FAQ's on Doing Business in Taiwan

by John Eastwood, Eiger Law on 2009-10-13

INTELLECTUAL PROPERTY: How can I protect my trademarks in Taiwan?
Trademarks generally need to be registered in Taiwan in order to be protected, and because success often leads to others’ imitations, it is important to get this right at the outset. To protect a trademark, it will be necessary to file an application with the Taiwan Intellectual Property Office (“TIPO”) in the appropriate classes for the goods and services that your company plans to offer. It is important to work closely with trademark counsel to check for previous registrations or applications so that you can see if the same or similar word or logo mark has been filed for by someone else. Once the mark is registered, it is a good idea to maintain files with information about how you have used the mark in marketing and advertising, on products, and as part of your corporate identity. Such files are also helpful to provide evidence about the growing market awareness of your trademark.

Once you have a valid trademark right in Taiwan, there are options under both the criminal and civil laws for taking action against infringers. While the criminal punishments are often not heavy, the procedures are often quite helpful for arranging for relatively quick and efficient seizure of counterfeit goods from stores, factories or warehouses.

INTELLECTUAL PROPERTY: How can I protect my patents in Taiwan?
Patents need to be registered in Taiwan with the Taiwan Intellectual Property Office (“TIPO”) in order to be protected in Taiwan. However, if a patent has not been registered here but a product infringing your patents in other countries is made here, you may be able to at least block the products incorporating those technologies from markets where you do have patent protection. Many patent rights holders also pursue litigation in other jurisdictions, notably the United States, where awards are thought to be higher. In that case, it may be important to ensure that your overseas litigation is enforceable back into Taiwan, and doing that will often require careful attention to the initial service of process steps, handling of judicial-assistance requests and having local counsel who is knowledgeable about enforcement of foreign judgments.

INTELLECTUAL PROPERTY: How can I protect my trade secrets in Taiwan?
Trade secrets include a very wide variety of a business’ confidential, proprietary information – everything from customer lists, secrets that give your business an advantage, marketing plans, sales numbers, ideas, as well as even the problems that your company specifically may face. Taiwan has a Trade Secrets Act that is closely modeled on its U.S. counterpart, as well as provisions of the Criminal Code that may be applicable to certain situations. It is important to have business partners exposed to your sensitive information sign Non-Disclosure Agreements (“NDAs”). It is also important to have relevant employees exposed to sensitive information sign NDAs or have provisions protecting confidential information within their employment contracts. You should also have systems in place to limit the access of employees to sensitive information and files, clearly mark confidential files as “CONFIDENTIAL”, and hold training programs to ensure that employees act appropriately to protect your sensitive information as well as that of your other business partners. However the specific needs of companies may often need the advice of local counsel experienced in handling trade-secrets issues.

LITIGATION: I am afraid my debtor is hiding his money - can I try to seize his assets before I file a civil claim?
A creditor may apply to the court for provisional attachment with regard to monetary claims or claims exchangeable for monetary claims for purposes of securing the satisfaction of a compulsory execution. Such an application is normally handled on an ex-parte basis.

LITIGATION: Can I file a civil litigation case against a party in Taiwan?
Yes, foreigners can file a civil litigation in Taiwan. It is not necessary for a company or individual filing such litigation to have a branch, subsidiary or other official representative in Taiwan. However, as a practical matter, it will normally be necessary or useful to have authorized legal counsel available to attend hearings to make arguments, file pleadings, etc. It is important to note that nearly all materials submitted to Taiwan courts must be translated into Chinese. Translations should also take into account the fact that legal terminology in Chinese differs between Taiwan, Hong Kong and Mainland China, and also Taiwan uses “traditional” Chinese characters whereas Mainland China uses “simplified” Chinese characters.

LABOR/EMPLOYMENT LAW: What are the limitations for enforceability of non-competition agreements?
The Council of Labor Affairs has a set of non-binding but highly useful guidelines suggesting several factors that may be used, but as a starting point it is important that the restrictions not be so tight as to prevent the employee from ever working again or from taking employment opportunities that would not pose any real harm to the original employer. A non-competition agreement must explicitly define the duration, geographical area and the scope of business. The compensatory measures and penalties for violation should be reasonable.

LABOR/EMPLOYMENT LAW : What are the basic severance payment rules for Taiwan?
The Pension Law applies to Taiwan nationals. The severance payment is calculated as half a month per year of service, but the total amount shall be maximum 6 months of salary. Labor Standard Law applies to foreign employees. The severance payment is calculated as 1 month of salary per year of service.

SETUP OF COMPANY: What possibilities do I have to setup a small business in Taiwan and to secure a work permit for myself at the same time?
If the person is an individual, he or she may obtain a work permit by setting up a company limited by shares or a limited company. For companies, the work permit would be issued with regard to the position of the chief representative, the General Manager, or the branch manager of the representative office or the branch office.

SETUP OF COMPANY: Subsidiaries: How many directors does a limited company need to have? Is it enough if I am the only director?
Yes, it is enough if there is only one director. A limited company shall have at least one but not more than three directors.

SETUP OF COMPANY: Can a natural person as a shareholder of a limited company appoint a director?
Yes, a person as a shareholder of a limited company can appoint a director. If there is only one shareholder, he or she himself shall be the director.

SETUP OF COMPANY: What are the requirements for the future registered business address of my subsidiary?
The future registered business address needs to be suitable and meet the requirements for running the business, with regard to the zoning of the property (e.g. commercial or industrial, but not purely residential).

SETUP OF COMPANY: Are there any special regulations for investments from Hong Kong and/or China?
Investments from Mainland China are currently not permitted. Investments from Hong Kong are subject to the regular regulations of foreign investment in Taiwan.

SETUP OF COMPANY: What is the minimum amount of money do I need to prepare to invest in Taiwan?
For limited companies, currently the minimum investing amount is TWD 500.000. For companies limited by shares, the minimum investing amount is TWD 1,000,000. The minimum amount (working capital) for branch offices depends on the structure of the headquarters.

SETUP OF COMPANY: Is it necessary for me to be physically present in Taiwan for the setup process of my branch office or subsidiary?
During the setup process, the future legal representative would need to be physically present in Taiwan at least once, for opening of the temporary bank account which is necessary for the capital contribution.

SETUP OF COMPANY: Branch office: Do the legal representative and branch manager need to be residents in Taiwan?
No, the legal representative does not need to be a resident in Taiwan. However, managerial personnel shall have a residence or domicile within Taiwan.

SETUP OF COMPANY: Branch office: Can the position of the legal representative and branch manager be split?
What is the “legal representative” after all? A legal representative is the designated representative of a foreign company who represents the company in all litigious and non-litigious matters and to serve as its responsible persons in Taiwan. Usually the legal representative is at the same time also the General Manager, but the two positions can be split, i.e. can be held by two different individuals.

SETUP OF COMPANY: Does a subsidiary need to have a General Manager?
No, for a subsidiary a General Manager is not necessary. A subsidiary may have one or more managerial personnel in accordance with its Articles of Incorporation. However, within the position of General Manager, it is usually easier to obtain a work permit as a foreign national

SETUP OF COMPANY: Can a limited company have a supervisory board?
No, a limited company cannot have a supervisory board. It shall be the shareholders who supervise the operations of the company.

SETUP OF COMPANY: What is a supervisor? How many supervisors does a company limited by shares need to have?
The supervisor is a person supervising the execution of business operations of the company, investigating the business and financial conditions of the company at any time, examining the accounting books and documents, and requesting the board of directors or managerial personnel to make reports thereon.A company limited by shares need to have a least one supervisor.

SETUP OF COMPANY: Subsidiaries: How many directors does a limited company by shares need to have? Can I ask friends or relatives from my home country to be one of the directors?
The board of directors of a company shall have at least three directors. Yes, you can ask friends or relatives to me one of the directors, since Taiwan does not have any requirements with regard to domicile or nationality of directors.

SETUP OF COMPANY: What are the advantages/ disadvantages of subsidiaries vs. branch offices?
For branch offices, the advantage is that there is no 25% withholding tax on the repatriation of after-tax profits. The disadvantage is liability, as the main company abroad is fully liable for its branch office in Taiwan.For subsidiaries, the advantage is that the liability is restricted. The disadvantage is that there will be the withholding tax of 20% on dividends paid to the shareholder(s) abroad.

VISA/ARC: How can my Chinese (PRC) wife or husband get a permission to stay in Taiwan?
A spouse from PRC can also obtain a permission, but there are more requirements need to be met and more formality regarding documents from Mainland China. VISA/ARC: How can my family members obtain an ARC? The family members can obtain an ARC by being dependent on the foreign employee.

VISA/ARC: How can I obtain an Alien Residence Certificate (ARC) and what is it?
To obtain an ARC, foreigners should file in the application to National Immigration Agency. Alien Residence Certificate is a document given by National Immigration Agency for foreigners who intend to reside in Taiwan for certain purposes, for example for an employment, marriage, or investment in Taiwan. The valid term differs from different purpose of residence.

VISA/ARC: What are the requirements for permanent residency, and what are the advantages compared to an ARC?
Foreigners who have legally and continuously resided in Taiwan for five years or the spouses and/or children of nationals with registered permanent residence in Taiwan who have legally and continuously resided in Taiwan for five years or have legally resided Taiwan for more than fifteen years during which they have resided for more than one hundred and eighty three days each year for five years, may apply for permanent residence (and the Alien Permanent Residency Certificate, or “APRC”) from the authority if they:

* (1) Are at the age of twenty and over, whereas the nationals' children are fourteen and over;
* (2) Have a decent character;
* (3) Have considerable properties, skills or talents that are enough to enable them to make a living by themselves;
* (4) Have resided in Taiwan for over 270 days each year during their legal and continuous residence in Taiwan, whereas the nationals' spouses or children have resided for over 183 days each year;
* (5) Are favorable to the national interests of Taiwan.

With the APRC, foreign employees may apply for an open work permit from the Council of Labor Affairs, and would not need to apply for work permits through their employers. However, one problem faced by those who have the APRC is that the permanent residency status is still based upon maintaining the required annual 183 days of residence within Taiwan – in other words, the status can be lost.

WORK PERMIT: I am married to a Taiwanese citizen; do I still need a work permit?
Aliens who are married to citizens of the R.O.C and who have made the necessary household registrations, are not required to apply for work permits. With the Alien Resident Certificate the foreign nationals possess the right to work in Taiwan.

WORK PERMIT: Can the new company employ other foreigners in addition to myself?
Yes. There are different purposes of hiring foreign employees, and some purpose requires some conditions to be met, for example the capital amount of the company.

WORK PERMIT: Can my company employ foreign students or interns?
Yes. There are three kinds of permission you may obtain to employ foreign students or interns: the permission from Foreign Investment Committee, student work permit from Council of Labor Affairs, and the regular work permit.

WORK PERMIT: When and how can I extend my work permit?
To extend the work permit, foreign employees can file an application to the Council of Labor Affairs within 60 days before the due date.

Article provided courtesy of Eiger Law www.eigerlaw.com

For more information, contact John Eastwood (john.eastwood@eigerlaw.com) or Nathan Kaiser (nathan.kaiser@eigerlaw.com).