Investing in Asia Pacific 2015: Taiwan

Transcription

1 Investing in Asia Pacific 2015: Taiwan Australia China Hong Kong India Indonesia Japan Korea Malaysia Singapore Taiwan Thailand Vietnam Audit Tax Advisory

2 All lasting business is built on friendship. Alfred A. Montapert

3 TABLE OF CONTENTS Introduction About Crowe Horwath International Establishing the business entity Tax information IPO quick facts Human resource requirements Withdrawal procedures

4 Investing in Asia Pacific with Crowe Horwath International

5 INTRODUCTION Welcome to the Crowe Horwath International Investing in Asia Pacific 2015: Taiwan guidebook. This guide forms a part of the Investing in Asia Pacific 2015 series and provides a quick reference for those interested in investing in Taiwan. While it is not exhaustive, this guide aims to answer some of the key questions that may arise. When specific issues arise in practice, it will often be necessary to consider the relevant laws and regulations and to obtain appropriate professional advice. The guidebook will cover five main topics as follows: Establishing the business entity Tax information IPO quick facts Human resource requirements Withdrawal procedures 5

6 Business is in itself a power. Garet Garrett

7 ABOUT CROWE HORWATH INTERNATIONAL The Crowe Horwath network consists of more than 200 independent accounting and advisory services firms and in over 120 countries around the world. Crowe Horwath International member firms are known for their local knowledge, expertise, and experience balanced by an international reputation for the highest quality in audit, tax, advisory and risk services. They are unified through a shared commitment for impeccable quality service, highly integrated service delivery processes and a common set of core values and management philosophies that guide their decisions daily. This unique combination of talent provides Crowe Horwath International the worldwide capabilities of a highly integrated network to deliver value to multinational clients doing business across borders. 7

8 TAIWAN Establishing the business entity Contact Lyra Wang INTERNATIONAL LIAISON OFFICER crowehorwath.tw ext 518 or Formation and costs Company a. Formation Four (4) corporate forms are available: an unlimited liability company, an unlimited company with limited liability shareholders, a limited liability company, or a company limited by shares. In practice, a company limited by shares and a limited liability company are the favorable two forms for foreign investors. To incorporate a company in Taiwan, notarization of the foreign investor s identification documents is necessary. If the manufacturing function is considered required, it might take at least two (2) months to complete the registration; if not, it might take 45 days in average to complete the whole process after having notarized documents from the investor. Certain sectors such as banking are regulated with minimum capital; and in such areas, special operating-approval may be required; also, the threshold for employing an expatriate is set as 5 million. In addition to those registered within specific sectors and/or those will have an employment with an expatriate there s no statutory minimum capital requirement; generally, the capital shall be sufficient to cover the preparation costs of setting up the company. In addition, office shall be registered at qualified office-locations or areas only. b. Cost One-time administration fee is stipulated for incorporating a company; however, no administration charge is stipulated after establishment unless an amendment or update towards company registration profile is made thereafter. Branch a. Formation Same as for company. Representative Office a. Formation A representative shall be designated to perform the concerned legal actions (such as price negotiation, quotation-offering, tender-participation and signing procurement agreement) within Taiwan, and if the representative needs to be stationed in the R.O.C., he shall establish a representative office by filing the after-notarization foreign company registration documents to the Authority. In such a form, no income-generating business activities would be allowed. Normally, it would take ten () working days to complete the filing after having notarized documents from the investor (only business recognized by the Authority as legally established foreign companies may set up a representative office in Taiwan). No specific requirement for the office address. Cost No administration fee is stipulated for establishing a representative office. 2. Investment incentives Company Ten ()-year loss carry-forward (tax certification or audit is required). Investment credit for specific or approved research & development projects/activities. Branch Ten ()-year loss carry-forward (tax certification or audit is required). 3. Foreign ownership restrictions Company Foreigners are prohibited from running the business stated in the Forbidden List (Negative List); for example, activities relating to public utilities such as water supply and electricity. 8 Branch Same as for company.

9 4. Work permits and visas Company The permits of work visa would be given to expatriates and the manager-in-register based on the minimum revenue threshold stipulated for every industry or business; and also, few qualifications of the expatriate should be met to get the permission. Crowe Horwath International Investing in Asia Pacific 2015 TAIWAN Besides, if a company wants to hire foreign expatriates to work in Taiwan in its first year of operation, the minimum capital to be registered is TWD 5 million. Branch Same as for company. Representative office The permission would be given to the representative only. 5. Accounting standards and audit requirements Company Accounting standards PIEs are required to fully adopt IFRSs in either 2013 or 2015; and non-public entities would adopt IFRS-SMEs in Audit requirements a. Tax audit Net sales and non-operating income are in excess of TWD 0 million. Banks, credit cooperatives, insurance, investment trust companies, short-term bill and finance companies, capital leasing companies and companies engaged in securities and futures and public companies. Have filed a consolidated income tax return. b. Statutory (financial) audit Capital-in-Register over TWD 30,000,000. Bank-loan amounting over TWD 30,000,000. Branch Same as for company. 6. Residential directors / promoters requirements Company If limited company is incorporated: shareholder: one (1), either individual or legal entity director: one (1), no residential requirement If (share) limited liability company is incorporated, shareholder: one (1) legal entity or two (2) individuals director & supervisor: three (3) directors and one (1) supervisor, no residential requirement Branch One individual is required to be registered as branch-representative and manager. Representative Office One individual is required to be registered as representative. 7. Foreign ownership over tangible assets Company The restriction is set by country individually and is normally limited to business-purpose property; that is, residential-purpose property is prohibited. Each acquisition should be investigated and approved by the Authority individually. Branch Same as for company. 8. Country quirks Company PRC investors were permitted to make direct investments in Taiwan since July 2009 after having adequate approval from the Authority; which is subject to different documentation and requirements case by case. Branch Same as for company. Representative office Same as for company. 9

10 Crowe Horwath International Investing in Asia Pacific 2015 TAIWAN Tax information 1. Tax rates on corporate income 17%. 2. Other taxes Value Added Tax (VAT) 5% in sales and purchases occurred within the territory of Taiwan. Other taxes % surtax on undistributed earnings (not applicable to branch). 20% withholding on distributed earnings (not applicable to branch). 3. Branch income Not subject to withholding tax while distributing earnings to head office; however, subject to 17% corporate income tax; and also, 5% VAT would incur when generating sales. 4. Income determination Except for certain exempt items, income from all sources (business income, interest, royalties, and capital gains realized from property sales) is subject to income tax. A company s taxable income is derived by adjusting non-taxable income, non-deductible expenses, allowable provisions, losses carried forward and so on from accounting income. 5. Deductions Except for certain non-deductible expenses (normally non-qualified (not substantiated by adequate and acceptable documents) expenses and costs, corporate income taxes paid, certain costs incurred with the income taxed on a final withholding tax basis and allowable provisions), all the costs and expenses are deductible. 6. Group taxation policies Transfer pricing documentation is required. 7. Tax incentives Inward investment: Merge and acquisition transactions that meet certain criteria qualify for tax benefit including exemption from deed tax, stamp duty, securities transaction tax, VAT and deferral of land value increment tax. Capital investment: Companies can claim tax credits for up to 15% of qualified research & development (R&D) expenses, with the maximum amount of tax credit capped at 30% of the tax payable in the year the expenses are incurred. Any unutilized R&D credit will be forfeited and cannot be carried back or carried forward. Investors located in prescribed areas: Export processing zones, science-based industrial parks and free-trade zones. Establishing operation headquarters, logistic and distribution centers within Taiwan: For headquarters, few types of income (headquarters management income, royalty income, gain from disposal of investment) are exempt from corporate income tax; while for logistic and distribution centers, income generated from qualified sales and delivery are exempt from corporate income tax. 8. Withholding tax Resident company(%) Resident individual(%) Non resident company / individual(%) Dividends Rental Interest Commissions Royalties Technical fee Professional fees N/A N/A(1) N/A(1) N/A(1) N/A(1) N/A(1) N/A , , 2, 3, N/A(1): statutory invoice is required

11 9. Tax administration 1. VAT filing and payment: a bi-monthly VAT filing shall be completed by the 15th day of the odd month for the two (2) preceding months; while the tax payment shall be made before VAT filing 2. Withholding processing: withholding tax shall be submitted to the Authority and the withholding certificate shall be issued within ten () days after the payment is made if the receiver is a non-resident; whereas the tax withheld is due in the th day of next month and the issuance of annual withholding certificate is due on January 31 of the following year. 3. Corporate income tax return: annually filing is stipulated and is due in the fifth month after the end of tax year; however, tax is paid on a self-assessment basis in two (2) installments: income tax equal to either 50% of the tax liability declared for the previous year or taxable income generated during the first six (6) months of the current year during 1 September and 30 September, while the second payment is due upon the filing of annual tax return. Crowe Horwath International Investing in Asia Pacific 2015 TAIWAN. Taxable incomes for non-residential companies and individuals Taiwan-sourced income only for non-residential companies. Taiwan-sourced income only for non-residential individual stays in Taiwan less than 90 days during a tax year; Taiwan-sourced income and proportional non-taiwan sourced income for non-residential individual stays in Taiwan within 183 days. IPO quick facts 1. Bourses in the country a. Taiwan Stock Exchange (TWSE) b. Over-the-counter GreTai Securities Market (GTSM) 2. Admission requirements A. Primary listing Taiwan Stock Exchange (TWSE) a. Company size Paid-in capital or shareholder s equity of at lease TWD 600 million or market capitalization over TWD 1,600 million. b. Trading record The applying foreign users or any of its controlled companies shall have three (3) years or more of trading records; where the applying foreign issuer is an investment holding company, the trading record may be based on the actual number of years of operation of its subsidiaries. c. Public shareholding requirement At least 1,000 shareholders, and where insiders of the foreign issuer and juristic persons own over 50% of the shareholding, not less than 500 shareholders other than such insider own at least 20% of the total issued shares (or not less than million shares). d. Qualitative requirements 1. Either an audit committee( which shall comprise all the independent directors and shall not less than three (3) persons) or supervisors (at least three (3) persons). 2. Cumulative pre-tax earnings of at least NTD250 million over the latest three (3) fiscal years, with at least TWD 120 million in the latest fiscal year, and no cumulative deficit. e. Others At least six (6)-month after filing a consultancy contract with underwriters, or registering as an emerging stock on the GTSM. Over-the-counter GreTai Securities Market (GTSM) a. Company size Shareholder s equity of at lease TWD 0 million. b. Trading record Two (2) years or more; where the applying foreign issuer is an investment holding company, the trading record may be based on the actual number of years of operation of its subsidiaries. c. Public shareholding requirement Where insiders of the foreign issuer and juristic persons own over 50% of the shareholding, no less than 300 shareholders other than such insider own at least 20% of the total issued shares (or not less than million shares). 11

12 Crowe Horwath International Investing in Asia Pacific 2015 TAIWAN d. Qualitative requirements Consolidated income before tax of at least TWD 4 million in the latest fiscal year. Furthermore, the ratio of income before tax to shareholders equity must meet one of the following requirements (not taking into account the effects of net minority interest income (or loss)): at least 4% for the latest two (2) fiscal years. for each of the latest two (2) fiscal years is 3% or highermost recent fiscal year is higher. that of the average of the latest two (2) fiscal years is 3% or higher, and profitability in the most recent fiscal year is higher that of the preceding fiscal year. e. Others At least six (6) months after filing a consultancy contract with underwriters, or registering as an emerging stock on the GTSM. B. Secondary listing Taiwan Stock Exchange (TWSE) a. Company size Shareholders equity of at least TWD 600 million. b. Trading record The registered shares, or securities representing its shares, issued by the foreign issuer in accordance with the laws of its home country, have been listed on one of the stock exchanges or securities markets (only those approved by Taiwan competent authority) for at least six (6) months. c. Public shareholding requirement Excluding insiders and juristic persons who hold over 50% of total shares: The number of registered holders of Taiwan Depository Receipts (TDR) in Taiwan must be at least 300 persons or more; The total number of shares held by these holders must be at least 20% of the total number of issued shares or at least TWD million shares. d. Qualitative requirements No cumulative deficit for the latest fiscal year and meet one of the following criteria, The income before tax for the latest fiscal year represents not less than 6% of the shareholders equity as shown in the issuer s final accounts; or The ratio of income before tax to shareholder s equity for each of the latest two (2) fiscal years is 3% or higher, or the average is 3% or higher, and the profitability in the latest fiscal year is better year-on-year than in the preceding year; or The income before tax for the latest two (2) fiscal years are both TWD 250 million or more. e. Others Local holders of the stock are not restricted from selling the stock on foreign stock exchanges or securities markets. The rights and obligations of stockholders are identical to those for the same class of stock listed on other stock exchanges or securities markets. Over-the-counter GreTai Securities Market (GTSM) a. Company size Shareholders equity of at least TWD 200 million. b. Trading record Same as TWSE TDR. c. Public shareholding requirement Same as TWSE TDR. d. Qualitative requirements No cumulative deficit for the latest fiscal year and meet one of the following criteria, The income before tax for the latest fiscal year represents not less than 4% of the shareholders equity as shown in the issuer s final accounts; or The ratio of income before tax to shareholder s equity for each of the latest two (2) fiscal years is 2% or higher, or the average is 2% or higher, and the profitability in the latest fiscal year is better year-on-year than in the preceding year; or The income before tax for the latest 2 fiscal years are both TWD 4 million or more. e. Others Same as TWSE TDR Specific requirements for specific industries For those TDRs categorized as technology, profitability threshold is set differently:

13 TWSE TDRs Crowe Horwath International Investing in Asia Pacific 2015 TAIWAN 1. Shareholders equity shall not be less than (Paid-in-capital plus Capital Surplus) multiplying second (2 nd ) of third (3 rd ); 2. Issuers must have sufficient working capital for twelve (12) months after listing (More than 50% of abovementioned working capital must be generated from operating cash flow) Furthermore, shareholders equity for the most recent period must be TWD 300 million or more. GTSM TDRs A foreign issuer that has obtained an appraisal opinion from a professional institution engaged by the Industrial Development Bureau of the Ministry of Economic Affairs, or engaged by the GTSM, stating that such an issuer is a technology enterprise and that is has successfully developed a product or technology with market potential may be exempted from the profitability restrictions. 4. Typical issuance size Primary listing: At least meet the public shareholding requirement. Secondary listing (TDRs): TWSE TDR:20 million units or more, or total with a market value of TWD 300 million or more GTSM TDR: million units or more, or total with a market value of TWD 0 million or more. 5. Moratorium imposed Evaluated as not qualified for listing application by underwriter; or listing application is rejected by Review Committee of TWSE/GTSM or is then rejected by the Competent Authority. 6. Requirements for the appointment of a resident / local director and board composition Requirement for directors(primary listing only). TWSE At least five (5) board members and at least two (2) independent non-executive directors, at least one (1) of whom must be domiciled in Taiwan. GTSM At least three (3) independent directors, which must account for at least 1/5 of the total number of director seats. At least one (1) of the independent directors shall be domiciled in Taiwan. 7. Methods of offer and restrictions It s mandatory that the foreign issuers being under consultation contract with underwriters. 8. Timeline Primary listing: Self-assessment of internal control system and/ or restructure plan conducted by the company Contract an underwriter for consultancy (three (3) months (additional three (3)-month extension is allowed) Conduct Public Issuance Fill in the listing application form (at least six (6) weeks) Reviewed by Review Committee of TWSE/GTSM one month)approved by the Board of TWSE/GTSM (two (2) to three (3) weeks) Approval from the Competent Authority or Financial Supervisor Commission (two (2) weeks) Get approval for capital-incremental plan (one (1) week) Listing. Secondary listing: Fill in the listing application form (ten () business days) Approval letter from TWSE/GTSM & (12 business days)approval letter from Central Bank (within seven (7) business days) File an effective registration with the Competent Authority or Financial Supervisor Commission (three (3) months (additional three (3)-month extension is allowed) Conduct Public Issuance (within three (3) days) Submit the chart of dispersion of shareholding and schedule the listing date (three (3) days prior to listing) Apply for Listing. 9. Approving authorities Primary listing: Review Committee of TWSE or GTSM. Financial Supervisory Commission. Secondary listing: Central Bank (approval letter for the foreign currency). Review Committee of TWSE or GTSM. Financial Supervisory Commission.. Estimated cost involved Contract an underwriter/investment bank for consultancy; engage an auditor/ lawyer. 13

14 Crowe Horwath International Investing in Asia Pacific 2015 TAIWAN 11. Restriction on secondary listing or dual listing The registered shares, or securities representing its shares, issued by the foreign issuer in accordance with the laws of its home country, shall have been listed on one of the stock exchanges or securities markets approved by Taiwan competent authority: NYSE Euronext(US); American Stock Exchange(US); NASDAQ(US); London Stock Exchange(UK); Deutsche Borse AG (Germany); Italian Stock Exchange(Italy); Toronto Stock Exchange(Canada); Australian Securities Exchanges (Australia); Tokyo Stock Exchange(Japan); Osaka Securities Exchange(Japan); Stock Exchange of Singapore(Singapore); Kuala Lumpur Stock Exchange(Malaysia); Stock Exchange of Thailand(Thailand); Johnnesburg Stock Exchange(South Africa); Hong Kong Exchanges and Clearing Limited(HK); Korea Exchange(Korea); others with special approval. 12. Language required for: a. Prospectus: Chinese b. Annual reports: Chinese c. Audit reports: Chinese 13. Audit opinion required for a. IPO Primary listing: Two (2) qualified CPAs from qualified firm to sign the audit opinion; and also, an unqualified opinion on internal control system shall be issued within three (3) months after the balance sheet date / most recent three (3) fiscal years audited consolidated financial report (if the application date is within the 4th, 7th and th month after the balance sheet date, the audit report for Q1, half-year and Q3 shall be submitted additionally). Secondary listing: Two (2) qualified CPAs from qualified firm to sign the review opinion for the GAAP differences / most recent three (3) fiscal years consolidated financial report (if the application date is after August 31, half-year consolidated report for the current year is required). b. After IPO Two (2) qualified CPAs from qualified firm to sign the audit (or review) opinion. 14. Requirements of accounting auditors to be appointed Foreign auditors are not allowed. 15. Delisting standards from bourses Extraordinary resolution of shareholders Supervisor Committee). (Approval from the Competent Authority (Financial Human resource requirements 1. Special labor standards to take heed of Statutory minimum level of pay: Statutory minimum level of pay: currently set at TWD 19,273 per month / TWD 115 per hour (TWD 20,008 per month / TWD120 per hour, effectively July 1, 2015) and shall be equal pay for man and woman; reviewed periodically. Working hours: Generally, may not exceed eight (8) hours a day and 84 hours within any 2-week period; 30-minute break shall entitle to worker for every 4-hour working period; overtime is limited to four (4) working hours a day and 46 hours a month. In addition, children under 15 year-old is not allowed to work, while those between 16 and 17 are allowed to work eight (8) hours a day without overtime. Other topics regarding sex discrimination and harassment as well as labor s health and safety are addressed in the labor standards as well. 2. Social welfare: insurance, pension, etc Labor and health insurance: mandatory contribution based on every employee s filed salary and dependents. Pension: mandatory: 6% contribution of every employee s filed salary Requirements for retirement benefits Companies are free to establish a retirement system for employees other than the mandatory defined contribution plan set by the government. Otherwise, the benefit would be paid through every employee s individual pension account via government s mandatory system upon his retirement.

15 4. Legal annual leave and public holidays Public holidays: Employees are allowed time off on public holidays; and normally, most companies follow the official government holiday schedule issued annually. Crowe Horwath International Investing in Asia Pacific 2015 TAIWAN Leaves: holiday and annual leave (7-day paid vacation after 1-2 year(s) continuous service, -day paid Vacation after 3-5 years continuous service, 14-day paid vacation for employees work over five (5) years; up to 30-day paid vacation for those work over ten () years); marriage (up to 8-day paid vacation) and funeral leave (depends on the relationship to the deceased); maternity leave and childcare. 5. Brief information on labour unions It s not mandatory to set a labor union within a company; normally, labor union is set at industrial-level; for example, CPA union. 6. Country quirks If it s normal in the industry to work overtime, the employer may require a written agreement or consent letter from the employees while recruitment. Withdrawal procedures 1. Company: legal procedures required for liquidation 1. Cancel company registration to clear company data maintained by the Authority. 2. Apply to court for the cancellation of Taiwan legal identification to avoid any contingent liabilities (or lawsuit filed by someone) incurred thereafter; few mandatory criteria have to be met in the process of court s investigation. 2. Company: tax requirements Complete liquidation tax filing to cancel the Company s tax identification number. 3. Branch: legal procedures required for closing branch Cancel company registration to clear company data maintained by the Authority. 4. Branch: tax requirements Complete liquidation tax filing to cancel the Company s tax identification number. 5. Representative office: legal procedures required for closing office File office-closing documents to the Authority, which may take ten () business days or so. 15

16 Crowe Horwath International is a leading international network of separate and independent accounting and consulting firms that may be licensed to use Crowe Horwath or Horwath in connection with the provision of accounting, auditing, tax, consulting or other professional services to their clients. Crowe Horwath International itself is a nonpracticing entity and does not provide professional services in its own right. Neither Crowe Horwath International nor any member is liable or responsible for the professional services performed by any other member.