Set up foreign investment office in Taiwan

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Set up foreign investment office in Taiwan

I. Introduction and Functions of Foreign Investment Office in Taiwan

In addition to setting up a subsidiary or branch, foreign-funded enterprises may also establish a representative office in Taiwan.

The legal basis for establishing a representative office is Article 386 of the Company Act. Unlike a branch, a representative office is limited to non-commercial functions such as liaison and coordination, and it must be reported to the Ministry of Economic Affairs. It is not permitted to engage in business activities. Therefore, if a foreign company does not intend to carry out commercial operations in Taiwan, it may choose to register a representative office instead of a branch.

Representative offices can be categorized as overseas Chinese or foreign investment offices, depending on the nature of the parent company. In general, there are no special requirements for the parent company when setting up an overseas Chinese or foreign investment office. However, if a Chinese (PRC) company applies to establish an office in Taiwan, it must meet certain conditions unless otherwise specified by special regulations:

  1. The parent company must have been established for more than three years.

  2. It must have a minimum paid-in capital equivalent to at least NT$6 million.

  3. Its business scope must include at least one item permitted under the regulations governing Chinese investment in Taiwan.

II. What tax burden does the office have?

In addition to local market development considerations, taxation is a key factor for foreign investors when deciding to establish business offices in Taiwan. Since a representative office is not permitted to conduct business activities and typically incurs only expenses without generating income, it generally does not give rise to tax obligations. If a liaison office is established by a foreign profit-seeking enterprise solely to manage procurement activities for its head office and does not engage in external commercial transactions, it may be exempt from business registration. Furthermore, procurement-related expenses remitted by the foreign headquarters fall outside the scope of business tax and are also exempt from profit-seeking enterprise income tax.

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