Starting Your Business in Taiwan Follow Up
Updated: Jan 5, 2022
This past Tuesday we again found ourselves at FutureWard for part two in their “How to Set Up a Business in Taiwan” series. This session, hosted by Sabine Lin of XiriLaw, was titled Starting Your Business in Taiwan and covered a wide array of important things for prospective entrepreneurs to consider. As with the first workshop, this one presented a lot of clearly organized information about topics that too often feel confusing and hard to approach because of the difficulty of finding accessible, reliable material about them.
The central topic in the first half of the talk was the important differences between companies designated as Limited, Close, and Limited by Shares. The clearest of the takeaways – which was reiterated by Sabine numerous times – is the significant tax advantages of Close or Limited by Shares companies (0.3% transaction tax) over strictly Limited companies (income tax rate up to 40% upon exit or sale under Taiwan income tax laws). A Limited company does have its benefits – a single person or group with or without capital can register a company this way, which considers work contributions equal to investment and is not limited by shares. Limited companies can later be converted to Close or Shares companies to receive those better tax rates.
Another key factor that appealed to a lot of prospective entrepreneurs in attendance is the fact that none of the company types require capital to file for your business registration in Taiwan. Of course, capital doesn’t hurt, but entrepreneurs and teams looking to get started can earn approval for their application by showing a variety of forms of investment, including cash, credit rights, assets, know-how, technology, and ready labor (see a breakdown of this in the table above).
When it comes to company structure and decision making, Limited is again the simplest, requiring only one Director role to be declared and breaking down voting rights by ratio of dollars invested. However, for Close and Limited by Shares companies, management structure, shares, and voting rights are defined by the makeup of the company’s leadership and investors. To give a very general overview of those company structures, we can say that both Close and Limited by Shares companies are recommended to form a board composed of some mix of directors and supervisors, although this is not required in all cases. In the case of shares and voting rights, these companies can offer a mix of common, preferred, and deferred shares, which can carry different voting strengths and can become key bargaining chips when dealing with investors and venture capitalists. The table below breaks down this last point rather clearly.
The final section of the business considerations covered profit sharing and dividends. Limited companies are only allowed to payout dividends on an annual basis, but Close and Shares companies can make payouts quarterly, bi-annually, or annually, based on the stipulations of their articles of incorporation (AOI).
At this point in her talk, Sabine changed gears to outline the actual processes, documents, information, and fees required to legally set up your company in Taiwan. It’s worth noting here that she strongly suggested using a lawyer or CPA for many of these needs as these professionals are experienced at dealing with the litany of documents and requirements.
This section led off by pointing out that your company must have a Chinese name to be registered in Taiwan. The company can also have a name in any other language, and that can be the name you use for the business in the course of daily business, but any non-Chinese name must be presented and spelled using the characters of the English alphabet (Arabic or Cyrillic languages, for example, would have to be translated or transliterated using English letters for this portion of the registration). You should note that this process requires a specific application and can take up to six months to be approved. It’s recommended that companies prepare more than one name in case their preferred moniker is unavailable or otherwise not approved.
Once the naming process is underway, your company will need to obtain approval for foreign investment, prepare your company chops (official stamps), open a bank account, and designate an office address. Finally, it’s then time for your company registration and the real part of the process that Sabine mentioned might be best handled by professionals. Here’s the list of items she provided at the event:
FIA approval – approval from Investment Commission
Articles of Incorporation
Meeting minutes of initial shareholders
Meeting minutes of directors
Registration of initial shareholders