Tax Implication on Different Company Types in Taiwan

Adjacent to Mainland China with its opened-economy and less strict regulations, Taiwan bears a unique position of entering into Asian markets. Taiwan also bears relatively lower cost-of-living standard comparing to other developed Asian countries.

The first step of doing business in Taiwan is usually to select a company type. Below we list out the most common company types with its tax implications.

• Representative Office

A representative office is not allowed to conduct profit-generating activities. It is only allowed to conduct ancilliary/solicitation services to its foreign counterparts, such as purchase materials or equipment and marketing services.

• Branch Office of a Foreign Company

A Branch office is treated as any other companies in Taiwan. It is allowed to conduct any kinds of profit-seeking activities, as long as its not illegal. In addition, it enjoys certain tax benefits from Taiwan tax perspective, such as no withholding tax when repatriating profits back to its foreign counterparts.

• Company Limited by Shares

“Company Limited by Shares” is very similar to a “Limited Company (“Ltd.”) in the US, and is the most common company types in Taiwan. The shares of which are in the form of share certificates, where the profit allocation is based on the shares each shareholders own. In addition, it enjoys certain R&D tax incentives in Taiwan; and when sale of the shares of the company, only 0.3% of securities transaction tax is applied.

• Small-Scale Limited Company

A Limited Company is usually for those smale-scale companies where the working capital of which is rather small. The company structure of which is usually simple with minimal hierarchy.

We summarize in below table a comparison for the two most common company types that foreign investors would choose when investing in Taiwan.

 

	Foreign branch	Company Limited by Shares
Corporate  income tax	17%	17%
10%  surtax on undistributed retained earnings	N/A (tax-efficient)	Yes
Withholding  tax when remitted back profits to VadaTech	N/A (tax-efficient)	Yes
R&D  credits and incentives	N/A	Yes (If you are to form a “R&D intensive company, this is the best choice.)