnership. There is no
minimum capital requirement
for partnerships and
sole proprietorships.
12

Taxation in Taiwan
Corporation Tax
Scope and Rates
Taiwan’s income tax system
consists of individual income
tax and profit-seeking
enterprise income tax
(corporate income tax).
The term ‘profit-seeking
enterprise’ refers to any entity
that engages in profit-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 office located
in Taiwan (including locally
incorporated subsidiaries
of foreign companies) –
subject to income tax
on its worldwide income.
• A non-resident foreign
enterprise with its head
office outside Taiwan
but with a permanent
establishment (PE) in Taiwan
(such as a branch office) –
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.
For Taiwan income tax purposes,
a PE refers to a fixed place of
business or a business agent.
Corporate Income Tax Rates
Taxable
Income
Up to
NT$120,000
NT$120,001
and over
0%
17%
Tax
Rate
On 28 May 2010, 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 ratified
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
Taxable Income
The taxable income of a
profit-seeking enterprise is
net income, which is defined 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 define the
types of income that should
be regarded as Taiwan-sourced.
To determine a company’s
taxable income, its accounting
income is adjusted by taking
into account exempt income,
non-deductible expenses and
allowable provisions, and losses
carried forward.
Exempt 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 detailed
in 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;
• 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.
Non-deductible Items
Expenses and losses unrelated
to the business operations of
a company are not tax deductible.
Unrealised expenses and
losses may not be claimed
as tax deductible items
except in the case of employee
retirement funds, labour pension
reserves, allowances for doubtful
accounts and provisions for
foreign investment losses, as
specified 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.
Thin Capitalisation
In January 2011, Taiwan
introduced a new thin
capitalisation rule. From 2011
onwards, deductible interest
on inter-company loans is
capped at a debt-to-equity ratio
of 3:1 as currently prescribed
by the MOF.
The new rule generally
applies to profit-seeking
enterprises, except banks,
credit cooperatives, financial
holding companies,
bills finance companies,
insurance companies and
securities companies.
Capital Gains
Taiwan does not impose
a separate capital gains tax,
as all gains, unless specifically
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.
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 from
20% 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. Starting from
1 June 2011 onwards, 15%
or 10% of luxury tax will apply
on real estate properties
purchased not for self-use and
sold within one or two years
period. Luxury tax is levied on
the actual sales price (including
business tax (VAT)) of real
estate. Exemption on luxury tax
applies on certain conditions
(e.g. non-voluntary transfer,
inheritance, gift, etc).
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 shareholderimputed
credit account.
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 taxable
income, 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% profit retention surtax
may be imposed on any part
of a resident company’s current
year profit (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 profit retention surtax paid
by 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 profit retention surtax
against the dividend withholding
tax is not a dollar-to-dollar
credit but calculated based
on a prescribed formula.
16

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-tax
profits to its head office
without further Taiwan tax.
Withholding taxes on wages,
commissions, rentals, interest
paid to non-financial 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 certificates and
submit them to the tax collection
office for verification by the end
of January of the following year.
According to MOF guidelines
issued 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 profits, 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 evidentiary
Type of
Income
Resident
Individuals
(%)
Resident
Enterprises
(%)
Dividends N/A N/A 20
Commissions 10 10 1 20
Rentals 10 10 1 20
Interest 10 10 15,20 2
Royalties 10 10 1 0,20 3
Technical service
fees
10 N/A 3,20 4,5
Prizes/Awards 6 10, 20 10 20
Professional
Fees
documents), and it may apply
for a tax refund within five years
from the payment date.
Alternative Minimum Tax
In addition to normal 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. There are
two AMT systems, one for
companies 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.
10 N/A 20
The following are not
subject to AMT:
• Sole proprietors
and partnerships;
Non-resident
individuals and
enterprises (%)
• Non-profit 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%.
In April 2012, the Ministry of
Finance proposed to increase
the AMT tax rate from 10% to
12% and reduce the exemption
threshold from NT$2 million
to NT$500 thousand. If the
proposal is approved by the
Legislative Yuan, the proposed
change is expected to take
effect from 2013 onwards.
Tonnage Tax System
In January 2011, Taiwan
introduced a new tonnage tax
regime. From 2011 onwards, a
qualifying enterprise engaged
in maritime transportation
having its head office in
Taiwan may apply to re-base
the taxation of their maritime
transportation income from the
regular income tax system to a
lump sum tax calculated on the
net tonnage of their fleet.
If the qualifying enterprise
has income other than
income derived from maritime
transportation, such income
will still be taxed pursuant
to the relevant rules of the
Income Tax Act.
Tax Administration
The tax year in Taiwan
runs from 1 January to
31 December; companies
must obtain prior approval
to adopt a fiscal year other
than the calendar year. Tax
payments are filed on a
self- assessment basis.
All Taiwan resident companies,
as well as foreign companies
with a PE in Taiwan, must file
annual returns with the tax
authority no later than five
months after the end of the
tax year. Penalties are imposed
for late filing and failure to file
a return, and interest is charged
on delayed payments.
Tax Returns
Corporate taxpayers must file
returns using one of the
following prescribed forms:
• Ordinary return – used by all
types of profit-seeking
enterprises; or
• Blue return – used by
enterprises with good filing
records, subject to prior
approval.
Group companies qualifying
under the Business Mergers
& Acquisitions Act, and
financial holding companies
as defined by the Financial
Holding Company Act, can
file a combined return for
the parent and its first tier
subsidiaries. Consolidated
returns are not permitted
for other enterprises.
Consequently, the losses
1.
Commissions, rentals and royalties
received by resident enterprises
that issue unified 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 certificates, corporate
bonds, government bonds or financial
debentures, as well as interest
derived from repurchase transactions
involving these bonds or certificates.
The rate in all other cases is 20%,
unless reduced under a tax treaty.
3.
Royalties received by foreign
enterprises with IPs registered in
Taiwan 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 power plants
for power generating companies,
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 nonresident
individuals and enterprises.
However, cash awards less than
NT$2,000 from lottery tickets
issued by the government are
not subject to withholding tax.
Whereas, cash awards more than
NT$2,000 from lottery tickets issued
by the government are subject to
20% withholding tax. This applies
regardless of whether resident
or non-resident individuals and
enterprises are involved.
.
18

of one affiliate cannot be used
to offset the profits of another.
As a general rule, losses
incurred by a profit-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 certified
by a certified public accountant
(CPA), may carry losses
forward for a period of up
to ten years. Losses cannot
be carried back.
Certification
Submission of audited financial
statements with tax returns is
neither required nor customary
That said, certain enterprises
must have their income tax
returns examined and certified
by a qualified CPA, including:
• Banks, credit cooperatives,
insurance companies,
investment trust companies,
short-term bill and finance
companies, capital leasing
companies, and companies
engaged in securities
and futures trading;
• 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 filed a
consolidated income tax return
in accordance with the Business
Mergers and 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 selfassessment
basis in two
instalments. A company
with fiscal year ending
31 December must pay
provisional income tax
between 1 and 30 September
equal to 50% of the tax liability
declared for the previous
year. However, if the taxpayer
meets certain requirements, it
can opt to pay the provisional
tax based on its taxable
income for the first six months
of the current tax year. The
second payment is made
when filing the annual return.
The return is then reviewed
by the tax authority and a final
assessment is issued.
Penalties are imposed for late
filing and failure to file 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 assessed
or follow the appeal procedures
provided under the relevant
tax provisions.
Tax Incentives
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.
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 are
available up to 15% of qualified
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.
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
Taiwan companies (including
the 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 derived
from foreign source income.
Double Taxation
Agreements
In addition to Taiwan’s domestic
arrangements that provide
relief from international double
taxation, Taiwan has entered
into bilateral double taxation
treaties with 23 countries as
of April 2012. These treaties
generally follow the Organisation
for Economic Co-operation and
Development (OECD) model and
their contents 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 Profit-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.

Withholding Taxes Under Double Taxation Agreements
Personal Income Tax
22
(as of 30 April 2012)
Country Dividends (%) Interest (%) Royalties (%)
Australia 10,15 1 10 12.5
Belgium 10 10 10
Denmark 10 10 10
France 10 10 10
Gambia 10 10 10
Hungary 10 10 10
India 12.5 10 10
Indonesia 10 10 10
Israel 10 7,10 2 10
Macedonia 10 10 10
Malaysia 3 12.5 10 10
Netherlands 10 10 10
New Zealand 15 10 10
Paraguay 5 10 10
Senegal 10 15 12.5
Singapore 40 4 NA 15
Slovakia 10 10 5,10 5
South Africa 5,15 6 10 10
Swaziland 10 10 10
Sweden 10 10 10
Switzerland 10,15 7 10 10
United Kingdom 10 10 10
Vietnam 15 10 15
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 profits of the
company.
5. 5% for royalties for the use of (or the
right to use) industrial, commercial,
or scientific equipment.
6. 5% for shareholders with at least a
10% shareholding.
7. 10% for shareholders that are
companies (other than partnerships)
with at least a 20% shareholding.
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 or 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 Rates (as of 1 January 2012)
Length of stay
Personal
exemption
Non-resident
Less than
183 days
No
183 days or more
Yes
Deductions No Yes
Tax rates In general 15%-
20%, depending
on income type
Resident
Progressive tax rates for 2012 tax year:
Net Taxable Income
(NT$)
Tax Rate
(%)
Progressive Difference
(NT$)
Expatriates working in Taiwan
are also taxed on fringe
benefits such as housing, living,
education and transportation
allowances. Fringe benefits
to individual taxpayers in the
form of cash allowances are
all taxable regardless of the
nature of the benefits. Fringe
benefits provided directly by
the employer without cash
payment to the employee
are also taxed unless the
recruitment of a foreign
employee satisfies certain
criteria for special tax incentives
applied to foreign professionals.
24
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 file 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 filed with respect
to Taiwan-source income. Married
couples must file joint returns
if both spouses have resided in
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
Taiwan for more than 183 days in
a taxable year. However, a spouse
can opt to 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 file 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 filing.
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.
Capital Gains
Taiwan does not impose
a separate capital gains tax,
as all gains, unless specifically
exempt by law, are assessed as
ordinary income and subject to
income tax. Gains from the sale
of land and qualified securities
transactions are currently exempt
from income tax.
Luxury tax (please see Page 17)
will apply on sale of real estate
properties purchased not
for self-use and sold within
two years.
Note however, that resident
individuals must include any gains
attributable to sales of unlisted
shares in Taiwan in their alternative
minimum tax calculation.
In April 2012, the MOF proposed
that individual taxpayer’ capital
gains securities (listed and
unlisted) and futures transactions

26
be taxed at a flat rate under the
regular income tax regime. If
the proposal is approved by the
Legislative Yuan, the proposed
change is expected to take
effect from 2013 onwards.
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 refundable
to 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 individuals
are not entitled to personal
exemptions and deductions.
Exemption
amount
Taxpayer NT$82,000 None.
Supporting
documents
Spouse NT$82,000 1. Basic information, e.g. copy
of passport, birth certificate,
etc.
2. Copy of marriage certificate.
Children or siblings
under 20 years
of age, or those
exceeding the
above age limit, but
studying in a school,
being physically
and mentally
incapacitated, or
incapable of earning
a livelihood
Lineal ascendant(s)
over 60 years of
age, or incapable of
earning a livelihood
Lineal ascendant(s)
over 70 years of age
Other dependants,
either under 20
years of age or over
60 years of age
and incapable of
earning a livelihood
NT$82,000
NT$82,000
NT$123,000
NT$82,000
1. Document(s) of relationship,
e.g. copy of birth
certificate(s), household
registration certificate(s), etc.
2. Document(s) certifying
the children or siblings are
supported by the taxpayer /
spouse.
3. For children or siblings
over 20 years of age:
Document(s) certifying
incapability of earning a
livelihood, e.g. copy of
tuition receipt(s), disability
certificate(s), etc.
1. Document(s) of relationship,
e.g. copy of the birth
certificate of the taxpayer /
spouse, household
registration certificate(s), etc.
2. Document(s) proving that
the ascendant is alive.
3. Document(s) certifying the
lineal ascendant(s) is (are)
supported by the taxpayer /
spouse.
4. For lineal ascendants
under 60 years of age:
Document(s) certifying
incapability of earning a
livelihood.
1. Document(s) of relationship,
e.g. copy of birth
certificate(s), household
registration certificate(s), etc.
2. Document(s) certifying the
dependants are supported
by the taxpayer / spouse.
3. For dependants over 60
years of age and incapable
of earning a livelihood:
Document(s) certifying
incapability of earning a
livelihood.
Standard Deductions (as of 1 January 2010)
Deduction item Deduction amount Supporting documents
Single taxpayer NT$76,000 None.
Married, filing jointly NT$152,000 Copy of marriage certificate.
Itemised Deductions (as of 1 January 2010)
Deduction item Maximum deduction Supporting documents
Charitable donations Limited to donations to Taiwan-registered
non-profit organisations and 20% of
annual gross taxable income
Life insurance premiums
Medical and
maternity expenses
Limited to NT$24,000 for each
person per year for life insurance and
labour insurance premiums. There is no
ceiling for health insurance premiums.
No limit
Original receipts.
Original receipts.
Original receipts issued by
a qualified hospital or clinic.
Calamity losses No limit Certificate issued by local tax office.
Interest paid on loans
for the purchase of an
owner-occupied
residence in Taiwan*
Rental expense for
the lease of a self-use
residence in Taiwan*
Limited to NT$300,000
for a tax filing unit
Limited to NT$120,000
for a tax filing unit
* Either ‘interest paid on loans’ or ‘rental expense’ is to be claimed.
• Interest payment receipt.
• Title deed.
• Documents evidencing the residence
was owner-occupied in the tax year.
• Rental contract with the name of the
taxpayer as lessee.
• Rental payment receipt issued by the
landlord.
• Documents evidencing the residence
was for self-use in the tax year.
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.

Audit and Accountancy
28
Special Deductions (as of 1 January 2010)
Deduction
item
Salaries and wages
Property transaction
losses
Savings and
investment
Disability
(mental or physical)
Dependant child
tuition
Alternative Minimum Tax
In addition to normal 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
Maximum
deduction
Limited to NT$104,000,
or actual salary/wages
received, per person,
whichever is lower.
Limited to property
transaction gains for
the same year. Any
residual balance may
be carried forward for
three years.
Limited to NT$270,000
per tax filing unit.
NT$104,000 per
taxpayer, spouse
and dependant,
if handicapped.
NT$25,000 per
dependant child if
studying in an approved
college or university.
Supporting documents
None.
• Certificate issued
by local tax office.
• Purchase and sales
contracts showing
the purchase and
sales price, and other
relevant documentation
detailing the related
costs and expenses
incurred.
None.
Copy of a physician’s
diagnosis certificate
or copy of Disability
Identification.
Student certificate or
tuition receipts issued
by the dependant child’s
college or university.
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
qualified insurance benefits,
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-source
income will increase the AMT
burden, any foreign taxes
paid on such income may be
credited against AMT payable,
with certain limitations.
Businesses are required
to maintain accounting
records and prepare annual
financial statements in
accordance with Taiwan
Generally Accepted Accounting
Principles (GAAP), which
largely follow International
Financial Reporting Standards
(IFRS) and US GAAP. Taiwan
requires financial statement
audits for any company with
paid-in capital exceeding
NT$30 million.
Accounting Books
and Records
Accounting Period
Businesses generally
use the 1 January to
31 December calendar year
as their accounting year,
which is the same as the
fiscal year for tax purposes.
However, a company may,
with permission, adopt
a non-calendar year-end.
Bookkeeping Currency
Accounting books must
be denominated in the local
currency (New Taiwan dollar,
NT$). 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 financial statements
Bookkeeping Language
All accounting books,
documents and financial
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 basis
of 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
financial statements in
accordance 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 financial statements
such as balance sheet,
income statement (profit
and loss account), cash
flow statement, statement
of changes in owners’
equity and notes to financial
statements, along with
comparative data for the
previous year, are all required.
Reporting Format
The format of financial
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 Books
and Records
All accounting records
must be kept for at
least five years, and
all accounting books
and financial statements
must be kept for at least
ten years after the completion
of annual closing procedures.

Human Resources
and Employment Law
Audit Requirements
Private companies are
required to have their annual
financial statements audited
and certified by a Taiwanlicenced
certified public
accountant (CPA) if their
paid-in capital is NT$30
million or more. Public
companies and financial
institutions must also have
their financial statements
audited and certified by a
CPA, as well as meet other
reporting requirements.
Public companies are
required to have their annual
financial statements audited
and certified by a CPA within
four months following the
close of each fiscal year.
They must also have their
semi-annual financial
statements audited and
certified by a CPA within
two months after the close
of each fiscal half year. In
addition, their first and third
quarter financial reports must
be reviewed by a CPA within
one month after the end of the
first and third fiscal quarters.
Taiwan’s Accounting
Profession
The National Federation of
Certified Public Accountants
Associations (NFCPAA)
represents the accounting
profession in Taiwan. It
oversees the education of
accountants and acts as
a communication channel
between the profession and
the government.
Practicing CPAs must register
with at least one of three CPA
Associations (representing
Taipei City, Kaohsiung City
and Taiwan Province), which
operate under the umbrella of
NFCPAA.
Auditor Independence
and Auditing Standards
The ‘Regulations Governing
Auditing and Certification
of Financial Statements by
Certified Public Accountants,’
cover independence matters,
reporting and disclosure
requirements, suggested
audit procedures, and other
general requirements related
to the review of internal control
systems. Independent auditors
must examine the financial
statements in accordance
with current auditing and
certification rules, as well as
the Statements of Auditing
Standards issued by the 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 financial 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. Early
adoption 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.
Labour-Related
Health Insurance
Labour Insurance
The Labour Insurance
Act basically requires
that, for companies with
five or more employees,
all employees must
be insured under the
government-run labour
insurance programme.
Companies with fewer
than five employees
may also apply for labour
insurance coverage.
There are two types
of labour insurance:
1. Ordinary risk insurance,
with six kinds of benefits
(maternity, injury and
sickness, unemployment,
old age and death benefits.
2. Occupational risk insurance,
with four kinds of benefits
(injury and sickness, disability
and death).
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) with Alien
Residence Certificate.
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 is
a defined 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

Labour Regulations
Wages and Salaries
Wages may not be less than
the statutory minimum wage,
which is reviewed annually by
the Council of Labour Affairs
(CLA). The statutory minimum
level of pay is currently set at
NT$18,780 (about US$641)
per month, or NT$103 (about
US$3.50) per hour.
Equal pay is also required for
men and women for work of
equal value.
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 marriage
(up to eight days), funerals,
medical care and recovery from
occupational accidents, or
legally required public service.
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 one
year 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 more
than six months, at half pay if
employed less than six months.
In the case of a miscarriage,
the leave taken will depend on
how long she was pregnant
before the 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
may request up to seven days
of family leave per year, treated
as normal leave, to care for a
family member who is suffering
serious illness or who must
handle major events.
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
specified above are made,
subject to the prior approval
of the authorities, for
supervisory/managerial
personnel 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:
Years of Service
1-

Trade
Competition and
Anti-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 efficiency. The Financial
Institution Mergers Act and the
Financial Holding Company Act
govern consolidation among
financial institutions. For
companies in other industries,
the Business Mergers and
Acquisitions Act provide the
legal framework and also
certain benefits to encourage
mergers, acquisitions and spinoff
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 investors are
strongly advised to seek
broader protection through
the MOEA’s Taiwan Intellectual
Property Office, 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 beneficial 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.
34

Banking in Taiwan
Overbanked Environment
Currently, Taiwan has almost
400 depository institutions
operating in Taiwan; including
37 local banks, 28 foreign
banks, 26 credit cooperatives,
302 credit departments of
farmers, and fishermen’s
associations and one postal
savings bank. These financial
institutions, along with
numerous trust and investment
companies, securities finance
corporations, non-life insurance
corporations, bills finance
companies and others compete
to cater to the financial needs
of Taiwan’s population of 23
million. Therefore, it would not
be an exaggeration to state
that Taiwan’s financial 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:
Type
Savings Account
Current Account
Time Deposits
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 different
options for a company to
establish a presence in Taiwan.
These include branch offices,
subsidiaries, representative
offices and more, depending
on the specific business needs
(Please refer to the ‘Conducting
Business in Taiwan’ section for
details). Your decision will have
implications on your business
scope, legal responsibilities
and taxes.
Features
The initial starting point of your banking relationship.
Payment and transfers – your most liquid assets.
Cheques for day-to-day payments (overdraft facility
available depending on credit standing).
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
flexibility for prudent tax
mitigation. Despite its
well known flexibility, however,
OBU accounts still face several
restrictions. For example, no
cash bank withdrawals are
allowed. Customers first
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 exact
amount 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.
Banking Authority
Taiwan’s foreign exchange
policy is a managed float,
which means that the exchange
rate will fluctuate freely under
the influence 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 Financial
Services MOU
Taiwan’s banking and financial
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 due
to the extraordinary potential
in the region.
36

HSBC in Taiwan
Overview
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 financial
and wealth management
needs of an international
customer base and provides
a complete range of banking
financial services for those
with cross border needs.
The current network of HSBC
(Taiwan) comprises 45 outlets,
including 28 branches in the
Greater Taipei area.
HSBC’s presence in Taiwan
dates back to 1885 when
The Hongkong and Shanghai
Banking Corporation Limited
appointed 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
financial services groups
in Taiwan.
HSBC Group is one of the
world’s largest banking and
financial services organisations,
with an international network
covering 84 countries
and territories and assets
of US$2,556 billion at
31 December 2011.
Awards for Excellence
• Named 2012 Most Valuable
Banking Brand by Brand Finance
• Best Sub-Custodian in Taiwan
2011 by Global Investor
• Best PCM Bank in Taiwan 2008-
2010 by Euromoney
• Top-rated Sub-Custodian Award
by Global Custodian, 1997-2008
• World’s Best Sub-Custodian
Banks by Global Finance, 2005-
2009
• HSBC 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 environmental
issues together with financial
performance to maintain and
grow a successful business for
the benefit of our stakeholders.
– We apply clear policies and
processes to manage potential
social and environmental risk in
our lending and other financial
activities in sensitive sectors.
– We help our clients to seize
the opportunities presented
by the shift to a low-carbon
economy.
– We try to reduce our own
environmental footprint
and share good practice
on this with our clients
and other stakeholders.
– We focus our community
investment (philanthropic
activities) on education
and the environment.
Our education programmes
help to lift people out of
poverty, build financial
literacy and promote
environmental awareness.
In Taiwan, besides its longterm
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.
Key Business Development
1984 Taipei Branch opened. Multinational Corporate Business
introduced
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 established
Assumed Republic National Bank of New York, later
integrated with HSBC Republic. Tienmu Branch opened
2002 online@hsbc launched. HSBC Premier introduced
2003 Smart Mortgage introduced
Nang Kang Central Processing Centre established
2004 Taipei Branch relocated
2005 Agreed with Global Payments Inc. to establish a joint venture
Global Payments Asia Pacific. Limited Taiwan Branch
2006 Launched HSBC Direct, Taiwan’s first direct banking services
2007 Acquired Chailease Credit Services Co., Ltd. and established
HSBC Factors Taiwan Limited. Established HSBC Life
(International) Limited Taiwan Branch. Announced the acquisition
of the assets, liabilities and operations of The Chinese Bank
2008 Completed the acquisition of the business and operations
of The Chinese Bank. HSBC’s islandwide branch network has
increased from 8 to 34.
2009 Obtained approval to set up a local subsidiary
2010 HSBC Bank (Taiwan) Limited established
HSBC Advance introduced
2011 HSBC Bank (Taiwan) Limited the first foreign bank in Taiwan
with license to offer RMB services and products at the OBUs
38

Country Overview
Capital city
Area and population
Taipei
Area (Taiwan and associated islands):
36,191 square kilometres
Population:
23.24 million (March 2012)
Language
Currency
International dialling code
Official: Mandarin Chinese;
Others: Taiwanese, Hakka, Austronesian languages, English
New Taiwan Dollar (NT$)
+886
National Holidays (2013)
Founding Day of the ROC
Chinese New Year Holiday
(27 January compensated
on 4 February)
Peace Memorial Day
(27 February compensated
on 3 March)
Children’s Day & Tomb
Sweeping Day
Labour Day
Dragon Boat Festival
Mid-Autumn Festival
National Day
(Source: 2010 Central Personnel Administration)
1 January
11 – 15 February
28 February
4 – 5 April
1 May
12 June
19 – 20 September
10 October
Business hours – general
Business hours – banking
Stock exchange
Political structure*
Monday – Friday 9:00-18:00
(Source: 2010, Tourism Bureau)
Monday – Friday 9:00-15:30
(Source: 2010, Tourism Bureau)
Taiwan Stock Exchange
Multi-party democracy
40
* Source: 2010, Government Information Office

Contacts
Richard Watanabe, Partner
General Line: +886 2 2729 6666
Direct Line: +886 2 2729 6704
Email: richard.watanabe@tw.pwc.com
http://www.pwc.com/gx/en/
worldwide-tax-summaries
Website: www.hsbc.com.tw
Phone: +886-2-8072-3993
Head Office: 14F, No. 333,
Keelung Road, Sec. 1,
Taipei City. Taiwan, R.O.C.
3rd Edition: December 2012
42
Copyright
Copyright 2013. All rights reserved.
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