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[ESTABLISHING A BUSINESS ENTITY IN TAIWAN]
Closely held company A closely held company is a private company limited by shares which may stipulate in its articles of incorporation a restriction on share transfer and can only have no more than 50 shareholders. Closely held companies are designed to encourage the growth of startups, particularly tech startups and small and medium enterprises, by granting more flexibility in operating the companies. Since this entity form is seldom used by foreign investors, we will focus on the limited company, company limited by shares and branch below.
requirement does not apply to a subsidiary as it is a Taiwanese company. 2. Steps and Timeline to Establish
Brief
overview
of
steps
to
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incorporate/constitute each
Branch Briefly speaking, to establish a branch office in Taiwan, the foreign company should file an application with the Ministry of Economic Affairs (MOEA) to apply for branch registration. Subsequently, the branch must apply for business registration and tax registration before it may start conducting business in Taiwan. Usually, it will take about 5 to 7 weeks to complete all the registrations. The branch office is required to appoint a branch manager as well as a representative to represent the foreign company (can be the same person). If the branch manager and/or the representative is a foreigner, a work permit and an Alien Resident Certificate should be obtained before he/she can work in Taiwan pursuant to the Employment and Service Act. Limited company A limited company must have at least one shareholder. There is no nationality restriction on the shareholder(s). If any of the shareholders is a foreign national, it must apply with the Investment Commission (IC) for foreign investment approval. Then, the foreign investor should file an application with the MOEA to apply for incorporation registration. There is no minimum capital requirement, but the capital of a limited company must be fully paid up by the shareholders; the capital cannot be paid in installments. A limited company can determine any capital amount
Matters to be considered when choosing a particular business entity type
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Various factors should be taken into consideration when determining the entity type to use, including tax, the kind of business to be operated in Taiwan, etc. Although there is no strict rule, a few points below may be noted. Generally speaking, compared to a branch, a subsidiary (either a limited company or company limited by shares) is subject to more tax burden in Taiwan such as withholding income tax on dividend repatriated to the foreign shareholders and retained earnings tax, and more corporate formalities such as the requirement to hold an annual meeting of shareholders. On a separate note, a foreign entity may acquire real property if and when necessary for the business operations of its Taiwan branch, provided that its home country shall grant the same rights and privileges to Taiwanese nationals and companies. In addition, approval of the Ministry of Interior must be obtained before the foreign company acquires real property. This approval
ILN Corporate Group – Establishing a Business Entity Series
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