By establishing a branch in Taiwan foreign investors can extend their business and bring their products or services closer to the Taiwanese public. Without having a distinct legal personality from the parent company, a branch will not have legal identity, nor procedural or judicial capacity. This means that the branch will not make important business decisions and at the same time it won’t bear liability in front of the local Courts.
One of our specialists in company formation in Taiwan is ready to explain to you the particularities of branches and to help you open one in Taiwan in compliance with the local legislation.
Foreign companies interested in company registration in Taiwan can reach out to our team for the purpose of branch creation, as well as for the registration of a Taiwanese legal entity. The choice between a branch and another business form can depend on many different criteria, starting with the foreign legal entity’s level of control, to its desire to maintain or to minimize the liability it has for its Taiwanese activities.
Table of Contents
What are the characteristics of a branch in Taiwan?
The branch opened by a foreign company in Taiwan does not need a particular legal form in which to be organized. Just like in the case of a Thai branch office, the Taiwanese branch is dependent on the parent company and usually follows the management and the strategy elaborated by it. This is why a branch does not necessarily need a director. The parent company bears responsibility for the actions performed by the branch in Taiwan.
When an investor wants to open a company in Taiwan and decides to set up a branch, he/she will have to register the branch with the Ministry Of Economic Affairs. The registration implies as well other steps such as name approval and identification of the parent company.
As part of the branch registration process, the foreign company will need to appoint a branch manager. This is mandatory, as the branch is required to have a local representative in the country (even if there is no need for it to have a director, as is required in the case of other business forms).
A local agent is appointed to handle the registration of the branch and our team specializes in offering this service to foreign companies interested in expanding to the Taiwan market.
A possible advantage of setting up a branch in Taiwan is that there is no need for a particular, minimum prescribed capital for this business form. The parent company will, however, need to provide all the needed registration documents in Chinese, so sworn translations will be required.
One of our consultants in Taiwan company registration matters remains at your disposal in order to clarify in more detail the procedure of opening a branch in Taiwan. Our lawyers in Taiwan can help you register a branch:
How is a branch registered in Taiwan?
One of the preliminary actions that need to be taken by a parent company in order to set up a branch in Taiwan is to enter into a tenancy agreement for a space. A branch can function in a commercial building anywhere in Taiwan.
One must also check and verify the proposed branch name, specifying the business items or activities the branch will engage in. You must also confirm the physical address of the branch in Taiwan.
This company type can also be liable for the payment of VAT and thus, investors should verify if their activity will be charged with this tax. The branch also needs to comply with accounting procedures, which must be completed only by accountants in Taiwan. Please read below to find out more about taxation in this country.
The foundation documents containing the certificate of incorporation and the articles of association need to be legalized through the Taiwan Embassy in the country of origin. They can be further included in the application with the Ministry of Economic Affairs in Taiwan so that the branch of the company is recognized. The authorities will require approximately 10 days to evaluate and decide whether the branch can be opened. If you want to open a branch in another country, we can put you in touch with our local partners in UAE who can help you incorporate a branch in Dubai.
You must also open a bank account at a local bank in order to establish a branch in Taiwan. This account will serve financial transactions and operations.
The parent company will have to send money to the Taiwanese branch as working capital. You’ll need to provide a report verifying this capital transfer.
After completing the registration steps, your branch will be issued a unique number that serves as a business license. This number is important for legal purposes.
We can help in setting up a company in Taiwan, whether you’re interested in establishing a branch or other business structure.
Required documents for opening a branch in Taiwan
The necessary documents and details required for registering a branch in Taiwan are the following:
- Certified copy of parent company’s board resolution: You’ll need a certified document that shows your parent company’s board of directors has agreed to create a branch in Taiwan;
- Parent company’s financial statements, audited by professionals;
- Certified copies of parent company’s Articles of Incorporation;
- Government approvals (if applicable): Depending on the parent company’s industry or business activities, you might have to get approval or clearance from government agencies in Taiwan;
- Acceptance of the local agent: If the person or entity acting as your branch representative isn’t the one signing the application form, you’ll need to show proof that he/she has accepted this role.
We can help you gather the relevant documents for opening a branch, as well as with other issues regarding company registration in Taiwan.
How is the Taiwanese branch taxed?
Branches in Taiwan are treated as nonresidents for tax purposes. This means that it qualifies as a profit-seeking company in Taiwan that has its head office outside of the country. Therefore, they are taxed only on their income sourced from Taiwan, at the same rate that applies to a locally registered business (a domestic company).
The following tax rates are relevant for investors who wish to open a branch in Taiwan:
- 20% corporate income tax rate;
- 21% withholding tax on dividend payments made to a nonresident (unless reduced through a double tax treaty);
- VAT at the applicable rate for the type of goods or services offered by the branch: 5% standard rate or reduced rates of 0%, 1% and 2%; VAT grouping is not permitted, however, in some cases, it can be approved in the case of branches (to file a single VAT return for all the Taiwan branches, if applicable);
- Social security contributions, as they apply according to the two applicable social security programs in the country: for example, in the case of labor insurance, the employer contributes 70% of the insured employee’s monthly insurance (which is calculated as 12% of the person’s salary);
- For the purpose of avoiding double taxation, Taiwan has signed approximately 30 tax agreements;
An important difference in the taxation of branches, when compared to the regime applicable to subsidiaries, is that the former are not subject to surtax on undistributed earnings.
The tax losses of the branch (as they were assessed) can be carried forward for ten years, with the condition that the branch keeps proper books and files the annual corporate tax return that was approved by a local certified public accountant (both for the year in which the losses were registered and for the year in which they were used).
The capital gains from real estate sales are taxed differently in the case of branches, compared to subsidiaries. For example, when real estate was held up for no more than two years, this tax is 45%. The same tax is 35% when the property was held for more than two years.
Companies in Taiwan are also subject to other taxes. We recommend discussing any tax liabilities for your branch (according to industry, number of employees, and other criteria) with our tax specialists and our accountants.
A Taiwan branch of a foreign legal entity is subject to thin capitalization rules, however, businesses in the financial sector (banks, insurance companies, securities companies, or financial holding companies) are not subject to these rules.
Differences from a subsidiary
When an investor opts to open a company in Taiwan as a subsidiary, it essentially forms an independent, limited liability company separate from its parent organization. This legal separation offers distinct advantages, primarily safeguarding the parent company from assuming the debts and obligations accrued by the subsidiary in its business activities.
In contrast, a branch in Taiwan is established as an extension of the parent company’s legal entity rather than a distinct legal entity in its own right. This means that the branch office and the parent company are often treated as a single legal entity under Taiwanese law. Consequently, any liabilities incurred by the branch office can potentially expose the entire parent company to those obligations.
One must note that companies planning to engage in activities such as real estate investment, investment holdings, or mergers and acquisitions are better suited to opt for the subsidiary structure. This is because opening a branch in Taiwan does not allow to register property or land in its own name and must do so under the name of the parent company.
When it comes to company formation in Taiwan, subsidiaries are required to have at least one director and one shareholder, with no specific nationality or residency requirements. This flexibility allows for the distribution of equity among multiple shareholders, enabling shared ownership.
In contrast, branches in Taiwan are only obligated to appoint one resident manager and their name must include that of its foreign parent company. Unlike subsidiaries, branches do not have directors or shareholders and are wholly managed and owned by their parent company.
The choice between establishing a branch in Taiwan or a subsidiary depends on the company’s specific circumstances and business objectives. Our team can assist in selecting the appropriate company structure.
How do you assist foreign investors?
Our company formation agents in Taiwan have relevant experience in assisting foreign companies interested in expanding their activities in this jurisdiction. Not only can we act as the local agent during the branch registration process, but we can also handle essential post-registration steps.
We will help prepare the required documents and will inform the foreign company of any additional documents that may be required by the Taiwanese authorities to approve the registration of the foreign branch. We can also answer questions concerning any additional licenses and permits needed to operate in selected business fields.
Additionally, if you are interested in company formation in Taiwan, here are some statistics about the companies in the territory:
- There were 1.56 million active companies in Taiwan in 2021, compared to 2016 were there were approximately 1.29 million active companies;
- In 2021, there were approximately 10,000 service sector companies involved in selling products or services to customers located in other countries through online channels;
- In the same year, 2,118 manufacturing companies in Taiwan were also engaged in cross-border e-commerce.
Feel free to contact our Taiwan company formation experts so that you can receive personalized help with the registration of a branch office for your company.