TAIWAN — Taiwan is becoming an attractive destination for Foreign Direct Investments (FDIs). A global leader in manufacturing products for the information technology sector, Taiwan relies its economy heavily on exports of high-tech and consumer goods. As many businesses are looking to secure a stronghold across the Asia-Pacific region, Taiwan emerges as an ideal location for foreign investors wanting to establish a presence, particularly in developing markets like FinTech.
According to the World Bank Index Report, Taiwan ranked 15 among the 190 countries/ regions in ease of doing business. One of the most indicating factors is tax payment environment for companies, improving efficiencies for profit-seeking enterprise tax certification and business tax refunds. And with new business laws and regulations coming into effect, areas of “credit acquisition” and “cross-border trade,” where Taiwan falls behind, will be ameliorated.
Regulatory Environment in Taiwan
The world of business is being affected by the global economic crisis, and Taiwan is no exception. Despite all these headlines and challenges, the Taiwanese government has followed a policy of deregulation to increase the transparency of laws related to foreign investments, keeping Taiwan attractive to foreign investors.
Foreign Ownership
In accordance with the Statute for Investment by Foreign Nationals (SIFN), all foreign investment must receive approval from the Investment Commission (IC) of the Ministry of Economic Affairs (MOEA). Except for certain industries like telecommunications and wireless, television broadcasting, and aviation, there are generally no restrictions on foreign ownership and control of local firms.
Competition Regulations and Consumer Protection
Taiwan founded the Fair Trade Commission in 1992 as the central authority of formulating competition policy and implementing the Fair Trade Act. Apart from being responsible for investigating illegal competition-restricting activities, the FTC also deals with other matters arising from the Fair Trade Act, like predatory pricing, monopolies, and other unfair trade practices.
Meanwhile, the Taiwanese government also set up the Consumer Protection Commission (CPC) to protect the interests of the consumers under the Consumer Protection Law, which was enacted in 1994. The CPC is charged with developing regulations related to consumer interests, educating consumers regarding their rights, handling consumer complaints, ensuring product safety, and protecting consumers from Internet scams, false advertisements, and other fraudulent practices.
Government Incentives
Taiwan’s government offers both tax-related and non-tax related incentives for businesses. Tax-related incentives offered generally cover Research and Development (R&D) tax credits, special tax deductions for hiring local additional staff or adjusting local staff salary upwards, and special tax deferrals for beneficiaries obtaining capital stock from contributing technical expertise.
Non-tax incentives aim to make it easier for developing companies to succeed in Taiwan by reducing operating costs. These incentives include the Industrial Technology Development Program, land lease incentives in industrial parks, government participation in investment, and low interest loans.
Import and Export Controls
An import or export permit is required for transporting any items into or out of Taiwan. Stricter controls are in place for the import and export of certain strategic technologies under the “Regulations Governing Export and Import of Strategic High-Tech Commodities.”In order to import or export controlled products, one must first obtain the proper certification.
Exchange Controls
Taiwan has restrictions on foreign exchange, specifically in terms of the outward remittance of funds that exceeds the prescribed amount. Any overseas investment in exceed of USD 50 million needs the approval from the Investment Commission of the Ministry of Economic Affairs (ICMOEA). In addition, any
investment in Taiwan, regardless of the monetary value, requires prior ICMOEA approval even if the investment is made through a third country.
Get Ready for Cross-border Business Opportunities
As technology advances, and regulations make business environments more conducive, the entry of foreign companies into the Taiwan market becomes more seamless. Business owners or companies can grow their customer base by using e-payment channels as preferred payment methods of cross-border purchases.
Apart from licensing and registration, businesses need to be culturally sensitive. Language barriers continue to be an issue that needs to be handled carefully in cross-border businesses.
Therefore, it would be ideal to consult experts who have local contacts and representatives in Taiwan. At DesFran, we have years of experience with cross-border business setup and management. We provide corporate solutions and strategic recommendations for your key business decisions.
Contact DesFran today.
References
Taiwan Ease Of Doing Business, Tradingeconomics.com
Taiwan-openness-to-foreign-investment, Export.gov
Cross-Border Business Is Becoming a Non-Negotiable. Are You Ready, Entrepreneur.com
Doing Business in Taiwan, Grantthornton.tw
About the Author
Jessie Kang is Strategic Communications and Research Intern at DesFran. Jessie has been in the field of research for almost 10 years, and will be completing her PhD studies in Nanyang Technological University soon. With keen interest in cultural studies, Jessie conducts research in narrative studies and postmodernist fictions as part of her academic work. The internship at DesFran allows Jessie to apply her research experience and skills in the commercial setting while learning more about the finance industry.
