Taiwan is an important market in regional and global trade and investment. It is one of the world’s top 25 economies in terms of gross domestic product (GDP) and was the United States’ 10th largest trading partner in 2019. An export-dependent economy of 23 million people with a highly skilled workforce, Taiwan is also a key link in global supply chains, a central hub for shipments and transshipments in East Asia, and a major center for advanced research and development (R&D).
Taiwan welcomes and actively courts foreign direct investment (FDI) and partnerships with U.S. and other foreign firms. The administration of President Tsai Ing-wen aims to promote economic growth in part by increasing domestic investment and FDI. Taiwan authorities offer investment incentives and seek to leverage Taiwan’s strengths in advanced technology, manufacturing, and R&D. Expanded investment by the central authorities in physical and digital infrastructure across Taiwan complements this investment promotion strategy. The authorities convene an interagency monthly meeting to address common investment issues, such as land scarcity. Some Taiwan and foreign investors regard Taiwan as a strategic relocation alternative to insulate themselves against potential supply chain disruptions resulting from regional trade frictions. In January 2019, the Taiwan government launched a reshoring initiative aimed to lure Taiwanese companies to shift production back to Taiwan from the People’s Republic of China (PRC) in response to rising tariffs on Taiwan’s critical electronics manufacturing industry.
Taiwan’s finance, wholesale and retail, and electronics sectors remain top targets of inward FDI, although Taiwan attracts a wide range of U.S. investors, including in advanced technology, digital, traditional manufacturing, and services sectors. The United States is Taiwan’s second largest single source of FDI after the Netherlands, through which some U.S. firms choose to invest. In 2018, according to U.S. Department of Commerce data, the total stock of U.S. FDI in Taiwan reached USD 17.5 billion. U.S. services exports to Taiwan totaled USD 10 billion in 2018. Leading services exports from the U.S. to Taiwan were in the intellectual property (industrial processes), transport, and travel sectors.
Structural impediments in Taiwan’s investment environment include: excessive or inconsistent regulation; market influence exerted by domestic and state-owned enterprises (SOEs) in the utilities, energy, postal, transportation, financial, and real estate sectors; foreign ownership limits in sectors deemed sensitive; and regulatory scrutiny over the possible participation of PRC-sourced capital. Taiwan has among the lowest levels of private equity investment in Asia, although private equity firms are increasingly pursuing opportunities in the market. Foreign private equity firms have expressed concern about a lack of transparency and predictability in the investment approvals and exit processes, as well as regulators’ reliance on administrative discretion in rejecting some transactions. These challenges are especially apparent in sectors deemed sensitive for national security reasons but that allow foreign ownership. Businesses have questioned the feasibility of Taiwan’s long-term energy policy in light of plans to phase out nuclear power by 2025 and increase use of LNG and renewables.
The Taiwan authorities have introduced new rules to help establish a modern regulatory framework for a thriving digital economy, but their reluctance to accommodate certain new business models, such as sharing economy platforms, presents a stark contrast to Taiwan’s efforts to position itself as a global innovation hub. Taiwan in late 2016 implemented new rules mandating a 60-day public comment period for draft laws and regulations emanating from regulatory agencies, but the new rules have not been consistently applied. Proposed amendments to foreign investment regulations, if passed, would help promote inward investment through streamlined reporting and approval procedures.
|TI Corruption Perceptions Index||2019||28 of 180||https://www.transparency.org/cpi2019|
|World Bank’s Doing Business Report||2020||15 of 190||http://www.doingbusiness.org/en/data/
|Global Innovation Index||2019||N/A|
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||USD 17,530||https://apps.bea.gov/iTable/iTable.cfm?reqid=2&step=1&isuri=1#reqid=2&step=1&isuri=1|
|World Bank GNI per capita||2018||N/A||http://data.worldbank.org/indicator/
3. Legal Regime
Transparency of the Regulatory System
Taiwan generally maintains transparent regulatory and accounting systems that conform to international standards. Publicly listed Taiwan companies have fully adopted International Financial Reporting Standards (IFRS) since 2015, and synchronized accounting standards with IFRS 9 and IFRS 15 in 2018. In January 2019, Taiwan adopted IFRS 16. Ministries generally originate business-related draft legislation and submit it to the Executive Yuan for review. Following approval by the Executive Yuan, draft legislation is forwarded to the Legislative Yuan for consideration. Legislators can also propose legislation. While the cabinet level agencies are the main contact windows for foreign investors prior to entry, foreign investors also need to abide by local government rules including those related to transportation services and environmental protection, among others.
Draft laws, rules, and orders are published on The Executive Yuan Gazette Online for public comment. The Taiwan authorities on December 25, 2015, first instituted a 14-day public comment period for new rules but extended it to no less than 60 days beginning December 29, 2016. All draft regulations and laws are required to be available for public comment and advanced notice, unless they meet certain criteria allowing a shorter window. While welcomed by the U.S. business community, the 60-day comment period is not uniformly applied. Draft laws and regulations of interest to foreign investors are regularly shared with foreign chambers of commerce for their comments. For the ongoing amendment to the Statute for Investment by Foreign Nationals, the authorities held several regional public hearing and professional consultations meetings before finalizing its draft for the Executive Yuan review.
These announcements are also available for public comment on the NDC’s public policy open discussion forum at https://join.gov.tw/index. Foreign chambers of commerce and Taiwan business groups’ comments on proposed laws and regulations, as well as Taiwan ministries’ replies, are publicly posted on the NDC website. In October 2017, the NDC launched a separate policy discussion forum specifically for startups, which can be found online at serving as the main platform to harmonizing regulatory requirements governing innovative businesses and startups operation.
The Executive Yuan Legal Affairs Committee oversees the enforcement of regulations. Ministries are responsible for enforcement, impact analysis, draft amendments to existing laws, and petitions to laws pursuant to their individual authorities. Impact assessments may be completed by in-house or private researchers. To enhance Taiwan’s regulatory coherence in the wake of regional economic integration initiatives, the NDC in August 2017 released a Regulatory Impact Analysis Operational Manual as a practical guideline for central government agencies.
Taiwan regularly discloses government finance data to the public, including all debts incurred to all levels of government. Past information is also retrievable in a well-maintained fiscal database. Taiwan’s national statistics agency also publishes contingent debt information each year.
International Regulatory Considerations
Taiwan is not a member of any regional economic grouping. Although Taiwan is not a member of many international organizations, it voluntarily adheres to or adopts international norms, including in the area of finance, such as IFRS. MOEA in July 2014 notified other Taiwan agencies of the requirement to notify the WTO of all draft regulations covered by the WTO’s Agreement on Technical Barriers to Trade and the Agreement on Sanitary and Phytosanitary Measures. Taiwan is a signatory to the Trade Facilitation Agreement (TFA) and has met some of the customs facilitation requirement specified in the TFA, such as single-window customs services and preview of the origin. In January 2018, citing tax parity for domestic retailers and the risk of fraud, Taiwan lowered the de minimis threshold from NTD 3,000 (USD 100) to NTD 2,000 (USD 67), an approach regarded as contrary to facilitating customs clearance and trade, especially for small- and medium-sized U.S. businesses. NDC is in the process of drafting proposed amendment to the Personal Information Protection Act and related regulations to meet the European Union’s General Data Protection Regulation (GDPR) standards and obtain adequacy status.
Legal System and Judicial Independence
Taiwan has a codified system of law. In addition to the specialized courts, Taiwan has a three-tiered court system composed of the District Courts, the High Courts, and the Supreme Court. The Compulsory Enforcement Act provides a legal basis for enforcing the ownership of property. Taiwan does not have discrete commercial or contract laws. A variety of different laws regulate businesses and specific industries, such as the Company Law, the Commercial Registration Law, the Business Registration Law, and the Commercial Accounting Law. Taiwan’s Civil Code provides the basis for enforcing contracts.
Taiwan’s court system is generally viewed as independent and free from overt interference by other branches of government. Taiwan established its Intellectual Property Court in July 2008 in response to the need for a more centralized and professional litigation system for IPR disputes. There are also specialized divisions in the District Courts and High Courts to deal with labor disputes. Foreign court judgments are final and binding and enforced on a reciprocal basis. Companies can appeal regulatory decisions in the court system.
Laws and Regulations on Foreign Direct Investment
Regulations governing FDI principally derive from the Statute for Investment by Foreign Nationals and the Statue for Investment by Overseas Chinese. These two laws permit foreign investors to transact either in foreign currency or the NTD. The laws specify that foreign-invested enterprises must receive the same regulatory treatment accorded local firms. Foreign companies may invest in state-owned firms undergoing privatization and are eligible to participate in publicly financed R&D programs.
Amendments the Legislative Yuan passed in June 2015 to the Merger and Acquisition Act clarified investment review criteria for mergers and acquisition transactions. The Investment Commission is drafting amendments to the Statute for Investment by Foreign Nationals in an aim to simplify the investment review process, including an amendment that would replace a pre-investment approval requirement with a post-investment reporting system for investments under a USD 1 million threshold, which is considered too low by many stakeholders. Ex ante approval would still be required for investments in restricted industries and those exceeding the threshold. The new proposal would also allow the authorities to impose various penalties for violations of the law. Guidance that previously required special consideration of the impact of a private equity fund’s investment has been folded into the set of general evaluation criteria for foreign investment in important industries. The MOEA in November 2016 released a supplementary document to clarify required documentations for different types of investment applications. This document, which was last revised in 2018 and in Chinese only, can be found at .
Competition and Anti-Trust Laws
Taiwan’s Fair Trade Act was enacted in 1992. Taiwan’s Fair Trade Commission (TFTC) examines business practices that might impede fair competition. In October 2017, TFTC imposed a USD 774 million antitrust fine on a U.S. technology company. The MOEA publicly expressed concern about the ruling’s potential impact on foreign investment. TFTC in 2018 reached a settlement with this U.S. company, lowering its fine to USD 90 million, and the company promised to make USD 700 million investment in Taiwan.
Expropriation and Compensation
According to Taiwan law, the authorities may expropriate property whenever such a course is determined to be necessary for the public interest, such as for national defense, public works, and urban renewal projects. The U.S. government is not aware of any recent cases of nationalization or expropriation of foreign-invested assets in Taiwan. There are no reports of indirect expropriation or any official actions tantamount to expropriation. Under Taiwan law, no venture with 45 percent or more foreign investment may be nationalized, as long as the 45 percent capital contribution ratio remains unchanged for a period of 20 years after the establishment of the foreign business. Taiwan law requires fair compensation be paid within a reasonable period when the authorities expropriate constitutionally protected private property for public use.
ICSID Convention and New York Convention
In part due to its unique political status, Taiwan is neither a member of the International Centre for the Settlement of Investment Disputes (ICSID) nor a signatory to the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). It also is not a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).
Investor-State Dispute Settlement
Foreign investment disputes with the Taiwan authorities are rare. Taiwan resolves disputes according to its domestic laws and based on national treatment or investment guarantee agreements. Taiwan has entered into bilateral investment agreements with countries including Singapore, Thailand, Malaysia, and India. Taiwan does not have an investment agreement with the United States. Taiwan’s bilateral investment agreements serve to promote and protect foreign investments. DOIS is not aware of investment disputes involving U.S. investors, although there have been reports of disputes between U.S. investors and their local Taiwan partners.
International Commercial Arbitration and Foreign Courts
Parties to a dispute may pursue mediation by a court, a mediation committee of a town or city, and/or the Public Procurement Commission. Mediation is generally non-binding unless parties agree otherwise. Civil mediation approved by a court has the same power as a binding ruling under civil litigation. The Judicial Yuan announced that alternative dispute resolution will be one of the issues addressed in an upcoming National Judicial Conference. Arbitration associations in Taiwan include the Chinese Arbitration Association, Taiwan Construction Arbitration Association, Labor Dispute Arbitration Association, and Chinese Construction Industry Arbitration Association in Taiwan.
A court order on recognition and enforcement must be obtained before a foreign arbitral award can be enforced in Taiwan. Any foreign arbitral award may be enforceable in Taiwan, provided that it meets the requirements of Taiwan’s Arbitration Act. In November 2015, the Legislative Yuan amended the Arbitration Act to stipulate that a foreign arbitral award, after an application for recognition has been granted by a court, shall be binding on the parties and have the same force as a final judgment of a court, and is enforceable. Taiwan referred to the United Nations Commission on International Trade Law (UNCITRAL) model law when the Arbitration Act was revised in 1998.
Taiwan has a bankruptcy law that guarantees creditors the right to share the assets of a bankrupt debtor on a proportional basis. Secured interests in property are recognized and enforced through a registration system. Bankruptcy is not criminalized in Taiwan. Corporate bankruptcy is generally governed by the Company Act and the Bankruptcy Act, while the Consumer Debt Resolution Act governs personal bankruptcy. The quasi-public Joint Credit Information Center is the only credit-reporting agency in Taiwan. In 2018, there were 217 rulings on bankruptcy petitions.
4. Industrial Policies
The Statute for Industrial Innovation provides the legal basis for offering tax credits for companies’ R&D expenditures. MOEA also operates several R&D subsidy programs. MOEA’s target industries for investment are IoT (including Asia Silicon Valley-related investments), smart machinery, biotechnology and biopharmaceuticals, green energy, national defense, the circular economy, and agriculture. Investors can receive tax incentives for investing in free trade zones, public construction, and biotechnology or biopharmaceuticals. Investment support from the central authorities may be available for priority projects. Industrial zones, export processing zones, science parks, and local governments offer various types of subsidies, financing, and tax deductions. Investors may receive low-interest loans or subsidies for participating in industrial R&D and industry revitalization programs. R&D tax credits, equivalent to 15 percent of total R&D expenditures, are available only to companies who file corporate income taxes in Taiwan. The Act for the Recruitment and Employment of Foreign Professionals passed in October 2017 offers relaxed visa requirements and high-earner tax deductions to foreign professionals. For a detailed list of investment incentives programs, please refer to the Invest in Taiwan website at To promote Taiwan’s green energy industry, Taiwan authorities are considering a national guarantee mechanism to facilitate financing green energy investment.
Foreign Trade Zones/Free Ports/Trade Facilitation
There are seven free trade/free port zones: Anping, Kaohsiung, Keelung, Suao, Taichung, Taipei, and Taoyuan International Airport. The authorities have relaxed restrictions on the movement of merchandise, capital, and personnel into and out of these zones. As part of a broader restructuring and to increase the competitiveness of Taiwan’s ports, the Ministry of Transportation and Communication established the Taiwan International Ports Corporation (TIPC) in 2012 to manage commercial activities of Taiwan’s ports and free trade zones. TIPC facilitates cooperation with foreign shipping operations and related businesses. In addition to preferential tariff and fees, the foreign labor ceiling for manufacturers in the free ports zones is 40 percent. Kaohsiung Port also serves as a London Metal Exchange (LME) delivery port of primary aluminum, aluminum alloy, copper, lead, nickel, tin, and zinc.
Performance and Data Localization Requirements
Taiwan does not mandate local employment, but the authorities have incentivized foreign companies to hire more local staff with preferential measures, such as in the mutual fund industry. Except for restricted industries on the negative list, there is no restriction on foreigners taking roles in senior management or on boards of directors. Foreign investors have long expressed concerns over difficulties in recruiting skilled executives and professionals. The Act for the Recruitment and Employment of Foreign Professionals that took effect February 2018 aims to attract foreign professionals through simplified policies regarding work, visa, and residence, and increased benefits on retirement, insurance, and tax obligations. As of 2019, more than 500 people have obtained the Employment Gold Card, which includes a visa, work permit, alien resident certificate, and re-entry permit; 24 percent of the recipients were Americans. Taiwan does not mandate any forced localization or performance requirements and does not ask software firms to disclose their source code. In September 2019, the Taiwan Financial Supervisory Commission amended rules to allow banks to store data on overseas cloud servers, as long as Taiwan regulators can obtain information for such operations and maintain the right to execute on-site examinations.
5. Protection of Property Rights
Interests in property are enforced in Taiwan, and it maintains a reliable recording system for mortgages and liens. Taiwan law protects the land use rights of indigenous peoples. Taiwan’s Land Act stipulated that forests, fisheries, hunting grounds, salt fields, mineral deposits, sources of water, and lands lying within fortified and military areas and those adjacent to national frontiers may not be transferred or leased to foreigners. Based on the Ministry of Interior’s (MOI) Operational Regulations for Foreigners to Acquire Land Rights in Taiwan, foreigners coming from countries that provide Taiwan residents the same land rights will be allowed to acquire or set the same rights in Taiwan. In May 2015, the Cadastral Clearance Act was passed to promote better land registration management. As in other investment categories, Taiwan has specific regulations governing property acquisition by PRC investors.
Intellectual Property Rights
Taiwan is not a member of the World Intellectual Property Organization (WIPO), but adheres to key international agreements such as the Berne Convention and the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). Reflecting progress in Taiwan’s IPR legal regime and enforcement, the Office of the U.S. Trade Representative removed Taiwan from the Special 301 Watch List in 2009. The United States continues to monitor a number of IPR issues in Taiwan, including online piracy of copyrighted materials, illegal textbook copying on university campuses, end-user piracy of software, satellite signal theft, corporate trade secret theft, and weak pharmaceutical patent protections. The importation and transshipment of counterfeit products, mainly from the PRC, continues to be a problem. The United States is actively working with Taiwan authorities to address these issues.
Taiwan’s legislature in 2017 passed an amendment to the Pharmaceutical Affairs Act introducing a patent linkage system aiming for better protection of innovative pharmaceuticals, and the implementing regulations were introduced in 2019 to include biologics and biosimilars. Proposed amendments to the Copyright Act, which features 93 amendments and 17 new articles seeking to prevent intellectual property infringement in the digital age, are still under legislative review. The Legislative Yuan has passed articles that would impose two-year criminal penalty or monetary fines up to NTD 500,000 (USD 16,700) for selling pirated TV boxes. In December 2019, the Legislative Yuan passed amendment to the Trade Secrets Act, which would allow prosecutors to issue a confidentiality preservation order over all information received and produced during investigations. Taiwan also passed amendment to the National Intelligence Work Act in 2019 to allow Taiwan’s intelligence agencies to collect information about illegal trade secret theft on behalf of foreign countries. Taiwan’s emphasis on improving its trade secrets protection regime has resulted in not only amendments to the Trade Secrets Act but also a major judicial ruling in favor of a U.S.-based investor over a local firm in a high-profile trade secrets theft case.
Taiwan’s National Police Agency reported that the value of trademark, copyright, and trade secret violation in 2019 totaled NTD 12.1 billion (USD 403 million), 11.3 percent up from the NTD 10.9 billion (USD 360 million) in 2018. Taiwan Customs reported 186 cases, or 111,525 items involving seizures of imported counterfeit branded goods in 2019, with the majority of the violations in footwear, clothing, and pharmaceutical industries. Taiwan prosecutes IP infringement, and imposes up to five years prison time for copyright violations, in addition to monetary fines. Affirmed IP infringement cases by the Prosecutors’ Offices of the District Courts totaled 6,315 cases in 2019, a 10.8 percent decline over the previous year, and nearly 57 percent of the cases were not indicted.
A trademark or patent applicant must file an application with Taiwan’s Intellectual Property Office (TIPO). TIPO normally renders a decision within six months after it receives all supporting documents. If the application is approved, the mark or patent will be published and registered after the applicant pays registration fees within two months upon receiving the approval notice. Taiwan has Patent Prosecution Highway (PPH) agreements with the United States (2011), Japan (2012), Spain (2013), the Republic of Korea (2015), and Poland (2017), with 455 requests to the United States filed in 2019.
In July 2018, TIPO hosted its first hearing for patent invalidation proceedings under the new invalidation mechanism. The hearings are considered a procedural alternative to administrative appeal and are expected to increase efficiency in resolving patent disputes.
Patent holders may request that Taiwan Customs authorities suspend clearance and detain goods suspected of infringing their patent rights. An affected rights holder must submit a written statement detailing the infringement allegation and a security deposit equivalent to the import value. If final judgment confirms that the detained goods have infringed the patentee’s rights, the owner of the detained goods will be responsible for all relevant expenses incurred.
6. Financial Sector
Capital Markets and Portfolio Investment
Taiwan authorities welcome foreign portfolio investment in the Taiwan Stock Exchange (TWSE) and Taipei Stock Exchange, with foreign investment accounting for approximately 40 percent of TWSE capitalization in the past few years. Taiwan allows the establishment of offshore banking, securities, and insurance units to attract a broader investor base. The Financial Supervisory Commission (FSC) utilizes a negative list approach to regulating local banks’ overseas business not involving the conversion of the NTD.
Taiwan’s capital market is mature and active. As of the end of 2019, there were 942 companies listed on the TWSE, with a total market trading volume of USD 882 billion (including transactions of stocks, Taiwan Depository Receipts, exchange traded funds, and warrants). Foreign portfolio investors are not subject to a foreign ownership ceiling, except in certain restricted companies, and are not subject to any ceiling on portfolio investment. The turnover ratio in the TWSE dropped to 73 percent in 2019, likely indicating more investors were willing to hold their positions for longer. Payments and transfers resulting from international trade activities are fully liberalized in Taiwan. A wide range of credit instruments, all allocated on market terms, are available to both domestic- and foreign-invested firms.
Money and Banking System
Taiwan’s banking sector is healthy, tightly regulated, and competitive, with 36 banks servicing the market. The sector’s non-performing loan ratio has remained below 1 percent since 2010, with a sector average of 0.21 in December 2019. Capital-adequacy ratios (CAR) are generally high, and several of Taiwan’s leading commercial lenders are government-controlled, enjoying implicit state guarantees. The sector as a whole had a CAR of 14.07 percent as of December 2019, far above the Basel III regulatory minimum of 10.5 percent required by 2019. Taiwan banks’ liquidity coverage ratio, which was required by Basel III to reach 100 percent by 2019, averaged 139.6 percent in December 2019. Taiwan’s banking system is mostly deposit-funded and has limited exposure to global financial wholesale markets. Regulators have encouraged local banks to expand to overseas markets, especially in Southeast Asia, and to minimize exposure in the PRC. Taiwan Central Bank statistics show that Taiwan banks’ PRC net exposure on an ultimate risk basis reached USD 68.1 billion in the fourth quarter of 2019, trailing the United States’ USD 86.4 billion. Taiwan’s largest bank in terms of assets is the wholly state-owned Bank of Taiwan, which had USD 171 billion of assets as of December 2019. Taiwan’s eight state-controlled banks (excluding the Taiwan Export and Import Bank) jointly held nearly USD 820 billion, or 48 percent of the banking sector’s total assets.
Foreign Exchange and Remittances
The Taiwan Central Bank operates as an independent agency and state-owned company under the Executive Yuan, free from political interference. The Central Bank’s mandates are to maintain financial stability, develop Taiwan’s banking business, guard the stability of the NTD’s external and internal value, and promote economic growth within the scope of the three aforementioned goals.
Foreign banks are allowed to operate in Taiwan as branches and foreign-owned subsidiaries, but financial regulators require foreign bank branches to limit their customer base to large corporate clients. To promote the asset management business in Taiwan, starting in May 2015, foreigners holding a valid visa entering Taiwan have been allowed to open an NTD account with local banks with passports and an ID number issued by the immigration office, replacing the previous dual-identification (passport and resident card) requirements. Please refer to the Taiwan Bankers’ Association’s webpage: for detailed information regarding various types of bank services (credit card, loans, etc.) for foreigners in Taiwan.
There are few restrictions in place in Taiwan on converting or transferring direct investment funds. Foreign investors with approved investments can readily obtain foreign exchange from designated banks. The remittance of capital invested in Taiwan must be reported in advance to the Investment Commission, but the Commission’s approval is not required. Funds can be freely converted into major world currencies for remittance, but in order to retain funds in Taiwan they must be held in currency denominations offered by banks. In addition to commonly used U.S. dollar, euro, and Japanese yen-denominated deposit accounts, most Taiwan banks offer up to 15 foreign currency denominations. The exchange rate is based on the market rate offered by each bank. The NTD fluctuates under a managed float system.
There are no restrictions on remittances deriving from approved direct investment and portfolio investment. No prior approval is required if the cumulative amount of inward or outward remittances does not exceed the annual limit of USD 5 million for an individual or USD 50 million for a corporate entity. Declared earnings, capital gains, dividends, royalties, management fees, and other returns on investment may be repatriated at any time. For large transactions requiring the exchange of NTD into foreign currency that could potentially disrupt Taiwan’s foreign exchange market, the Taiwan Central Bank may require the transaction to be scheduled over several days. There is no written guideline on the size of such transactions, but according to law firms servicing foreign investors, amounts in excess of USD 100 million may be affected. Capital movements arising from trade in merchandise and services, as well as from debt servicing, are not restricted. No prior approval is required for movement of foreign currency funds not involving conversion between NTD and foreign currency.
Sovereign Wealth Funds
Taiwan does not have a sovereign wealth fund. Taiwania Capital Management Company, a partially government-funded investment company, was established in October 2017 to help promote investment in innovative and other target industries. In December 2018, Taiwania raised USD 350 million for two funds investing in IOT and biotech industries.
7. State-Owned Enterprises
According to the NDC, there are 17 SOEs with stakes by the central authorities exceeding 50 percent, including official agencies such as the Taiwan Central Bank. Please refer to the list of all central government, majority-owned SOEs available online at . Some existing SOEs are large in scale and exert significant influence in their industries, especially monopolies such as Taiwan Power (Taipower) and Taiwan Water. MOEA has stated that Taipower’s privatization will not take place in the near future but plans to restructure it as a new holding company under Electricity Industry Act revisions passed in January 2017 that will gradually liberalize power generation and distribution. CPC Corporation (formerly China Petroleum Corporation) controls over 70 percent of Taiwan’s gasoline retail market. In August 2014, the Aerospace Industrial Development Corporation (AIDC) was successfully privatized through a public listing on the TWSE, and MOEA’s stake in AIDC declined to 35.2 percent by the end of 2019. The Labor Insurance Bureau ceased to be an SOE in 2014 but remained under the Ministry of Labor (MOL). Taiwan authorities retain control over some SOEs that were privatized, including through managing appointments to boards of directors. These enterprises include Chunghwa Telecom, China Steel, China Airlines, Taiwan Fertilizer, Taiwan Salt, CSBC Corporation (shipbuilding), Yang Ming Marine Transportation, and eight public banks.
In 2018 (latest data available), the 17 SOEs together had net income of NTD 347 billion (USD 11.6 billion), up 1.5 percent from the NTD 342 billion (USD 11.4 billion) in 2017. The SOEs’ average return on equities continued to decline from a recent peak of 11.13 percent in 2015 to 9.83 percent in 2018. These 17 SOEs employed a total of 118,359 workers.
Taiwan has not adopted the OECD Guidelines on Corporate Governance for SOEs. In Taiwan, SOEs are defined as public enterprises in which the government owns more than 50 percent of shares. Public enterprises with less than a 50 percent government stake are not subject to Legislative Yuan supervision, but authorities may retain managerial control through senior management appointments, which may change with each administration. Public enterprises owned by local governments exist primarily in the public transportation sector, such as regional bus and subway services. Each SOE operates under the authority of the supervising ministry, and government-appointed directors should hold more than one-fifth of an SOE’s board seats. The Executive Yuan, the Ministry of Finance, and MOEA have criteria in place for selecting individuals for senior management positions. Each SOE has a board of directors, and some SOEs have independent directors and union representatives sitting on the board.
Taiwan acceded to the WTO’s Agreement on Government Procurement (GPA) in 2009. Taiwan’s central and local government entities, as well as SOEs, are now all covered by the GPA. Except for state monopolies, SOEs compete directly with private companies. SOEs’ purchases of goods or services are regulated by the Government Procurement Act and are open to private and foreign companies via public tender. Private companies in Taiwan have the same access to financing as SOEs. Taiwan banks are generally willing to extend loans to enterprises meeting credit requirements. SOEs are subject to the same tax obligations as private enterprises and are regulated by the Fair Trade Act as private enterprises. The Legislative Yuan reviews SOEs’ budgets each year.
There are no privatization programs in progress. Taiwan’s most recent privatization, of AIDC in 2014, included imposition of a foreign ownership ceiling of 10 percent due to the sensitive nature of the defense sector. In August 2017, Taiwan authorities identified CPC Corporation, Taipower Company, and Taiwan Sugar as their next privatization targets. Following passage of the Electricity Industry Act amendments in January 2017, the authorities planned to submit a Taipower privatization plan within six to nine years after successfully separating Taipower’s power distribution/sales business from its power generation business.
8. Responsible Business Conduct
The Taiwan public has high expectations for and is sensitive to responsible business conduct (RBC), in part due to concerns about such issues as food safety and environmental pollution. Taiwan authorities actively promote RBC. MOEA and the FSC have issued guidelines on ethical standards and internal control mechanisms to urge businesses to take responsibility for the impact of their activities on the environment, consumers, employees, and communities. MOEA maintains an online newsletter to publicize best practices and raise awareness of the latest RBC-related developments in Taiwan and abroad. The Taiwan Stock Exchange conducts an annual review of corporate governance performance of all publicly listed companies.
Taiwan authorities place a high priority in addressing and promoting socially responsible investment. In 2015, the authorities mandated that publicly listed companies with more than NTD 10 billion (USD 333 million) in capital and firms with direct impact on consumers such as food processing, restaurants, chemicals, and financial prepare annual social responsibility reports. Starting in 2017, the capital threshold for mandatory reporting was lowered to NTD 5 billion (USD 167 million). More than 500 of the TWSE’s 907 listed companies have issued annual social responsibility reports. To promote more profit-sharing with employees, Taiwan’s Securities and Futures Act mandates that all publicly listed companies establish a compensation committee. In November 2018, the Act was amended to mandate all publicly listed companies disclose average employee compensation and wage adjustment information. In addition to the Taiwan Top Salary 100 index and the Taiwan Corporate Governance 100 index that were respectively launched in 2014 and 2015, Taiwan Index Plus, an indexing subsidiary under the TWSE, together with FTSE Russel in December 2017 launched the FTSE4Good TIP Taiwan ESG Index, to help investors integrate environmental, social and governance (ESG) considerations into their portfolios.
In response to food safety and environmental protection problems, Taiwan authorities have imposed stricter monetary penalties on violators and launched a registration platform for food industry suppliers to track food ingredients used in the industry’s production chain. Taiwan authorities encourage Taiwan firms to adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and many Taiwan listed companies have voluntarily enclosed conflict minerals free statement in their annual social responsibility reports. In 2019, 15 Taiwan companies were included in the Dow Jones Sustainability World Index. Taiwan does not participate in the Extractive Industries Transparency Initiative.
Taiwan has implemented laws, regulations, and penalties to combat corruption, including in public procurement. The Act on Property-Declaration by Public Servants mandates annual properties declaration for senior public services officials and their immediate family members. In 2019, there were 59 violations found by the Control Yuan and a total of USD 480 thousand of fines were imposed. The Corruption Punishment Statute and Criminal Code contain specific penalties for corrupt activities, including maximum jail sentences of life in prison and a maximum fine of up to NTD 100 million (USD 3.3 million). Laws provide for increased penalties for public officials who fail to explain the origins of suspicious assets or property. The Government Procurement Act and the Act on Recusal of Public Servants Due to Conflict of Interest both forbid an incumbent and former procurement personnel and their relatives from engaging in related procurement activities. Although not a UN member, Taiwan voluntarily adheres to the UN Convention against Corruption and published its first country report in March 2018.
Guidance titled Ethical Corporate Management Best Practice Principles for all publicly listed companies was revised in November 2014. It asks publicly listed companies to establish an internal code of conduct and corruption-prevention measures for activities undertaken with government employees, politicians, and other private sector stakeholders. The Ministry of Justice is drafting a Whistle Blowers Protection Act aiming to effectively combat illegal behaviors in both government agencies and the private sector. The Anti-money Laundering Act implemented June 2017 requires the mandatory reporting of financial transactions by individuals listed in the Standards for Determining the Scope of Politically Exposed Persons Entrusted with Prominent Public Function, Their Family Members and Close Associates, and by the first-degree lineal relatives by blood or by marriage; siblings, spouse and his/her siblings, and the domestic partner equivalent to spouse of these politically exposed individuals. The U.S. government is not aware of cases where bribes have been solicited for foreign investment approval.
Resources to Report Corruption
Agency Against Corruption, Ministry of Justice
Overall Planning Division
No. 318, 2nd floor, Song-jiang Road, Taipei
Transparency International Taiwan
Dr. YEH, I Jan
TI Chinese Taipei
5F, No.111 Mu-Cha Road, Section 1
Taipei, Taiwan 11645
10. Political and Security Environment
Taiwan is a young and vibrant multi-party democracy. The transitions of power in both local and presidential elections have been peaceful and orderly. There are no recent examples of politically motivated damage to foreign investment.
11. Labor Policies and Practices
Against a strong domestic economic rebound, Taiwan’s unemployment rate in 2019 edged up to 3.73 percent, while the unemployment rate for people aged between 15 and 24 years also rose from 11.5 percent in 2018 to 11.9 percent. MOI data show that 47 percent of Taiwan’s population aged above 15 years is at least college-educated. An official labor force survey indicated that atypical employment has hit 819,000 in 2019, and among the 819,000 atypical workers, 278,000 had at least college education.
The size of Taiwan’s labor force is decreasing as the society ages. Taiwan transitioned from an “aging society” to an “aged society” in 2018. In 2019, 15.3 percent of its population are 65 years old or above, up from 10.6 percent in 2009. Taiwan’s total fertility rate in 2018 was 1.06, remaining one of the lowest in the world. As of December 2019, there were 718,058 foreign laborers in Taiwan, of which 456,601 were working in the industrial sector. The Labor Standard Act and the Act of Gender Equality in Employment are universally applied to both domestic and foreign workers, with the exception that domestic foreign helpers are not covered by the Labor Standard Act.
Taiwan Ministry of Labor (MOL) data indicated that, while labor shortage rates remained stable at around 3 percent in the manufacturing industry, the rates have been increasing over past few years in services industries such as food and accommodation, information and communication, art and entertainment, recreation, and real estate activities. Industry groups have long claimed that a lack of blue-collar workers is one of the major issues facing manufacturers operating in Taiwan and have urged the authorities to increase the ceiling on foreign workers. To attract Taiwan businesses to relocate back to Taiwan, Taiwan authorities lifted foreign workers ceiling for specific industries, but the foreign workers ceiling across the board remained at 40 percent of total employees. Taiwan businesses are also urging the authorities to ease work visa requirements to recruit foreign professionals, especially the skilled white-collar labor in the information technology sector. However, Taiwan’s low wage growth compared with neighboring economies poses a challenge for talent recruitment and retention. Taiwan issued 31,125 working permits to foreign professionals in 2019, and 23.5 percent of them were from Japan, followed by 13.5 percent from Malaysia, and 11.8 percent from the United States. 21.7 percent of foreign professionals work in the manufacturing industry. Taiwan authorities sponsor training and certificate programs for college graduates to increase the talent pool for the manufacturing industry.
Private companies are not subject to rules requiring the hiring of nationals. Employers may institute unpaid leave with employees’ consent but must notify the labor authorities and continue to make health insurance, labor insurance, and pension contributions. Taiwan provides unemployment relief based on the Employment Insurance Law, vocational training allowances for jobless persons, and employment subsidies to encourage hiring. Labor laws are not waived in order to attract or retain investment.
Labor unions have become more active in Taiwan over the past decade, and the Collective Agreement Act outlines the negotiation mechanism for collective bargaining in order to protect labor’s interests in the negotiations. The number of effective collective bargaining agreements increased from 723 in 2018 to 772 in 2019, mainly due to an increase of such agreements with corporate unions. If a proposal is refused, a union may submit an application for arbitration to the MOL’s Committee for Dispute Resolution for Unfair Labor Practices. Taiwan has labor dispute resolution mechanisms in operation at all levels of labor, and the number of dispute cases filed slightly dropped 26,649 in 2018 to 26,435 in 2019, with disputes over wages accounting for more than 40 percent of total dispute cases. Taiwan also introduced an arbitration mechanism in 2011 to preempt disputes through a professional and neutral mediation system.
Labor relations in Taiwan are generally harmonious. Although Taiwan is not a member of the International Labor Organization (ILO), it adheres to ILO conventions on the protection of workers’ rights. Taiwan law, including related regulations and statutory instruments, protects the right to join independent unions, conduct legal strikes, and bargain collectively. Taiwan’s labor authorities have announced the increasing frequency and coverage of labor inspections. A new Labor Incident Act took effect in January 2020 mandates the establishment of special labor courts, which would help improve labor right through accelerated dispute resolution and reduced financial cost for labor filing employment lawsuits.
Improving labor welfare is the one of the core themes pursued by the current Tsai administration. Minimum monthly wage has been raised since 2017 to NTD 23,800 (USD 793) in 2020. MOL is also drafting a bill aiming to replace the current annual minimum wage review panel with a Minimum Wage Act. In March 2018, Taiwan amended the Labor Standard Act to address foreign investor community’s concerns over rules governing rest days, overtime work, and overtime pay. In December 2019, the Middle-aged and Elderly Employment Promotion Act was passed to promote employment opportunities for employees aged above 45 years, but the effective implementation date has yet to be announced.
There have been strikes in the aviation industry since 2016. During the Lunar New Year peak travel week in 2019, pilots at the state-controlled flag carrier China Airlines, of which Taiwan government owns a 35 percent stake, launched a 160-hour strike. In June, flight attendants at Taiwan’s second largest airline Eva Air also launched a 488-hour strike when the peak summer travel season started. Under public pressure, the Ministry of Transportation and Communications proposed a draft amendment to MOL, suggesting MOL stipulate a seven-to-ten-day notice requirement if any union, particularly in the transportation industry, plans to strike.
Link to the U.S. Department of State Human Rights Report on Taiwan: https://www.state.gov/reports/2019-country-reports-on-human-rights-practices/taiwan/
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
* Source for Host Country Data: GDP: Directorate General of Budget, Accounting, and Statistics; FDI: Investment Commission, Ministry of Economic Affairs
Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.
14. Contact for More Information
Deputy Chief, Economic Section, American Institute in Taiwan
100 Jinhu Road, Taipei, Taiwan