January 09, 2025
CORPORATE GOVERNANCE IN TAIWAN
INTRODUCTION
Taiwan, officially known as the Republic of China, is a developed country located in East Asia. It has a legal system based on civil law, similar to Japan. Taiwan offers a favorable business environment for foreign investors, with forms of business organizations that a foreign company may set up including a subsidiary, foreign branch, or representative office. A natural person of foreign nationality may also form a partnership with other people or carry out business by way of sole proprietorship. The country is known for its strong civil liberties, healthcare, and human development. The media environment in Taiwan is among the freest in Asia, and the country is one of the world’s major economic players, particularly in the field of technology.
CORPORATE GOVERNANCE IN TAIWAN
Understanding corporate governance is critical to ensure the long-term success and sustainability of an organization, but also to build an effective corporate structure that manages the roles, responsibilities and risks of the business and its investments. In recent years, the Taiwan government has made significant steps in enhancing its corporate governance, driven by regulatory reforms and market demand for higher standards of corporate conduct to promote transparency and accountability.
A thorough understanding of common issues in managing a corporation in Taiwan ensures compliance with regulatory requirements and mitigates legal risks from misunderstandings. For corporate executives, a grasp of corporate governance and recurring issues are essential for navigating regulatory landscapes and contributing to the organization health and prosperity.
ENTITY FORMATION
Forming a business entity in Taiwan is a straightforward process. Commonly established types of entities include companies limited by shares, limited companies and branch offices. Each of these types can be readily incorporated by following prescribed legal and regulatory procedures.
COMPANY LIMITED BY SHARES
A company limited by shares carries on a profit- seeking business whereby its capital is divided into shares. A foreign investor may incorporate a company limited by shares. A foreign investor may incorporate a company limited by share upon the approval of the Investment Commission (‘IC”).
LIMITED COMPANY
A limited company places restrictions on share transfers, thereby permitting certain shareholders to control the company. A shareholder will not transfer his contribution to the capital of the company to another person without the consent of a majority of all the company to another person without the consent of a majority of all other shareholders. A foreign investor may incorporate a limited company upon the approval of the IC.
BRANCH OFFICE (“BO”)
A foreign company may register its BO to carry on profit seeking activities in Taiwan. A BO is exempted from almost all the corporate formality requirement of a company limited by shares.
REPRESENTATIVE OFFICE
A Representative office (“RO”) is one of the easiest ways to establish a legal business presence in Taiwan. The Representative Office is the most efficient form of entity to set up in Taiwan. In Taiwan, RO is neither liable to pay Value added tax (“VAT”) nor liable to file corporate income tax.
JOINT VENTURE
Joint operations with other Taiwanese entities or individuals are popular, especially in industries where local parties are crucial to the successful operation of the business. These collaborations leverage local expertise, networks and resources that are vital for achieving business objectives in Taiwan’s market. However, it is also due to this that parties must carefully consider and articulate their exit strategies from the outset. These strategies should be clearly documented in writing within the joint venture/operation agreements to ensure predefined, mutually agreed on procedures for scenarios where one party needs to disengage from the joint operation, whether due to strategic shifts, market conditions or other reasons.
HOW WE CAN HELP?
- Our team can assist corporations in structuring operations to optimize tax liabilities, including profit- seeking enterprises income tax and business tax compliances.
- Our team can businesses on VAT applicability and rates, including special cases like small- scale businesses and reinsurance premiums.
- Our team can help start-ups and businesses design tax- efficient operational models and advise on tax incentives available for new business in Taiwan.
For more information or queries, please email us at
[email protected]
Key Contact
Surendra Singh Chandrawat
Managing Partner
