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Types of entity in Taiwan

Author: James Chang 547 views

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​

Since a rep. office is not permitted to any business activity in Taiwan and has no profit accordingly, we ignore it and only compare a (subsidiary) company and a branch. Then we can find a branch more beneficial because no tax attached to distributed or retained earnings :
(Subsidiary) CompanyBranch
1. Corporate Income Tax20%20%
2. Withholding tax on profits distributed to foreign investors21%N/A
3. Additional income tax on undistributed profit5%N/A
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