Types of entity in Taiwan
Generally, there are three options: (Subsidiary) company, Branch, and Representative office. Generally speaking, if the business entity in Taiwan will generate sales revenue soon, a branch is more advisable considering the exemption of profit distribution to foreign headquarters. On the other hand, if the entity in Taiwan is involved in R&D activities and even intend to apply for government subsidy, usually a (subsidiary) company would be required. On the contrary, a representative office’s function is limited to liaison only. Any other activities may be regarded as “business activities” and not permitted in Taiwan.
Permitted Activities
Both a (subsidiary) company and a branch are permitted to have business activities in Taiwan, but a rep. office’s function is limited to liaison only.
Taiwan entity’s legal status and foreign investor’s financial responsibility in Taiwan
A (subsidiary) company is a legal person in Taiwan, and the foreign investor takes limited financial liability. The foreign investor’s financial responsibility is limited to the investment in the Taiwanese (subsidiary) company. On the contrary, a branch or a rep. office is not a legal person but a unit belongs to the foreign headquarter, and the foreign headquarter takes joint liability.
Government subsidy for startups
A (subsidiary) company is still a Taiwanese company although its shareholders are foreign investors. Therefore, usually it would be qualified to apply for government subsidies just like other normal Taiwanese companies. On the contrary, a branch or a rep. office is not a Taiwanese company but a unit subordinate to the foreign headquarter. And therefore it is usually not qualified for government subsidies.
Tax treatment
| (Subsidiary) Company | Branch | |
|---|---|---|
| 1. Corporate Income Tax | 20% | 20% |
| 2. Withholding tax on profits distributed to foreign investors | 21% | N/A |
| 3. Additional income tax on undistributed profit | 5% | N/A |