[A quick overview on choice of legal entities for international founders setting up in Taiwan, part 2]
Hi, I’m Norman, an AppWorks Analyst. Last week I introduced the first type of entity founders can set up in Taiwan: a representative office. If you missed the post, you can click here to find it: https://bit.ly/2DZMNoY
Today, I will move on to the other two types of entities: setting up a local company and setting up a branch office. This is for founders who are planning on doing some business here in Taiwan. Let’s get started!
Unless you are going to run a certain kind of business (e.g. construction, telecommunications, mansions management, etc.), then there’s no minimum working capital requirements for setting up these two types of entities, while founders need to apply for company registration and file Profit-seeking Enterprise Provisional Income Tax Return. So what’s the main difference between these two entities?
・Set up a local company: founders can apply for setting up a company as an individual or on behalf of the mother company. This is generally applicable to founders who wish to establish a company in Taiwan. This method of incorporation is much more involved than representative offices and branch offices, also it will be much easier to apply for multiple sources of government subsidies, and applicable to tax incentives authorized by the Statute for Industrial Innovation. However, if the company wires after-tax profits to the foreign mother company, 21% of the dividend income tax will be charged.
・Set up a branch office: it’s not possible to set up a branch office as an individual applicant, so if founders would like to set up a branch office, you must apply on behalf of the foreign mother company, saving you some time dealing with the shareholders’ structure and nominating directors. The advantage of setting up a branch office is that it is exempt from 21% tax on repatriation on after-tax profits to the parent company. However, a branch office is not considered a "legal entity," so if the founder signs the contract on behalf of the branch company, the parent company that would legally enjoy the rights and assume the liabilities eventually.
Of course there are other factors that international founders should take into account when deciding which type of entity will you set up in Taiwan, like the business model, tax considerations, if you are going to hire international professionals, etc. As a result, before deciding which kind of entity you would like to set up in Taiwan, make sure you already think of all the factors, pros and cons mentioned before.
Another question founders might wonder is: how long will it take to finish the whole application process? It will generally take 1-2 months, though it might take longer if too many apply at the same time.
Hopefully you have some takeaways on which company entity you can set up in Taiwan after reading my posts. If there’s anything you would like me to clarify, feel free to leave a comment below.
By Norman Chi, AppWorks Analyst
Photo by Kon Karampelas on Unsplash
