In a previous article, we revealed two types of local entities: subsidiary companies and limited partnerships. If you want to expand your foreign company into Taiwan, here are the business entities to consider: branch office and representative office.
Categories of Business Entities in Taiwan
Let's quickly review the four types of business entities in Taiwan:
subsidiary company
limited partnership
Foreign Entities:
Each type of entity has different considerations regarding shareholder structure, tax obligations, and administrative requirements. Each also comes with its own benefits and drawbacks, so it’s important to choose the structure that best aligns with your vision.
Branch office (分公司)
If you’re simply looking to expand your existing company into Taiwan, you might consider forming a branch office. A Branch office is not required to have shareholders beyond the parent company However, it must appoint a manager who has a Taiwanese residence and registers an office address in Taiwan. To hire yourself (a foreigner) as a manager for the first year of establishment, there is a minimum capital requirement of NTD 500,000, and there will be stricter revenue and professional qualifications for the second work permit application or when the company has been established for over 1 year.
The foreign parent company becomes fully responsible for any and all of the branch office’s liabilities. As the branch office is a separate legal entity, there is no minimum required number of company directors. There is also no minimum paid-in capital requirement, but branch offices are required to translate their foreign parent company name into Chinese and indicate their home country.
Branch offices tend to be better suited to specific regulated industries, where they have more to gain from the additional administrative overhead. Companies offering financial services or banking options, for example, might benefit from the added expertise of having a local manager. Having a streamlined ownership structure back to the foreign parent company might also be more attractive if you are responsible for sensitive information. Additionally, branch offices are not required to pay a withholding tax on the earnings distributed to the foreign parent company. They are, however, still subject to corporate income tax.
Representative office (辦事處)
If you’re looking to invest in Taiwan but have yet to decide on a specific form for your business, establishing a representative office could be a sensible first step for you. Representative offices are similar to branch offices in that they are Taiwanese extensions of a foreign parent company.
Representative offices are restricted to non-commercial activities such as market research and liaising with local contacts. There are strict limitations on the kinds of actions a representative office can take, and the general guideline is that they are restricted from profit-seeking activity. However, a representative office could be a sensible preliminary step in researching Taiwan as a feasible destination for expansion.
Which Type of Taiwan Business Entity Should I Choose?
To help you evaluate your options, we’ve included the following business entity comparison table.
Subsidiary (limited company) 有限公司 | Subsidiary (company limited by shares) 股份有限公司 | Limited Partnership有限合夥 | Branch Office 分公司 | Representative office 辦事處 | |
Required shareholders | At least 1 | At least 2 individuals or 1 corporate entity | At least 2 | 1 – Parent company | 1 – Parent company |
Required directors | 1 – 3 | 3 unless owned by a sole corporate shareholder | 1 general partner | None | None |
Shareholder liability | Limited by capital contribution | Limited by share ownership | Limited partner – limited by capital contribution General partner – unlimited beyond company assets | Parent company has unlimited liability | Parent company has unlimited liability |
Tax obligations | Corporate tax; Withholding tax on dividends for foreign beneficiaries | No corporate tax; Partners must file personal income tax returns | Corporate tax; No withholding tax for foreign parent company | Cannot generate income | |
VAT Rate | 5% | 5% | N/A | 5% | N/A |
Corporate Tax Rate | 20% | 20% | N/A | 20% | N/A |
Minimum capital requirement | None; During its first year of establishment, if hiring a foreign manager, NTD 500,000 capital is required, and the foreigner must own at least 1/3 of the capital or shares of the business. | None | None; During its first year of establishment, if hiring a foreign manager, NTD 500,000 capital is required, and the foreigner must own at least 1/3 of the capital or shares of the business. | ||
Can hire/apply for work permit for foreign manager | Yes, if it meets specific capital and legal requirements. More stringent revenue and professional qualifications when applying for the second work permit or when the company has been established for over one year. | No | Yes, if it meets specific capital and legal requirements. More stringent revenue and professional qualifications when applying for the second work permit or when the company has been established for over one year. |
For further details on hiring restrictions and regulations with regard to hiring a foreign manager for a Taiwan business, please refer to the Qualifications and Criteria Standards for Foreigners Undertaking the Jobs text on the MOJ website.
Your decision on enterprise structure should ultimately align with your business interests or your financial planning strategy. You might consider establishing a subsidiary via a limited company for administrative ease and flexibility. Limiting your personal liability to a set amount of capital contribution can be a sensible choice. Or instead, forming a company limited by shares could give you greater flexibility in transferring ownership and responsibility through share distribution instead of capital investment. Subsidiaries are great for shareholders who want to maintain a hands-on approach to enterprise processes as well as executive leadership.
If you already have a Taiwanese business partner, or a Taiwanese spouse, you might consider a limited partnership more attractive. A limited partnership allows you to invest in a knowledgeable general partner’s business operations, or assume the responsibility of a general partner and capitalize on a limited partner’s expertise and contributions without exposing yourself to corporate tax obligations. Limiting the scope of operations responsibilities while spreading shareholder interest might also be an attractive prospect depending on your specific partnership agreement.
If you represent or own a company in a foreign country and you’re instead looking to expand into Taiwan, a representative office might be the better choice as you explore the Taiwanese market. Alternatively, if you already know you’re ready for expansion and you’re looking for a specific ownership structure, a branch office might be the best choice. There are more administrative requirements for a branch office versus a limited company subsidiary, but certain industries are better suited to branch offices. More simply, avoiding the withholding tax for foreign beneficiaries might be worth establishing a branch office over a subsidiary. Depending on the tax circumstances of your home country, this could represent a substantial financial opportunity for you.
Next Steps: How To Get Your Business Started In Taiwan
Now that you’re familiar with the general landscape of business entities in Taiwan, you might be left with even more questions. If you’re interested in the exact language of the relevant legislation, available in English on the Ministry of Justice’s official site:
You can also reach out to us at Del Sol CPA & Associates with any kind of questions about the incorporation process in Taiwan. When you do decide to launch your business, keep in mind there can be a significant amount of paperwork and administrative tasks to complete. Depending on the specific enterprise you choose, it could take anywhere from a few weeks to a few months to get fully established.
We can help you along the way. Whether it’s fulfilling the requirements for establishing a company, discussing business goals, or simply getting clarification on rules, regulations, or do’s and don’ts, Del Sol CPA and Associates is ready to help.
Either by acting on your behalf, or consulting with you on the best course of action, we’re committed to streamlining the process and helping you choose the best course of action. Let us worry about the details so you can achieve your goals.
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