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’ 9th largest trading partner in 2020. An export-dependent economy of 23 million people with a highly skilled workforce, Taiwan is also a critical 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 a monthly interagency 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 authorities launched a reshoring initiative 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 and to diversify risks.
Taiwan’s finance, wholesale and retail, and electronics sectors remain top targets of inward FDI. 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 2019, according to U.S. Department of Commerce data, the total stock of U.S. FDI in Taiwan reached USD 17.3 billion. U.S. services exports to Taiwan totaled USD 8.9 billion in 2020. Leading services exports from the United States to Taiwan were intellectual property, transport, and financial services.
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, and 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 the use of Liquified Natural Gas (LNG) and renewables.
Taiwan is at the center of regional high-technology supply chains due to its dominant role in the international technology supply chain with its advanced R&D capability in developing products for emerging technologies such as semiconductor, 5G telecommunication, AI, and the Internet of Things (IoT.) Taiwan authorities have been actively launching initiatives for partnerships with foreign investors in fostering a resilient production network in the region. 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.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2020||28 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2020||15 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||N/A||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||USD17,353||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||N/A||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Promoting inward FDI has been an important policy goal for the Taiwan authorities because of Taiwan’s self-imposed public debt ceiling limiting public spending and its low levels of private investment. Despite the global economic recession caused by the COVID-19 pandemic, Taiwan’s domestic private investment continued to rise by 5.0 percent in 2020 due to increased reshoring investment by overseas Taiwan companies since late 2018. Taiwan has pursued various measures to attract FDI from both foreign companies and Taiwan firms operating overseas. A network of science and industrial parks, technology industrial zones, and free trade zones aim to expand trade and investment opportunities by granting tax incentives, tariff exemptions, low-interest loans, and other favorable terms. Incentives tend to be more prevalent for investment in the manufacturing sector.
In January 2019, Taiwan launched a reshoring incentive program to attract Taiwan firms operating in the PRC to return to Taiwan and has received favorable responses from Information Communication Technology (ICT) manufacturers. The Ministry of Economic Affairs (MOEA) Department of Investment Services (DOIS) Invest in Taiwan Center serves as Taiwan’s investment promotion agency and provides streamlined procedures for foreign investors, including single-window services and employee recruitment. For investments over New Taiwan Dollar (NTD) 500 million (USD 17.6 million), authorities will assign a dedicated project manager to the investment process. DOIS services are available to all foreign investors. The Centre’s website contains an online investment aid system (https://investtaiwan.nat.gov.tw/smartIndexPage?lang=eng) to help investors retrieve all the required application forms based on various investment criteria and types. Taiwan also passed the Foreign Talent Retention Act to attract foreign professionals with a relaxed visa and work permit issuance process and tax incentives. In the past two years, over 2000 foreigners have received the Taiwan Employment Gold Card, which is a government initiative to attract highly skilled foreign talent to Taiwan (https://goldcard.nat.gov.tw/en/). The MOEA is drafting a proposed amendment to the Statute for Investment by Foreign Nationals, which would replace the existing pre-approval investment review process with an ex-post reporting mechanism and strengthen screening of investment in industries of national security concerns.
Taiwan maintains a negative list of industries closed to foreign investment because the authorities assert relate to national security and environmental protection, including public utilities, power distribution, natural gas, postal service, telecommunications, mass media, and air and sea transportation. These sectors constitute less than one percent of the production value of Taiwan’s manufacturing sector and less than five percent of the services sector. Railway transport, freight transport by small trucks, pesticide manufactures, real estate development, brokerage, leasing, and trading are open to foreign investment. The negative list of investment sectors, last updated in February 2018, is available at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=ZYi4SMROrBA=.
The Taiwan authorities have been actively promoting the “5+2 Innovative Industries” and six strategic industries development program to accelerate industrial transformation that would boost domestic demand and external market expansion. Target industries include smart machinery, biomedicine, IoT, green energy, national defense, advanced agriculture, circular economy, and semiconductors, among other key sectors. Taiwan authorities also offer subsidies for the research and development expenses for Taiwan-foreign partnership projects. The central authorities take a cautious approach to approving foreign investment in innovative industries that utilize new and potentially disruptive business models, such as the sharing economy.
The American Chamber of Commerce in Taiwan (AmCham Taiwan) meets regularly with Taiwan agencies such as the National Development Council (NDC) to promote the resolution of concerns highlighted in the AmCham Taiwan’s annual White Paper. The authorities also regularly meet with other foreign business groups. Some U.S. investors have expressed concerns about a lack of transparency, consistency, and predictability in the investment review process, particularly regarding private equity investment transactions. Current guidelines on foreign investment state that those private equity investors seeking to acquire companies in “important industries” must provide, for example, a detailed description of the investor’s long-term operational commitment, relisting choices, and the investment’s impact on competition within the sector. U.S. investors have claimed to experience lengthy review periods for private equity transactions and redundant inquiries from the MOEA Investment Commission and its constituent agencies. Some report that public hearings convened by Taiwan regulatory agencies about specific private equity transactions have appeared to advance opposition to private equity rather than foster transparent dialogue. Private equity transactions and other previously approved investments have, in the past, attracted Legislative Yuan scrutiny, including committee-level resolutions opposing specific transactions.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign entities are entitled to establish and own business enterprises and engage in all forms of remunerative activity as local firms unless otherwise specified in relevant regulations. Taiwan sets foreign ownership limits in certain industries, such as a 60 percent limit on foreign ownership of wireless and fixed-line telecommunications firms, including a direct foreign investment limit of 49 percent in that sector. State-controlled Chunghwa Telecom, which controls 97 percent of the fixed-line telecom market, maintains a 49 percent limit on direct foreign investment and a 55 percent limit on overall foreign investment, including indirect ownership. There is a 20 percent limit on foreign direct investment in cable television broadcasting services, and foreign ownership of up to 60 percent is allowed through indirect investment via a Taiwan entity. In practice, however, this kind of investment is subject to heightened regulatory and political scrutiny. In addition, there is a foreign ownership limit of 49.99 percent for satellite television broadcasting services and piped distribution of natural gas and a 49 percent limit for high-speed rail services. The foreign ownership cap on airport ground services firms, air-catering companies, aviation transportation businesses (airlines), and general aviation businesses (commercial helicopters and business jet planes) is less than 50 percent, with a separate limit of 25 percent for any single foreign investor. Foreign investment in Taiwan-flagged merchant shipping services is limited to 50 percent for Taiwan shipping companies operating international routes.
Taiwan has opened more than two-thirds of its aggregate industrial categories to PRC investors, with 97 percent of manufacturing sub-sectors and 51 percent of construction and services sub-sectors open to PRC capital. PRC nationals are prohibited from serving as chief executive officer in a Taiwan company, although a PRC board member may retain management control rights. The Taiwan authorities regard PRC investment in media or advanced technology sectors, such as semiconductors, as a national security concern. The Cross-Strait Agreement on Trade in Services and the Cross-Strait Agreement on Avoidance of Double Taxation and Enhancement of Tax Cooperation were signed in 2013 and 2015, respectively, but have not taken effect. Negotiations on the Agreement on Trade in Goods halted in 2016.
The Investment Commission screens applications for FDI, mergers, and acquisitions. Taiwan authorities claim that 95 percent of investments not subject to the negative list and, with capital less than NTD 500 million (USD 17.6 million), obtain approval at the Investment Commission staff level within two to four days. Investments between NTD 500 million (USD 17.6 million) and NTD 1.5 billion (USD 53 million) in capital take three to five days to screen. The approval authority for these types of transactions rests with the Investment Commission’s executive secretary. For investment in restricted industries, in cases where the investment amount or capital increase exceeds NTD 1.5 billion, or for mergers, acquisitions, and spin-offs, screening takes 10 to 20 days and includes review by relevant supervisory ministries. Final approval rests with the Investment Commission’s executive secretary. Screening for foreign investments involving cross-border mergers and acquisitions or other special situations takes 20-30 days, as these transactions require interagency review and deliberation at the Investment Commission’s monthly meeting.
The screening process provides Taiwan’s regulatory agencies opportunities to attach conditions to investments to mitigate concerns about ownership, structure, or other factors. Screening may also include an assessment of the impact of proposed investments on a sector’s competitive landscape and protection of the rights of local shareholders and employees. Screening is also used to detect investments with unclear funding sources, especially PRC-sourced capital. To ensure monitoring of PRC-sourced investment in line with Taiwan law and public sentiment, Taiwan’s National Security Bureau has participated in every PRC-related investment review meeting regardless of the size of the investment. Blocked deals in recent years have reflected the authorities’ increased focus on national security concerns beyond the negative-list industries. The proposed revisions to the principal investment statute would, if passed, allow the authorities to apply political, social, and cultural sensitivity considerations in their investment review process.
Foreign investors must submit an application form containing the funding plan, business operation plan, entity registration, and documents certifying the inward remittance of investment funds. Applicants and their agents must provide a signed declaration certifying that any PRC investors in a proposed transaction do not hold more than a 30 percent ownership stake and do not retain managerial control of the company. When an investment fails review, an investor may re-apply when the reason for the denial no longer exists. Foreign investors may also petition the regulatory agency that denied approval or may appeal to the Administrative Court.
Other Investment Policy Reviews
Taiwan has been a member of the World Trade Organization (WTO) since 2002. In September 2018, the WTO conducted the fourth review of the trade policies and practices of Taiwan. Related reports and documents are available at: https://www.wto.org/english/tratop_e/tpr_e/tp477_crc_e.htm
MOEA has taken steps to improve the business registration process and has been finalizing amendments to the Company Act to make business registration more efficient. Since 2014, the application review period for company registration has been shortened to two days. Applications for a taxpayer identification number, labor insurance (for companies with five or more employees), national health insurance, and pension plans can be processed at the same time and granted decisions within five to seven business days. Since January 1, 2017, foreign investors’ company registration applications are processed by the MOEA’s Central Region Office.
In recent years, the Taiwan authorities revised rules to improve the business climate for startups. To develop Taiwan into a startup hub in Asia, Taiwan authorities launched an entrepreneur visa program allowing foreign entrepreneurs to remain in Taiwan if they meet one of the following requirements: raise at least NTD 2 million (USD 70,400) in funding; hold patent rights or a professional skills certificate; operate in an incubator or innovation park in Taiwan; win prominent startup or design competitions; or receive grants from Taiwan authorities. Starting from 2019, startup entrepreneurs can use intellectual property (IP) as collateral to obtain bank loans, which applies to foreign investors. In September 2020, the Taiwan authorities proposed a new draft amendment to relax the criteria to attract more foreign professionals working in Taiwan.
By the end of 2020, nearly 2,000 people had obtained the Employment Gold Card, which includes a residency permit for the applicant and his/her immediate relatives (parents, spouse, children), a work permit for three years, an alien resident certificate, and a re-entry permit. More than 30 percent of the recipients were Americans. The Employment Gold Card policy helped alleviate recruiting companies’ liability in work permit applications and associated administrative expenditures.
Further details about business registration process can be found in Invest Taiwan Center’s business one-stop service request website at http://onestop.nat.gov.tw/oss/web/Show/engWorkFlow.do
The Investment Commission website lists the rules, regulations, and required forms for seeking foreign investment approval: https://www.moeaic.gov.tw/businessPub.view?lang=en&op_id_one=1
Approval from the Investment Commission is required for foreign investors before proceeding with business registration. After receiving an approval letter from the Investment Commission, an investor can apply for capital verification and then file an application for a corporate name and proceed with business registration. The new company must register with the Bureau of Labor Insurance and the Bureau of National Health Insurance before recruiting and hiring employees.
For the manufacturing, construction, and mining industries, the MOEA defines small and medium-sized enterprises (SMEs) as companies with less than NTD 80 million (USD 2.8 million) of paid-in capital and fewer than 200 employees. For all other industries, SMEs are defined as having less than NTD 100 million (USD 3.5 million) of paid-in capital and fewer than 100 employees. Taiwan runs a Small and Medium Enterprise Credit Guarantee Fund to help SMEs obtain financing from local banks. Firms established by foreigners in Taiwan may receive a guarantee from the Fund. Taiwan’s National Development Fund has set aside NTD 10 billion (USD 350 million) to invest in SMEs.
The PRC used to be the top destination for Taiwan companies’ overseas investment given the low cost of factors of production there, such as wages and land. With rising trade tensions between the United States and the PRC starting in 2018, the Taiwan authorities have intensified their efforts to assist Taiwan firms to diversify production by either relocating back home or to other markets, including in Southeast Asia. The Tsai administration launched the New Southbound Policy to enhance Taiwan’s economic connection with 18 countries in Southeast Asia, South Asia, and the Pacific. In 2020, Taiwan companies’ investment in the 18 countries totaled USD 2.8 billion. The Taiwan authorities seek investment agreements with these countries to incentivize Taiwan firms’ investment in those markets. Invest in Taiwan provides consultation and loan guarantee services to Taiwan firms operating overseas. Taiwan’s financial regulators have urged Taiwan banks to expand their presence in Southeast Asian economies either by setting up branches or acquiring subsidiaries.
According to the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, all Taiwan individuals, juridical persons, organizations, or other institutions must obtain approval from the Investment Commission to invest in or have any technology-oriented cooperation with the PRC. The Taiwan authorities maintain a negative list for Taiwan firms’ investment and have special rules governing technology cooperation in the PRC. The Taiwan authorities, Taiwan companies, and foreign investors in Taiwan are increasingly vigilant about the threat of IP theft and illegal talent poaching in key strategic industries, such as the semiconductor industry.
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 adopted IFRS 16 in January 2019. Taiwan’s Financial Supervisory Commission has affirmed that Taiwan will begin implementing IFRS 17 in January 2026. 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 primary contact windows for foreign investors before 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. On December 25, 2015, the Taiwan authorities 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 specific 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 hearings and professional consultation 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, and Taiwan ministries’ replies, are posted publicly on the NDC website. In October 2017, the NDC launched a separate policy discussion forum specifically for startups, which can be found online at http://law.ndc.gov.tw/, serving as the central platform to harmonize 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 respective 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 by 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 agreements but is a full member of international economic organizations such as the WTO, APEC, ADB, and Egmont Group. 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 requirements 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 150) to NTD 2,000 (USD 70), 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 a 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. Various 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 labor courts at every level of the court system 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 Statute 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 to 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 to simplify the investment review process. Included is 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 many stakeholders consider too low. 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 certification for different types of investment applications. This document, which was last revised in 2018 and in Chinese only, can be found at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=5dRl9fU97Fk=
In December 2020, Taiwan authorities amended the Regulations Governing the Approval of PRC Investment in Taiwan to ensure the complex structure of foreign investments by investors from the PRC do not circumvent the investment control through any indirect investment structure. The new PRC investment rules introduced stricter criteria for identifying PRC investment through third-area intermediary, expanded the scope of investment subject to the authorities’ approval, and forbid PRC investment with any political or military affiliation.
All foreign investment-related regulations, application forms, and explanatory information can be found on the Investment Commission’s website, at http://run.moeaic.gov.tw/MOEAIC-WEB-SRC/OfimDownloadE.aspx
The Invest in Taiwan Portal also provides other relevant legal information of interest to foreign investors, such as labor, entry and exit regulations, at https://investtaiwan.nat.gov.tw/showPageeng1031003?lang=eng&search=1031003
Competition and Antitrust Laws
Taiwan’s Fair Trade Act was enacted in 1992. Taiwan’s Fair Trade Commission (TFTC) examines business practices that might impede fair competition. Parties may appeal a TFTC decision directly to the High Administrative Court. After the High Administrative Court issues its opinion, either party may file an appeal to the Supreme Administrative Court, which will only review decisions to determine if the lower court failed to apply the law.
Expropriation and Compensation
According to Taiwan law, the authorities may expropriate property whenever it is deemed 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 20 years after establishing the foreign business. Taiwan law requires fair compensation must 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 Singapore, Thailand, Malaysia, India, and Vietnam. 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 town or city mediation committee, 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 has been promoting alternative dispute resolution, one of its judiciary reform goals. 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 a court has granted an application for recognition, 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 a bankrupt debtor’s assets 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 2020, there were 200 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 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 and took effect in 2018 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 https://investtaiwan.nat.gov.tw/showPage?lang=eng&search=1031001 In promotion of 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 tariffs 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, which took effect in 2018 aims to attract foreign professionals through simplified policies regarding work, visa, and residence and increased benefits on retirement, insurance, and tax obligations.
With one prominent counterexample, Taiwan does not mandate any forced localization or performance requirements and does not ask software firms to disclose their source code. In this counterexample, the National Communications Commission prohibited a local telecom carrier from contracting a PRC cloud services company due to concerns over personal data protection. Positive examples of data mobility include new businesses such as Uber and Food Panda and mobile payment firms like Apple Pay, all of which freely transmit data cross-border. The authorities may, subject to strict legal proceedings based on Personal Data Protection Act to examine financial crime data from services providers. 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
Property interests 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, water sources, 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 has established a Patent Act, Trademark Act, Copyright Act, and Trade Secrets Act, and instituted the pharmaceutical patent linkage system in mid-2019. The Intellectual Property Rights Protection Corps of the Criminal Investigation Brigade (CIB), National Police Administration (NPA), receives IP infringing reporting through a toll-free direct line of 0800-016-597; and email: firstname.lastname@example.org. IP infringement cases will be investigated and prosecuted through the Ministry of Justice and be judged by District Courts and the specialized IP Court. Violators of trademark or copyright cases could receive criminal penalties of up to three years; trade secrets cases are subject to penalties of up to 10 years.
Taiwan is a member of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the WTO and the Intellectual Property Rights Experts’ Group (IPEG) of the Asia-Pacific Economic Cooperation (APEC). In addition, Taiwan harmonizes its IPR regulations as much as possible with that from international IP treaties and conventions, including the Paris Convention for the Protection of Industrial Property, The Hague Agreement Concerning the International Registration of Industrial Designs, the European Patent Convention (EPC), the Patent Cooperation Treaty (PCT), and the Bern Convention.
To prepare for joining the Comprehensive and Progressive Agreement for a Trans-Pacific Partnership (CPTPP) in the future, Taiwan has proposed separate draft amendments of the Trademark Act, Patent Act, and Copyright Act. Proposed changes would comply with related rules in CPTPP in which the Trademark Act amendment draft adds criminal punishment on counterfeit labeling, the Patent Act draft grants new-drug patent holder the rights to file infringement litigation, and the Copyright Act draft grants competent authorities legal power to prosecute major copyright infringements without compliant. Those amendments are pending the Executive Yuan’s review.
The Trade Secrets Act amendment, enacted in January 2020, allows a foreign juristic person to file a complaint to initiate prosecution or ia civil suit against alleged trade secrets misappropriation. Additionally, this amendment contains provisions that allowa prosecutor to issue confidentiality orders during investigation proceedings. A person violating a confidentiality order may be sentenced to up to three years and/or be fined up to USD 35,000 (NTD 1 million). Taiwan also passed an amendment to the National Intelligence Work Act in 2019 to allow Taiwan’s intelligence agencies to conduct investigations on persons who illegally obtain trade secrets 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 significant judicial ruling in favor of a U.S.-based investor over a local firm in a high-profile trade secrets theft case.
Taiwan is not listed on the USTR’s Special 301 Report.
For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .
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 45 percent of TWSE capitalization in 2020. 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. At the end of 2020, 948 companies were listed on the TWSE, with a total market trading volume of USD 157.4 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 rose to 126 percent in 2020 as the TWSE Capitalization Weighted Stock Index (TAIEX) soared 23 percent in 2020. Payments and transfers resulting from international trade activities are fully liberalized in Taiwan. A wide range of credit instruments, all allocated on market terms, is available to domestic- and foreign-invested firms alike.
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 0.24 in September 2020. 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 14.1 percent as of September 2020, 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 132.6 percent in September 2020. Taiwan’s banking system is primarily 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 minimize exposure in the PRC. Taiwan Central Bank statistics show that Taiwan banks’ PRC net exposure on an ultimate risk basis was USD 49.8 billion in the third quarter of 2020, trailing the United States’ USD 94.2 billion. Taiwan’s largest bank in terms of assets is the wholly state-owned Bank of Taiwan, which had USD 186.2 billion of assets as of December 2020. Taiwan’s eight state-controlled banks (excluding the Taiwan Export and Import Bank) jointly held nearly USD 912 billion, or 48 percent of the banking sector’s total assets.
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 Exchange and Remittances
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. As a measure to promote the asset management business in Taiwan, since 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. These requirements replaced the previous dual-identification (passport and resident card) requirements. Please refer to the Taiwan Bankers’ Association’s webpage: https://www.ba.org.tw/PublicInformation/BusinessDetail/10?returnurl=%2Ffor 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 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. Prior approval is not 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. According to law firms servicing foreign investors, there is no written guideline on the size of such transactions but amounts more than 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 to move foreign currency funds not involving conversion between NTD and foreign currency.
Sovereign Wealth Funds
Taiwan does not have a sovereign wealth fund, although the American business community has advocated for one. Taiwania Capital Management Company, a partially government-funded investment company, was established in October 2017 to 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, 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 https://ws.ndc.gov.tw/Download.ashx?u=LzAwMS9hZG1pbmlzdHJhdG9yLzEwL3JlbGZpbGUvMC8xMjk1LzM3NGExNjVjLWM5MzAtNDYxZS1iYjViLTA3ODkzYjNlNWVhMi5kb2M%3d&n=M2ZjMzZmMDItZjVjOC00ZjU2LThiMTctZmM3Y2EzMTE1MDRhLmRvYw%3d%3d&icon=..doc Some of these 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 occur 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. The most recent privatization took place in August 2014, when the Aerospace Industrial Development Corporation (AIDC) was successfully privatized through a public listing on the TWSE. Taiwan authorities retain control over some SOEs that were privatized, including 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 Transport Corp., and eight public banks.
In 2019 (latest data available), the 17 SOEs together had a net income of NTD 325 billion (USD 11.2 billion), down 7 percent from the NTD 350 billion (USD 12.1 billion) in 2018. The SOEs’ average return on equities continued to decline from a recent peak of 11.13 percent in 2015 to 8.73 percent in 2019. These 17 SOEs employed a total of 120,198 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. Still, 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 supervising ministry’s authority, 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 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, and 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 the 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 the 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 the corporate governance performance of all publicly listed companies.
Taiwan authorities place a high priority on addressing and promoting socially responsible investment. Taiwan authorities mandated that publicly listed companies with more than NTD 5 billion (USD 180 million) in capital and firms in sectors with direct impact on consumers, such as food processing, restaurants, chemicals, and financial services, etc., prepare annual social responsibility reports. More than 500 of the TWSE’s 907 listed companies have issued annual social responsibility reports, and nearly half of the reports are prepared voluntarily. 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 require all publicly listed companies to disclose average employee compensation and wage adjustment information. In December 2017, Taiwan Index Plus, an indexing subsidiary under the TWSE, together with FTSE Russel launched the FTSE4Good TIP Taiwan ESG Index, which helps investors integrate environmental, social and governance (ESG) considerations into their portfolios. Taiwan Depository & Clearing Corporation, a government-run securities depository of Taiwan, in 2020 launched Taiwan ESG Dashboard to encourage sustainable investing and enhance companies’ performance on ESG issues. Taiwan is ranked the fourth among 12 Asian markets in the Corporate Governance Watch 2020 report, behind only Australia, Hong Kong, and Singapore. There are also independent NGOs and business associations promoting or monitoring RBC in Taiwan.
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 2020, 26 Taiwan companies were included in the Dow Jones Sustainability World Index. Taiwan does not participate in the Extractive Industries Transparency Initiative.
Taiwan has a private security industry. Taiwan is not a signatory of The Montreux Document on Private Military and Security Companies, nor a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA.)
Department of State
Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/);
Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;
North Korea Sanctions & Enforcement Actions Advisory ( https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf ).
Department of Labor
Findings on the Worst forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings );
List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods );
Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab ) and;
Comply Chain ( https://www.dol.gov/ilab/complychain/ ).
Resources to Report Corruption
Agency Against Corruption and Northern Investigation Office
No.166, Bo’ai Rd., Zhongzheng Dist.,, Taipei
Anti-corruption Hotline opens 24 hrs: +886-0800-286-586 https://www.aac.moj.gov.tw/7170/278724/
TI Chinese Taipei, TICT https://www.transparency.org/en/countries/taiwan
TI Chinese Taipei
M513, No.111 Mu-Cha Road, Section 1
Taipei, Taiwan 11645
Taiwan has implemented laws, regulations, and penalties to combat corruption, including in public procurement. The Act on Property Declaration by Public Servants mandates annual property declaration for senior public services officials and their immediate family members. In 2020, the Control Yuan found 44 violations found and imposed a total of USD 397,000 in fines. 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 3.5 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 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 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 a spouse of these politically exposed individuals. The U.S. government is not aware of cases where bribes have been solicited for foreign investment approval. 10. Political and Security Environment
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
11. Labor Policies and Practices
Affected by the global pandemic, Taiwan’s unemployment rate in 2020 edged up to 3.85 percent, while the unemployment rate for people aged between 15 and 24 years slightly decreased from 11.9 percent in 2019 to 11.6 percent in 2020. Ministry of Interior (MOI) data show that 52.8 percent of Taiwan’s population aged above 15 years is at least college-educated. An official labor force survey indicated that atypical employment had hit 799,000 in 2020, accounting for 7 percent of employment.
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 2020, 15.8 percent of its population were 65 years old or above, up from 10.6 percent in 2009. Taiwan’s total fertility rate, already one of the lowest in the world, dipped to 0.99 in 2020, marking the first time it went under one. As of December 2020, there were 709,123 foreign laborers in Taiwan, of which 457,276 worked 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 foreign domestic 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 the past few years in service industries such as food and accommodation, information and communication, arts 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. Taiwan authorities lifted the foreign worker ceiling for specific industries to attract Taiwan businesses to relocate back to Taiwan. However, the foreign worker ceiling across the board remained at 40 percent of total employees. Taiwan businesses consistently urge 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 36,852 working permits to foreign professionals in 2020, 22.4 percent of whom were from Japan, followed by 14.2 percent from Malaysia, and 10.3 percent from the United States. Twenty-three (23.0) 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. Due to the global pandemic, 31,816 employees suffered from unpaid leave in 2020. 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 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 to protect labor’s interests in the negotiations. The majority of labor unions exist in the manufacturing sector. The number of effective collective bargaining agreements increased from 772 in 2019 to 821 in 2020, mainly due to increased agreements with corporate unions. The authorities provide financial incentives to enterprise unions to encourage negotiation of “collective agreements” with employers that detail their employees’ immediate labor rights and entitlements. Taiwan has labor dispute resolution mechanisms in operation at all levels of labor. The number of dispute cases filed rose slightly from 22,643 in 2019 to 27,670 in 2020, with disputes over wages accounting for more than 41 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 to protect 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. Since 2019, government incentives for business growth and industrial development have incorporated the labor inspection record as a core evaluating item for the applying entities. Violating employers will not be eligible for tax reduction or grants. 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.
The Tsai administration has made improving labor welfare one of its core priorities. The administration has consistently raised the minimum monthly wage since 2017, bringing it up to NTD 24,000 (USD 850) in 2021. it reached NTD 24,000 (USD 850). In March 2018, Taiwan amended the Labor Standard Act to address the 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 above 45 years of age. However, the effective implementation date has yet to be announced. In January 2020, a new Labor Incident Act was enacted to consolidate the labor elements in various laws. It stipulates clear definitions of labor disputes and establishes the “Labor Professional Court” in the judicial system to handle all labor cases. It further clarifies that the employers, not the laborers, are obliged to provide the burden of proof in wage and hour disputes.
No strikes were initiated/conducted in 2020 due to the serious economic impact of the global pandemic.
Link to the U.S. Department of State Human Rights Report on Taiwan: https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/taiwan/ 12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|Host Country Statistical source*||USG or international statistical source||USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other|
|Host Country Gross Domestic Product (GDP) ($M USD)||2019||$611,255||2018||$608,132||https://unctad.org/en/Pages/statistics.aspx|
|Foreign Direct Investment||Host Country Statistical source*||USG or international statistical source||USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other|
|U.S. FDI in partner country ($M USD, stock positions)||2020||$24,876||2019||$17,353||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Host country’s FDI in the United States ($M USD, stock positions)||2020||$22,159||2019||$11,099||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Total inbound stock of FDI as % host GDP||2020||27.5||2019||16.4||UNCTAD data available at https://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx?sCS_ChosenLang=en|
* 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
14. Contact for More Information
Deputy Chief, Economic Section, American Institute in Taiwan
100 Jinhu Road, Taipei, Taiwan +886-2-2162-2000