Procedures for foreign companies (defined by the source of capital) to establish a branch company in Taiwan can be confusing. How exactly does it differ from setting up a subsidiary company? One may encounter different problems and is subject to different regulations. In the following Q&A, we answer questions about the funding and functions of a branch company, how to apply for work permits for foreign managers, and taxation in plain and simple terms.
Establishment of branch companies
1. What is the difference between a branch company and a subsidiary company?
Answer: Subsidiary companies have legal-person status, while branch companies do not.
2. Is there a minimum capital for branch companies?
Answer: Branch companies are subject to no minimum capital. But if that branch company wishes to hire foreign managers, then it has to have a registered capital of over NTD500,000. If the branch company operates in fields that require special licensing, other capital requirements may apply.
3. Must branch companies be reviewed by Investment Review Committee?
Answer: No. The establishment and funding of foreign branch companies are managed by the Department of Commerce, Ministry of Economic Affairs; only branch companies with capitals from Mainland China would involve Investment Review Committee.
4. Can a branch company be owned through a joint-stock partnership?
Answer: No. A branch company is defined as an integral part of the parent company, meaning that the foreign company has sole ownership of its branch company.
5. Must a branch office be registered at a valid commercial address?
Answer: Yes. A branch company has to be registered at a valid commercial address (for which TECL has a line of options).
6.Is there a limit on the scope of operation for branch companies?
Answer: No. For example, a Japanese restaurant can open a bakery shop in Taiwan. But many businesses require special licensing, such as the sales of tobacco, alcohol, or medical equipment.
7. If the person responsible for a branch company lives abroad, what procedures require his/her presence in Taiwan?
Answer: On two occasions through the procedure must the foreigner visit Taiwan. He/she must show up at the bank to open a preparatory bank account, and after being approved as a business entity by National Taxation Bureau, he/she must pay an in-person visit to National Taxation Bureau.
8. Can the establishment of a branch company be entrusted to a third party?
Answer: Yes. TECL stands ready to help you through the entire process.
9. How long does it take for a branch company to be established?
Answer: It takes about 30 business days.
Taxation for branch companies
1. Can a branch company conduct business in Taiwan?
Answer: Yes. Branch companies can operate as regular companies in Taiwan and issue invoices when selling.
2. How much does a branch company pay in Business Tax?
Answer: 5%. Business Tax is filed every two months.
3. How much does a branch company pay in Profit-Seeking Enterprise Income Tax?
Answer: 20%. Profit-Seeking Enterprise Income Tax is filed once every year.
4. What are taxes are the profit of a branch company subject to?
Answer: None. Since profits are wired abroad to the parent company, there is no more taxable transaction.
5. Can a branch company outsource its accounting works?
Answer: Yes. Accounting and bookkeeping can be performed by outside professionals.
Person responsible and managers of branch companies
1. What is the personnel requirement for a branch company?
Answer: A branch company is required to have a person responsible (representative) and a manager, but those two titles can belong to the same person.
2. Must the person responsible also be a foreign national?
Answer: No. A Taiwanese can be put in charge of a foreign branch company, and the same goes for managers.
3. If the person responsible or managers are foreign nationals, can they apply for work permits?
Answer: Only foreign managers (not the person responsible) can apply for work permits, but the starting capital of that branch capital must exceed NTD 500,000.
4. Upon obtaining the work permit, can the foreign manager apply for residency as well?
Answer: Yes. The residency will have the same duration as the work permit.
5. Can the work permit of a foreign manager be extended?
Answer: Yes. But the extension is dependent on if the company reached an average yearly revenue of NTD 3 million in the previous three years.
6. Can the family members of a foreign manager apply for dependent residency?
Answer: Yes. The spouse and minor children can obtain dependent residency.
7. If a branch company has a starting capital under NTD 500,000 but exceeds NTD 3 million in yearly revenue, can that branch company apply for work permits for its managers?
Answer: Yes. Eligibility for work permits depends on the starting capital only at the initial stage. Yearly revenue is the criteria thereafter.
8. What is the duration of the initial work permit for foreign managers?
Answer: 12 to 36 months, depending on the official assessment of the branch company’s qualifications.
9. What is the duration of the work permit extension for foreign managers?
Answer: It may depend on the contract duration between the branch company and the manager. If the branch company consistently exceeds the NTD 3 million mark in yearly revenue, a longer duration may be granted.
10. If a foreign manager continuously reside in Taiwan for 5 years, would he/she be eligible for permanent residency?
Answer: Yes. If a foreign manager resides in Taiwan for more than 183 days a year for 5 consecutive years, he/she will be eligible for permanent residency.
11.Can a foreign manager be enrolled in Labor Insurance and National Health Insurance?
Answer: Yes. But foreigners are excluded from the pension program.