Whether you’re considering entrepreneurship, or looking to incorporate yourself as part of your long-term financial planning strategy, Taiwan is a great place to do it. In addition to the many attractive qualities of living in or doing business in Taiwan, the effective corporate tax rate here is lower than that in most countries, and as a foreigner with a Taiwanese business entity, you can take full advantage of this to maximize your financial gains while minimizing risk.
The first concrete step to starting a business is choosing an entity type. Choosing the right business structure can go a long way to helping you achieve your professional or financial goals. Before diving into a new venture, it’s a good idea to get a general picture of what it looks like to do business in Taiwan as an expat.
You will need to consider some important questions about how you want to organize your company. How do you want to allocate ownership? What is your scope of operations? How can you best limit your personal liability? Your answers to these questions will help you decide on your corporate structure.
This article is the first in a series of posts covering the ins and outs of starting a business in Taiwan. stay tuned to our blog for more updates as they arrive!
Categories of Business Entities in Taiwan
Broadly speaking, there are four forms of business entities to consider in Taiwan.
Local Entities:
Foreign Entities:
branch office
representative office.
Each type of entity has different considerations regarding issues such as shareholder structure, tax obligations, and administrative requirements, and comes with its own benefits and drawbacks, so it’s important to consider what structure best aligns with your vision.
Subsidiary company 子公司（有限公司/股份有限公司）
The Taiwan Company Act outlines four types of company classes:
unlimited
unlimited with limited liability shareholders
These classes are categorized by how they structure shareholder liability. To keep things simple, we’ll go over the two more common classes: the limited company and the company limited by shares.
Limited company (有限公司)
A limited company has at least one shareholder (individual or corporate), where each shareholder’s liability is limited to the extent of the capital they contribute. Capital in this case can be cash, credit extended to the company, property and/or technical expertise required by the company. Shareholders can be allocated votes proportional to their capital contributions if that is outlined in the articles of incorporation; however, each shareholder is entitled to one vote regardless of their contribution.
Limited companies must have at least one director up to a maximum of three. Both the shareholder(s) and director may be of foreign nationality. There is no minimum capital investment required, however it’s generally considered a good idea to budget an amount ahead of time to fund operations, and at least NTD 500,000 is needed if a work permit application is required.
There is an exception in that some specific industries (e.g. finance, telecommunications, media) may need special permits or approval and additional capital requirements.
Company limited by shares (股份有限公司)
A company limited by shares must have a minimum of two individual shareholders or may have a single corporate entity as the sole shareholder. Shareholder liability is limited to the amount of share ownership, as distinct to a limited company where it is determined by their capital contributions.
The company must:
elect a supervisor who has a Taiwanese residence
have a board of directors with at least three elected directors.
If the company has a sole corporate shareholder, it may choose not to have supervisors or a board of directors and instead choose one or two directors.
Similar to a limited company, companies limited by shares do not have a minimum paid-in capital requirement before incorporation, but it is advised to prepare an amount to cover a period of general operation and administrative costs.
Limited liability subsidiaries 子公司（股份有限公司/ 有限公司）present a good avenue to pursue business opportunities while protecting your personal assets. They can shield you against financial risk, limiting your exposure to your capital investment or share ownership. Subsidiaries also allow shareholders to participate in managing daily operations and/or executive decision-making processes, in contrast to other entity structures that can limit a shareholder’s actions.
However you choose to organize your subsidiary, once you are established you are able to engage in the full range of business operations, including hiring foreign employees. A subsidiary must fulfill corporate tax obligations as well as the relevant administrative requirements. Furthermore, dividends distributed to foreign shareholders are subject to a withholding tax. These finer details can be very time-consuming, so it’s worth considering employing a local firm to assist with legislative compliance.
Limited partnership (有限合夥)
Another form you might consider for your business is a limited partnership. A limited partnership is composed of at least one general partner and one limited partner. The general partner(s) is responsible for the actual operation of the business and is liable for the partnership’s liabilities if its assets are otherwise insufficient. The limited partner(s) is only liable to the extent of their capital contributions as outlined in the partnership agreement. Limited partners may only be added to the partnership with the consent of all general partners unless otherwise outlined in the partnership agreement; general partners may only be added with the consent of all partners.
Notably, limited partnerships are not required to pay a corporate tax: instead, shareholders will pay tax on their distributions of company profit at their personal tax rates. As with a subsidiary company, there is no minimum capital requirement to form a limited partnership.
Limited partnerships have more restrictions than subsidiary companies, but they might be the right choice for your specific needs. If, for example, you are looking to personally oversee the business’ daily operations but seek to benefit from the expertise of a knowledgeable Taiwanese business partner, a limited partnership might be an agreeable solution.
Limited partnerships may also be a suitable structure for expats with Taiwanese spouses.
In the next section, we will discuss the advantages and specific details for "Foreign Entities" in Taiwan, including the branch office, representative office, and an overall comparison table for each type.
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