Taiwan has a robust and developed capitalist economy. Taiwan is the seventh largest economy in Asia and the 20th largest in the world as measured by purchasing power parity. Taiwan is classified as a high-income economy by the World Bank.

Over the past 40 years, Taiwan's economic growth has been driven by exports. Known for its manufacturing capabilities, Taiwan's economy has in recent years transitioned to technology and capital-intensive service industries such as electronics and information technology, which now make up approximately 35% of Taiwan's industrial structure. Most businesses are small and medium-sized enterprises, often run by families.

Dominant industries include semiconductor manufacturing, information technology and electronics. Taiwan Semiconductor Manufacturing Company (TSMC) is the world's most valuable semiconductor company and one of Taiwan's most important companies. Global brands originating from Taiwan include:

Taiwan is also present in emerging industries, producing solar panel batteries and LED panels, and leading Asia in offshore wind power. It is estimated that 75% of Tesla's supply chain is located in Taiwan.

Approximately 23.7 million people live in Taiwan. The most widely spoken language is Mandarin Chinese written in traditional characters. Taiwanese (also known as Hokkien), Hakka dialects and approximately 16 indigenous languages are also spoken and recognised (along with sign language) as national languages, although proficiency varies across the country. English literacy is higher in large cities and among younger individuals.

Business culture in Taiwan is typically hierarchical in nature, with power and authority commonly being wielded based on seniority and age. People in senior positions are often referred to by their title and surname rather than their first names. Business etiquette is not as rigid as in Japan and South Korea. When meeting and greeting each other, businesspeople shake hands and exchange business cards. Because the economy is largely geared towards exports, many Taiwanese businesspeople are familiar with global business etiquette.

There are between ten to 15 public holidays a year. Some are observed on fixed dates on the Gregorian calendar, others are based on the lunar calendar and therefore do not have a fixed Gregorian calendar date. The most important holidays include:

The fixed-date holidays include:

Due to its political situation, Taiwan is not a member of the UN, but has codified UN Covenants on human rights into domestic law. Taiwan is a member of the World Trade Organization (WTO) and Asia-Pacific Economic Cooperation (APEC). Taiwan plans to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Until May 2021, Taiwan had avoided lockdowns and the suspension of economic activity due to the Covid-19 pandemic. GDP actually grew 2.98% in 2020 due to an increase in exports. In particular, demand for semiconductors, personal computers and laptops reached new highs as people around the world switched to working from home.

Taiwan has seen the repatriation of businesses from China in light of the US-China trade war and enjoyed an increase of USD42 billion in investment by Taiwanese companies returning from China between 2019 and February 2021. The local economy also benefited from:

Elections are held every four years, typically in January and November. The President, Vice President and the Legislature (Legislative Yuan) are directly elected. Local elections for city and county government posts are often held at different times from presidential and legislative elections. There may also be by-elections. The next presidential election will be held in 2024.

Recent noteworthy legislative changes include amendments to the:

Taiwan is a civil law jurisdiction and draws heavily on German and Japanese models. Intellectual property (IP) and commercial law in Taiwan are greatly influenced by similar laws in the US.

Under the Statute for Investment by Foreign Nationals (SIFN), all foreign investment must be approved by the Investment Commission (IC) of the Ministry of Economic Affairs (MOEA).

There are no general restrictions on foreign shareholders other than in relation to specific industries (see below, Specific Industries).

Restrictions on the acquisition of shares by foreign shareholders can apply where this would exceed certain thresholds in specific industries (see below, Specific Industries).

The Taiwanese Government prohibits foreign investment in some specific industries, due to national security and environmental protection concerns. These industries include:

There are also limits on foreign ownership and control of local firms in certain industries, such as:

The ability of foreign nationals and companies to buy general residential or commercial real estate in Taiwan is based on a principle of reciprocity. Foreign nationals and companies whose home jurisdictions allow Taiwanese individuals and companies to buy property can buy property in Taiwan.

There are certain restrictions on doing business with the People's Republic of China (PRC) due to its complicated political relationship with Taiwan. Investors from the PRC are subject to different rules and regulations to those applicable to investors from other jurisdictions. PRC investors can only invest in certain permissible businesses, and their investment applications receive closer regulatory scrutiny. PRC investors subject to such regulation include not only PRC nationals and entities domiciled in the PRC, but also entities from non-PRC jurisdictions that are more than 30% owned (either directly or indirectly), or otherwise controlled, by PRC investors. Regulatory authorities recently amended the 30% ownership threshold calculation mechanism so that in a multi-tiered ownership structure, if any entity in the structure is deemed to be a PRC investor, then the entity is deemed to be 100% PRC-controlled for the purpose of calculating the 30% ownership threshold for any of the entity's direct subsidiaries.

Relations with the PRC are the responsibility of the Cabinet level Mainland Affairs Council (www.mac.gov.tw).

Inward and outward remittances involving currency exchange between New Taiwan Dollars (TWD) and another foreign currency are subject to an annual ceiling of:

Any total annual remittance exceeding these thresholds requires approval by the Central Bank of the Republic of China (CBC). Individual foreign exchange transactions over TWD500,000 must be reported to the CBC.

There are no other foreign exchange controls on trade, insurance, and authorised investment transactions, and no limit on repatriation of capital or profits from portfolio investments. There are also no registration requirements under anti-money laundering laws.

Research and development and investment grants are available at the central and local government level.

The Taiwanese Government offers several tax incentives to all investors (including foreign investors), including:

Foreign investors are eligible for most incentives and grants.

Under the Act for the Recruitment and Employment of Foreign Professionals, foreign nationals who work in Taiwan for at least 183 days in a calendar year and receive income over TWD3 million may, for their first three years in Taiwan, exclude half of that part of their salary above TWD3 million from their Taiwan taxable income.

The most common business vehicles in Taiwan are:

Taiwan's Company Act allows capital investments in the form of cash or monetary credit, property, or technical know-how. If the company is formed as a closed company, investors may also make capital contributions in the form of labour (that is, "sweat equity"). However, there are certain limits to the amount of sweat equity that can be contributed, depending on the total equity amount.

Most foreign invested companies in Taiwan are established as limited companies. Limited companies are preferred for their flexibility in terms of management and corporate governance. Limited companies are also flexible in that they can be reincorporated as corporations or closed companies, whereas corporations and closed companies cannot be reincorporated as limited companies.

The most common form of business vehicle in Taiwan is the limited company. To establish a limited company subsidiary in Taiwan, a foreign company must file an application for reservation of its Taiwan subsidiary's proposed Chinese name and business scope. The foreign company can register a foreign language name for its Taiwan subsidiary if the name is set out in the subsidiary's articles of incorporation. The foreign company must then file an application for Foreign Investment Approval (FIA) with the Investment Commission (IC). After the foreign company receives its FIA, the newly formed, foreign-held Taiwan subsidiary must make additional filings with local tax authorities and the Ministry of Economic Affairs (MOEA). It usually takes about eight to 12 weeks to successfully set up a limited company subsidiary.

The MOEA maintains an online database of companies registered in Taiwan. The database is available at www.findbiz.nat.gov.tw.

Taiwan's Company Act requires companies registered in Taiwan to make annual reports of major equity holders (defined as persons holding 10% or more of a company's outstanding equity), directors and officers. In addition, there is an ongoing reporting requirement with respect to basic company information. Any change of a company's registered information must be filed with the relevant authority within 15 days. Such changes include any:

Taiwan does not specify a minimum capital investment amount in connection with company formation. However, any initial investment amount must be sufficient to meet the established needs and expenses of the proposed company. TWD200,000 is typically sufficient for these purposes. When the initial investment in a company is TWD500 million or higher, the company must register with the Department of Commerce of the MOEA. If the initial investment is less than TWD500 million, the company must be registered with the local municipality or the Central Region Office of the MOEA, depending on the expected business location.

For limited companies, closed companies and corporations, contributions can be made in the form of cash, debt forgiveness, assets or technology. Contributions to closed companies can also be made in the form of a contribution of services.

Restrictions on Rights Attaching to Equity. The amended Company Act allows agreements among equity holders that restrict the holders' voting rights. This amendment was a direct legislative response to the majority view in Taiwan's courts that voting agreements among equity holders in relation to the election of directors and supervisors were unenforceable except in the case of a closed company.

Equity holder agreements restricting equity holders' rights to transfer equity are allowed under Taiwan law, but such agreements must be between or among individual equity holders and not between or among equity holders and the company.

Automatic Rights Attaching to Equity. Investors in a limited company are granted basic rights of first refusal under the Company Act.

A limited company must have one to three directors. Each director must be an equity holder. A company equity holder can appoint an individual to act as a director on its behalf. If there are two or more directors, the directors can elect a chair to act as a representative of the company. Other equity holders who do not act as directors have rights to monitor the directors and audit the financial statements prepared by the directors.

There are no nationality restrictions in relation to directors, except with respect to PRC nationals (see Question 5).

All directors of a company have fiduciary duties, including a duty of care and a duty of loyalty.

Taiwan's Legislative Yuan passed amendments to the Company Act in 2013 and 2018 allowing for piercing of the corporate veil. A shareholder who has abused a company's legal status can now be held personally responsible for any company obligations arising from that abuse, where it would be difficult for the company to meet the obligations in question.

Taiwan's Supreme Court handed down a decision in August 2018 that held the company RCA Taiwan Limited (RCA) and three associated companies (Technicolor, Thomson Consumer Electronics (Bermuda) Ltd, and General Electric Company) to be jointly and severally liable for the illnesses and deaths of hundreds of former employees who worked in their factories during the 1970s and 1980s. This was the first time the corporate veil had been pierced by a Taiwanese court. The court based its decision on the fact that RCA was an alter ego of its shareholders that was used to shield them from liability. In addition, each subsequent controlling corporation knew of the hazardous work environment but did not seek to remedy the situation or notify the employees or the public. The court also found that Thomson Consumer Electronic's transfer of billions of TWD out of Taiwan after the closure of its Taiwan factories was a purposeful evasion of the company's obligations and liabilities.

The Basic Environment Act defines and encourages the protection of Taiwan's natural environment and resources. Of primary importance to businesses are the:

Violation of any of these statutes can result in criminal liability for companies, as well as their representatives and employees.

Standards for water and air emissions vary based on industry, location and amount. It is important that every business confirms which standards apply to each of its business locations.

Companies that retain the services of waste management companies can be found jointly liable if they fail to exercise due care in the selection and monitoring of service companies. It is therefore important to ensure that:

The Labour Standards Act (LSA) applies to most foreign employees working in Taiwan.

The LSA applies to Taiwan employees working abroad for Taiwanese employers.

The primary law governing employment relationships in Taiwan is the LSA, which establishes a set of minimum rights for employees who fall under its purview. These minimum rights prevail regardless of any choice of law provisions in the employment contract.

Employment relationships that are not covered by the LSA (primarily those involving substantial independent managerial authority) are covered by the Civil Code.

Written contracts are not required by law but are commonly used. Foreign employees must have written contracts to obtain work permits. Terms should include hours of work, place of work, compensation, holiday and other benefits.

Even when the terms of the employment relationship are not detailed in a written employment contract, the employer must meet or exceed the minimum requirements contained in the Labour Standards Act and other related labour laws and regulations.

Any employment terms agreed to in a collective agreement with unions or employee representatives are automatically incorporated into an employment agreement executed between an employer and any employees who are subject to the collective agreement. If an individual employment agreement contains terms that differ from those of an applicable collective agreement, the terms of the collective agreement prevail, unless either the:

Employers must apply for work permits for most foreign employees.

Foreign employees with work permits can apply for a residency permit, known as an "Alien Resident Certificate" (ARC). ARCs cost TWD1000 per year and take ten business days to obtain from application. The length of residency is determined by the length of employment specified in the work permit, up to a maximum of three years.

Employees are not entitled to management representation. If not consulted before the announcement of a planned mass redundancy, employees and their representatives can negotiate the terms of mass redundancy layoffs.

See Question 17.

Employment in Taiwan is not at-will. Any termination must be for "good cause", as defined in the Labour Standards Act (LSA).

Statutory Minimum Notice. Notice periods depend on length of service, as follows:

Severance Payment. Severance pay is calculated based on the average wages received and length of service.

Grounds for Unfair Dismissal. There is no concept of unfair dismissal in Taiwan. Any termination without statutory good cause is considered void. Employees can then claim reinstatement and back pay.

Remedies. Employees who believe they have been dismissed unfairly can claim mediation through their local labour department or the courts. Any termination without statutory good cause is considered void. Employees can claim reinstatement and back pay.

Pregnant or nursing employees are afforded additional protection under the LSA and other laws.

Mass layoffs are defined and regulated under the Act for Worker Protection of Mass Redundancy.

The Act for Worker Protection of Mass Redundancy (MRA) defines mass redundancy and establishes rules regarding notice periods, negotiations, and fines for non-compliance. The MRA applies to an employer's intended layoff plan on a site-by-site basis. Each separate office location or work site is evaluated separately. Whether the MRA applies to the proposed layoff plan for any particular office location or work site depends on both the:

If the layoff plan is subject to the MRA, the employer must notify the local labour authority, union or labour-management committee, and the impacted employees 60 days before the proposed layoffs. Once notification has been given, the affected employees and employer must enter into negotiations within ten days from the start of this 60-day period. An employer cannot dismiss or transfer any of the employees involved in the mass layoff during this negotiation period.

If an agreement between the employer and employees is not reached within ten days from the commencement of negotiations, the relevant local labour authority will invite the employer and employees to form a negotiating committee and propose alternatives if appropriate.

As employment in Taiwan is not at-will, layoffs due to mass redundancies require a specified statutory cause for termination, as for any other layoff. These causes for termination are set out in Article 11 of the Labour Standards Act (LSA). The most common statutorily acceptable reasons for mass redundancy layoffs are:

On termination, it is the responsibility of the employer to calculate and provide affected employees with at least their minimum statutory entitlements as set out under the LSA and LPA. Failure to comply with the MRA can result in:

Taiwan nationals and foreign nationals are taxed in Taiwan based on their Taiwan-source income.

Tax residents must file Taiwan tax returns. An employee is a Taiwan tax resident if they are:

Non-tax residents are taxed through a withholding made by their employer or a tax return filed on their departure from Taiwan.

Employees pay income tax at progressive rates ranging from 5% to 40%.

Employers and employees are jointly responsible for social security contributions, which include:

Foreign nationals who reside in Taiwan for less than 183 days per year are subject to withholding tax of 18% on their Taiwan-source income.

If an employee has paid taxes overseas on their Taiwan-source income, the amount paid can be deducted from income taxes payable by the employee in Taiwan.

Employers must withhold income tax and make contributions to their employees' LI, LP, and NHI.

A tax resident business, meaning any business with its head office in Taiwan, is subject to tax on its net income.

A non-tax resident business is subject to tax on all Taiwan-source income.

All businesses in Taiwan must pay:

Dividends paid to foreign corporate shareholders are taxed at 21%.

Dividends received from foreign companies are taxed as income at 18% to 20%.

Interest paid to foreign corporate shareholders is taxed at 15% for certain holdings such as short-term bills and corporate bonds. For interest on other forms of debt, the tax rate is 20% unless otherwise specified in an applicable tax treaty.

IP royalties paid to foreign corporate shareholders are taxed at 20%.

Other than certain companies in the financial industry, profit-seeking enterprises are subject to thin capitalisation rules. Interest on debt owed to related parties that exceeds a debt-to-equity ratio of 3:1 is not deductible by the taxpayer.

Taiwan introduced controlled foreign company rules to the Income Tax Act (ITA) in 2016. If a Taiwan company holds 50% or more of the shares of a company in a low-tax offshore jurisdiction or otherwise maintains significant control of the company's operations, the Taiwan company must include its respective share of the offshore company's earnings.

Taiwan has imposed rules to ensure accepted transfer pricing methods and arm's-length transactions between business entities. A business that exceeds certain revenue or other transactional thresholds set by the Ministry of Finance must submit transaction records for a given tax year when filing its income tax returns. Companies under investigation by the tax authorities must also submit a transfer pricing report.

The Customs Act imposes customs duties on the importation of goods. The Customs Import Tariff may stipulate separate tariff rates for different quantities of specified imported goods.

Currently, Taiwan has:

In general, these agreements cover corporate and individual income taxation and follow the Organisation for Economic Co-operation and Development (OECD) Model Tax Conventions.

Taiwan's competition authority is the Fair Trade Commission (FTC).

The Fair Trade Act (FTA) includes provisions prohibiting concerted action and agreements that aim to restrict the parties with whom others can conduct business.

Unilateral conduct is not defined or specifically regulated under the FTA, but the law does prohibit behaviour deemed to be monopolistic.

The FTA applies to foreign entities when their conduct occurs or results in consequences in Taiwan. Violation of the FTA can give rise to criminal penalties.

The Fair Trade Act empowers the Fair Trade Commission to prohibit merger transactions that it finds would negatively impact the Taiwan market. A pre-merger filing is required if a proposed transaction meets one of the following market impact thresholds:

Transactions subject to merger control include typical M&A transactions, such as statutory mergers and share or asset purchases.

Bribery and corruption of public officials in Taiwan are regulated by the Criminal Code and the Anti-Corruption Act. The Anti-Corruption Act lists various behaviours that constitute bribery of public officials. Public officials who commit bribery can be punished by up to life imprisonment together with a fine of up to TWD100 million. Any private individual who commits bribery of public officials can be punished by up to seven years of imprisonment together with a fine of up to TWD3 million.

Hospitality accepted by a public official is only allowed under limited circumstances specified in the Integrity and Ethics Directions for Civil Servants. The value of gifts received by a public official cannot exceed TWD500. Gifts received due to visits to companies cannot exceed TWD3,000. The total value of gifts received from the same source in one year cannot exceed TWD10,000.

The Ethical Corporate Management Best Practice Principles for Listed Companies also provide guidance establishing a risk assessment system preventing unethical conduct, including the implementation of ethical corporate management policies and bribery prevention programmes.

Definition and Legal Requirements. Taiwan's Patent Act allows for the registration of invention patents, utility models and design patents.

Registration. The Taiwan Intellectual Property Office (TIPO) handles all patent registrations. The patent registration procedure, fees and other information are available on the TIPO's website (www.tipo.gov.tw).

Enforcement and Remedies. Those who infringe the patent rights of others can be held civilly liable. Remedies for patent infringement include injunctive relief and compensation for items such as pre-grant fees, post-grant damages and court fees, and up to treble damages for intentional infringement.

Length of Protection. The terms for each type of patent are as follows:

Definition and Legal Requirements. Under Taiwan's Trademark Act, a trade mark is a symbol that has distinctiveness, and can consist of a word, device, symbol, colour, three-dimensional shape, motion, hologram, sound or any combination thereof.

Taiwan is a first-to-file jurisdiction, and full protection generally begins only from the date of registration. However, both the Trademark Act and the Fair Trade Act (FTA) contain provisions that offer some protection for unregistered trade marks that are well known to the public.

Registration. The TIPO handles all trade mark registrations. Trade mark fees, application procedures and other information are available on the TIPO's website.

Enforcement and Remedies. Infringement of trade mark rights in Taiwan can lead to civil or criminal liability. Rights holders whose trade mark rights have been infringed can seek injunctive relief and damages. The enforcement process typically includes an investigation, police raid, seizure of goods, indictment and trial.

Length of Protection and Renewability. Registered trade mark owners retain exclusive rights to their trade marks for a period of ten years. Registration can be renewed indefinitely.

Definition. Under the Patent Act, a design is a "creation made in respect of the shape, pattern, colour, or any combination thereof, of an article as a whole, or in part by visual appeal".

Registration. The TIPO handles design registrations.

Enforcement and Remedies. The enforcement and remedies for registered design violations are the same as those for patents (see above, Patents).

Length of Protection and Renewability. The term of protection for a registered design is 15 years.

Definition and Legal Requirements. An unregistered design is any design that has not been registered with the TIPO.

Enforcement and Remedies. There is no general law or regulation for the protection of unregistered designs. However, the FTA does allow for some protection in cases of unauthorised use of a well-known container or packaging design, or of the general appearance of another's goods. Some unregistered designs may also be protected under the Trademark Act and the Copyright Act.

Length of Protection. If rights to the design can be established based on the qualifications above, there is no time limit on protection under the FTA.

Definition and Legal Requirements. Copyright, as defined in Taiwan's Copyright Act, consists of the moral and economic rights to a completed work. Works may include oral and literary works, musical works, dramatic and choreographic works, artistic works, photographic works, pictorial and graphical works, audio-visual works, sound recordings, architectural works and computer programs.

Protection. Taiwan has no official registration system for copyrights. Copyright protection begins from the time that a work is completed.

Enforcement and Remedies. Infringement of copyrights in Taiwan can lead to civil or criminal liability. The author of a work can seek damages or injunctive relief against the infringer.

Length of Protection and Renewability. Economic rights to a work typically last for the lifetime of the original copyright owner plus 50 years. Rights to a photograph, audio-visual work, sound recording or performance last for 50 years after its public release.

The Trade Secrets Act provides protection for and remedies against the theft of methods, techniques, processes, formulas, programs, designs, or other information that can be used during economic production, sales or operations.

Taiwan does not have specific legislation regulating agency agreements beyond the general provisions in the Civil Code that govern contractual relationships.

Under the Fair Trade Act, an enterprise cannot restrict the resale price of goods supplied to its trading counterpart without legitimate reason, or engage in any activities that may restrict competition. For example, an enterprise cannot impose improper restrictions on its trading counterparts' business activity as part of the requirements for trade engagement. See Question 28.

In addition to the prohibition against anti-competitive conduct, under FTC guidelines franchisers must provide their trading counterparts with important franchise information in writing at least ten days (or some other reasonable period of time) before entering into a franchise relationship. Franchisers must allow at least five days (or some other reasonable period of time) for franchisees to review the franchising contract.

The main laws relating to the conduct of e-commerce in Taiwan are the:

Taiwan's tax rules were amended in 2017 to apply VAT to foreign providers of e-commerce services that do not have a physical presence in Taiwan. These companies must now register with the Taiwan tax authorities or risk a fine of TWD30,000.

Taiwan does not have specific legislation regulating online platforms. The Fair Trade Act applies when there is unfair competition, and the Consumer Protection Act applies to marketing information.

All advertising in Taiwan is regulated by the Fair Trade Act and other industry-specific laws. Relevant regulatory agencies include the:

The advertisement of certain types of goods or services is either prohibited or heavily restricted. These include gambling, firearms, sexual services, tobacco products and alcohol.

FTC guidelines provide that an influencer should disclose their relationship with the advertiser if such a relationship cannot be reasonably expected by the public.

There are no laws governing direct marketing or spam in Taiwan.

In Taiwan, sales promotions are regulated under the Fair Trade Act (FTA). In general, a sales promotion must be true, correct, and disclose all conditional requirements for the sales promotion. An enterprise must also properly arrange its sales promotion beforehand and prepare sufficient products and services to fulfil the commitments stated in the promotion.

In addition, the FTA prohibits competition for trading opportunities through the improper offering of gifts or prizes. Under the relevant regulations, giveaways are divided into gifts and prizes, and different upper limits are imposed for each type.

Taiwan's main data protection law is the Personal Data Protection Act (PDPA). The enforcement of the PDPA has produced decisions imposing liability on companies for:

The PDPA was previously named the Personal Information Protection Act (PIPA).

Taiwan does not have separate consumer privacy laws.

Product liability is covered by the:

Liability for specific categories of goods and services is also provided by other laws and regulations, including the Food Safety and Sanitation Act and the Drug Injury Relief Act.

Main Activities. The Fair Trade Commission (FTC) is responsible for investigating activities by enterprises that impede competition, including mergers, concerted actions and other unfair trade actions. The FTC is also responsible for developing fair trade policy and drafting legislation.

W www.ftc.gov.tw.

Main Activities. The Environmental Protection Administration (EPA) is responsible for implementing legislation that protects the natural environment. The EPA is also responsible for setting pollution limits and can investigate and fine enterprises that violate the law.

W www.epa.gov.tw.

Main Activities. The Financial Supervisory Commission (FSC) is responsible for the regulation of Taiwan's financial services sector. The FSC can fine enterprises that violate Taiwan's financial services legislation.

W www.fsc.gov.tw.

Main Activities. The National Communications Commission (NCC) is responsible for regulating Taiwan's information, communication, and broadcasting industries. The NCC has powers to impose fines, and is responsible for granting and revoking broadcast licences.

W www.ncc.gov.tw.

A database of all laws in Taiwan is available at www.law.moj.gov.tw, although not all legislation is available in English. English versions should be used for reference only.