Doing Business in Taiwan

Contributed by: Formosan Brothers Taiwan N&A Contact: Ing Chian Sun (profile), Kaedeko Takagi (profile) 1. INTRODUCTION 1.1 Please give a brief outline of the legal system in Taiwan. Is it based on common law, civil law, or some other system? Similar to Japan, Taiwan is a civil law country with most of its laws and regulations being codified. 1.2 How are the courts organized in Taiwan? The organization of the courts in Taiwan mainly depends on the type of dispute in question, i.e., whether it is a civil, criminal, or administrative matter. In particular, in regard to civil and criminal matters, the system consists of three levels and three instances: district courts, high courts, and supreme courts. Each district court and high court is further divided and allocates its manpower and resources to specialized courts such as the family law division, labor law division, juvenile courts, etc. As to administrative matters, since Taiwan employs a principle of petition before litigation (before bringing a suit, people must first file a petition to the administrative agency to express his/her opposition to the administrative agency’s decision; if the administrative agency upholds its original decision, the person can then bring an administrative suit against the administrative agency), in regard to the adjudication of administrative matters, the system consists of two levels and two instances: administrative high courts and administrative supreme courts. Moreover, since July 2008, in order to speed up the process of adjudicating intellectual property cases, an intellectual property court has been established with the jurisdiction to preside over civil, criminal, and administrative matters arising from intellectual property disputes. 1.3 How are lawyers organized in Taiwan? In order to be qualified as a lawyer in Taiwan, a person must pass a national examination and complete a five-month internship at a law firm, and a one-month intensive training course at the Taiwan Bar Association. A lawyer must be registered with the local bar association and the local district court before he/she can start practicing. Currently, there are sixteen local bar associations, which together form the Taiwan Bar Association. 1.4 What types of legal fee arrangements are common in Taiwan? Attorneys’ fees in Taiwan are generally charged based on the agreement of the client and the attorney. There are in principle two common methods of calculating attorneys’ fees in Taiwan. One method is to charge by the case, i.e., an attorney will charge a fixed amount for providing his/her legal services within the agreed scope (e.g., from the filing of a lawsuit until a judgment is rendered by the court of first instance). The other method is to charge by the hour, i.e., an attorney will charge based on the actual hours spent in providing his/her legal services within the agreed scope. Furthermore, in cases involving civil matters, an attorney can make an agreement with the client to also charge a certain percentage of the judgment awarded by the court upon winning the case (also called a contingency fee arrangement). However, a contingency fee arrangement cannot be made in respect of criminal cases, family law cases, or juvenile cases. Regardless of the method used for calculating attorneys’ fees, actual expenses such as telephone calls, photocopies, transportation, etc. incurred by an attorney during the course of providing legal services can be charged separately, depending on the agreement reached between the attorney and his/her client. 2. STRUCTURES FOR DOING BUSINESS 2.1 Is it necessary to set up a business organization in Taiwan to provide services or sell goods in Taiwan? A foreign company must (1) set up a subsidiary in Taiwan, or (2) establish a branch in Taiwan, which must be recognized by the competent authority, before it can engage in business activities such as providing services or selling goods in Taiwan. However, if a foreign company is not planning to set up operations in Taiwan but merely wishes to appoint a representative to carry out certain legal acts in the course of business on its behalf in Taiwan (which shall be limited to legal acts for the business operated by the foreign company and legal acts in Taiwan by the representative, for example, conducting negotiations or signing contracts to procure raw materials on behalf of the foreign company in Taiwan, or acts as a counsel or agent of the foreign company), it only needs to (3) establish the representative’s office, which must be notified to the competent authority. The so-called subsidiary (as described in (1)) is a profit-seeking company registered and established pursuant to the Company Act of Taiwan and is an independent juristic person. A foreign branch (as described in (2)) is a branch of a foreign company set up for the purpose of carrying out business activities in Taiwan. A branch can begin its operations in Taiwan upon the recognition and approval of the competent authority according to the Company Act of Taiwan. A representative office (as described in (3)) is 2 established when a foreign company has no intention of setting up a subsidiary or branch within the territory of Taiwan and, therefore, appoints a representative to carry out legal acts in the course of business on behalf of the company within the territory of Taiwan. If a natural person of foreign nationality wishes to engage in commercial activities in Taiwan, he/she may carry out business by way of sole proprietorship without setting up any business organization, or form a partnership with other natural persons. It should be noted, however, that currently a limited liability partnership (LLP) is not allowed in Taiwan. 2.2 What forms of business organizations can be set up in Taiwan? As explained above, the forms of business organizations that a foreign company may set up in order to engage in commercial activities in Taiwan are a subsidiary, foreign branch, or representative office, and a natural person of foreign nationality may form a partnership with other people or carry out business by way of sole proprietorship in order to engage in commercial activities in Taiwan. In particular, a subsidiary can be further divided into an unlimited company, unlimited company with limited liability shareholders, limited company, and company limited by shares. Most subsidiaries are set up in the form of a company limited by shares. 2.3 What is the process, time required, and cost for setting up each? 2.3.1 Setting up a company (in the case of a company limited by shares) (1) Procedure: The procedure for setting up a subsidiary can be divided into five stages - application for registration of the company name and scope of business, application for investment permission, capital remittance, application for capital verification, and company registration. (2) Time required: The review of an application for registration of the company name and scope of business requires approximately four working days. The time required for the review of an application for investment permission and application for capital verification depends on the amount invested by the foreign company and the type of the industry invested in. The reference time frame is as follows: for an investment amount less than NT$500,000,000, the review requires approximately two to four working days; for an investment amount over NT$500,000,000, the review requires approximately three to five working days; and for an investment amount over NT$1,000,000,000, the review requires approximately 14 to 30 working days. The review of an application for company registration requires approximately four working days. 3 (3) Cost: The government fee charged for an application for registration of the company name and scope of business is NT$300. There is no government fee required for an application for investment permission or an application for capital verification. The government fee for company registration depends on the total amount of capital stipulated in the Articles of Incorporation, whereby for every NT$4,000 of capital, a fee of NT$1 is charged. Where the amount of the fee calculated based on the total amount of capital is less than NT$1,000, the government fee is NT$1,000. 2.3.2 Setting up a branch (1) Procedure: The procedure for setting up a subsidiary can be divided into four stages - application for registration of the company name and scope of business, application for foreign company recognition and branch registration, capital remittance, submission of proof of capital remittance, and completion of recognition and registration procedure. (2) Time required: The review of an application for registration of the company name and scope of business requires approximately four working days. The review of an application for foreign company recognition and branch registration requires approximately four working days. The review of a submission of proof of capital remittance and completion of recognition and registration procedures also requires approximately four working days. (3) Cost: The government fee charged for an application for registration of the company name and scope of business is NT$300. The government fee for an application for foreign company recognition and branch registration depends on the total amount of capital as stipulated in the Articles of Incorporation, whereby for every NT$4,000 of capital, a fee of NT$1 is charged. Where the amount of the fee calculated based on the total amount of capital is less than NT$1,000, the fee is NT$1,000. 2.3.3 Setting up a representative office (1) Procedure: There is only one stage - submission of an application for setting up a representative office. (2) Time required: Approximately four working days.

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