Executive Summary

Taiwan, located between Northeast and Southeast Asia, 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 is the United States’ 10th largest trading partner. 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). Official Taiwan statistics estimate 2017 GDP growth may reach two percent, marking a recovery over recent years in step with improving global economic conditions.

Taiwan welcomes and actively courts foreign direct investment (FDI) and partnerships with U.S. and other foreign firms. President Tsai Ing-wen, who was elected in January 2016 and assumed office in May that year, has launched an initiative to promote economic growth by increasing domestic investment and FDI. The effort aims to leverage Taiwan’s strengths in high-technology, manufacturing, and R&D with a focus on targeted sectors, including smart machinery, defense and aerospace, green energy, biotechnology and biopharmaceuticals, and the Internet of Things (IoT). Plans for expanded investment by the central authorities in physical and digital infrastructure across Taiwan complement this investment promotion strategy.

As a relatively open and liberal economy, Taiwan benefits from substantial FDI as well as the management and technical expertise that accompany it. The finance, wholesale and retail, and electronics sectors have been the top targets of inward FDI over the past decade, although Taiwan attracts a wide range of U.S. investors, including in the high-technology, digital, traditional manufacturing, and services sectors. The United States is Taiwan’s second largest single source of FDI after the Netherlands, through which many U.S. companies choose to invest. In 2015, according to U.S. Department of Commerce data, the total stock of U.S. FDI in Taiwan reached USD 15 billion, while U.S. private commercial services exports to Taiwan totaled over USD 12 billion. Taiwan is a major purchaser of U.S. intellectual property (IP), spending nearly USD $5.3 billion on licensing of technology and audiovisual materials in 2015.

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 participation of People’s Republic of China (PRC)-sourced capital. The Taiwan Central Bank retains a currency convertibility policy in which it reserves the right to require large transactions that could impact the foreign exchange market to be scheduled over several days. Taiwan has among the lowest levels of private equity investment in Asia, and U.S. private equity firms have expressed concern about a long-standing lack of transparency and predictability in the investment approvals process, especially in sectors deemed sensitive but that allow foreign ownership. Sharing economy investors have faced obstacles in the form of protections for domestic industries and the absence of implementing regulations for approved investments. Taiwan in late 2016 implemented new rules mandating a 60-day public comment period for draft laws and regulations emanating from regulatory agencies; while welcomed by the U.S. business community, the new rules have not been consistently applied.

Table 1

Measure Year Index / Rank Website Address
TI Corruption Perceptions index 2016 31 of 176 http://www.transparency.org/news/feature/
World Bank’s Doing Business Report “Ease of Doing Business” 2017 11 of 189 doingbusiness.org/rankings
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2016 23,772 Taiwan Ministry of Economic Affairs


World Bank GNI per capita N/A N/A http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

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 that limits public spending and its low levels of domestic private investment, which on average grew only 3.3 percent per year over the last five years. Taiwan has pursued various measures to attract FDI from both foreign companies and Taiwan firms operating overseas. A network of science and industrial parks, export processing 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 traditional manufacturing sector. 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. DOIS services are available to all foreign investors.

Taiwan maintains a negative list of industries closed to foreign investment for reasons 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 is available at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=ZYi4SMROrBA =.

The central authorities take a cautious approach to approving foreign investment in innovative industries that utilize new and potentially disruptive business models, such as in the sharing economy. Investments in the sharing economy have been approved without clear regulatory frameworks in place, generating regulatory and political hurdles for investors and, in one case, targeted legislation regarded as highly punitive.

Some U.S. investors have expressed concerns about a lack of transparency, consistency, and predictability in the investment review process, particularly with regard to transactions involving private equity investment. Current guidelines on foreign investment state that 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 and the investment’s impact on competition within the sector. U.S. investors have experienced lengthy review periods for private equity transactions and redundant inquiries from the MOEA Investment Commission and its constituent agencies. Public hearings convened by Taiwan regulatory agencies about specific private equity transactions often appeared designed to advance opposition to private equity rather than foster transparent dialogue. Private equity transactions and other previously approved investments have 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 direct foreign ownership of wireless and fixed line telecommunications firms, and a 49 percent limit on direct foreign investment 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 indirect foreign investment. 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, although in practice 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 gradually eased restrictions on investments from the PRC since 2009. 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 Service and the Cross-Strait Agreement on Avoidance of Double Taxation and Enhancement of Tax Cooperation were signed in 2013 and 2015, respectively, but are not expected to take effect until the Taiwan authorities and Legislative Yuan pass a new oversight mechanism for cross-Strait agreements. Cross-Strait negotiations on the Agreement on Trade in Goods did not advance 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 New Taiwan Dollars (NTD) 500 million (USD 16.5 million) obtain approval at the Investment Commission staff-level within two to four days. Investments between NTD 500 million and NTD 1.5 billion (USD 49.5 billion) in capital take three to five days to screen, and the approval authority 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 (USD 49.5 billion), or for mergers, acquisitions, and spin-offs, screening takes 10 to 20 days and includes review by relevant supervisory ministries and final approval from 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 has provided Taiwan’s regulatory agencies opportunities to attach conditions to investments in order 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, including 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 investment review meeting since April 2014, regardless of the size of the investment.

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 2014, the WTO conducted the third 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/tp402_e.htm . The Organization for Economic Cooperation and Development (OECD) and United Nations Conference on Trade and Development (UNCTAD) have not conducted investment policy reviews of Taiwan.

Business Facilitation

MOEA has taken steps to improve the business registration process and is expected to propose amendments to the Company Act to make business registration more efficient. Since 2014, the company registration application review period has been shortened to two days, while 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. Starting 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. With the goal of developing Taiwan into a startup hub in Asia, Taiwan launched an entrepreneur visa program allowing foreign entrepreneurs to remain in Taiwan if they raise at least NTD 2 million (USD 66,000) in funding. Taiwan has initiated rules to enable IP rights (IPR) holders to use IP as collateral in obtaining bank loans, and this and other rules apply to foreign investors.

The MOEA operates a Commerce Industrial Services Portal that describes the business registration process: http://gcis.nat.gov.tw/mainNew/English/index.jsp .

Please refer to the “Business in Taiwan” section of the MOEA’s Invest in Taiwan Center website, which provides useful information for foreign investors: http://investtaiwan.nat.gov.tw/homePage?lang=eng .

The Investment Commission website lists the rules, regulations, and required forms for seeking foreign investment approval: http://www.moeaic.gov.tw/ .

Approval from the Investment Commission is required before proceeding with business registration. After receiving an approval letter from the Investment Commission, an investor can apply for capital verification and may 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 it may start 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 2.5 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 3.1 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. Foreign firms may pay a fee to obtain a guarantee from the Fund. Taiwan’s National Development Fund has set aside NTD 10 billion (USD 330 million) to invest in SMEs.

Outward Investment

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. In recent years, however, the authorities have begun assisting Taiwan firms in relocating to lower-cost markets, including in Southeast Asia. Taiwan’s financial regulators have urged Taiwan banks to expand their presence in Southeast Asian economies either by setting up branches or by acquiring subsidiaries. The administration of President Tsai Ing-wen launched the New Southbound Policy to enhance Taiwan’s economic connection with 18 countries in Southeast Asia, South Asia, and the Pacific. The Taiwan authorities seek investment agreements with these countries to incentivize Taiwan firms’ investment in those markets. DOIS provides consultation and loan guarantee services to Taiwan firms operating overseas.

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 in order to invest in or have any technology-oriented cooperation with the PRC. The authorities maintain a negative list for Taiwan firms’ investment in the PRC. The central authorities, Taiwan companies, and foreign investors in Taiwan are increasingly vigilant about the threat of IP theft in key strategic industries, such as the semiconductor industry.

Taiwan does not have a bilateral taxation treaty with the United States. Taiwan has 32 bilateral tax agreements in force, available at on the Ministry of Finance website . agreements with Canada and Poland took effect on January 1, 2017. Taiwan signed a taxation agreement with the PRC in August 2015, but the Agreement has not yet taken effect.

Taiwan has concluded economic cooperation (free trade) agreements with El Salvador, Guatemala, Honduras, Nicaragua, Panama, Singapore, and New Zealand, and has concluded 25 bilateral investment protection agreements, available at https://www.dois.moea.gov.tw/Home/relation1_1_3 ).

Under the Taiwan Relations Act, the terms of the 1948 Friendship, Commerce, and Navigation Treaty between the Republic of China and the United States remain in force. U.S. investors are guaranteed national treatment and are provided a number of protections, including protection against expropriation. Representatives of the United States and Taiwan signed a Trade and Investment Framework Agreement (TIFA) in 1994 to serve as the basis for consultation on trade and investment issues. TIFA discussions were suspended beginning in 2008 in response to Taiwan policies affecting U.S. beef imports, but resumed in 2013.

In July 2016, the Legislative Yuan passed anti-tax avoidance legislation, but the new rules will not take effect until Taiwan and the PRC conclude a prospective Cross-Strait Tax Agreement and Taiwan commits to voluntary adherence of the OECD’s Common Reporting Standard for the automatic exchange of information of financial accounts.

Transparency of the Regulatory System

Taiwan generally maintains transparent regulatory and accounting systems that conform to international standards. Taiwan’s publicly listed companies have adopted the 2013 International Financial Reporting Standards (IFRS). 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.

Draft laws, rules, and orders are published on The Executive Yuan Gazette Online for public comment, at http://gazette.nat.gov.tw/egFront/indexEng.do . 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 that would allow 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. These announcements are also available for public comment on the National Development Commission’s (NDC) 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.

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 such as the Trans-Pacific Partnership, the NDC in March 2016 released a Regulatory Impact Analysis Operational Manual as a guideline for central government agencies, available in Chinese here .

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.

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 LawCommercial Registration LawBusiness Registration Law, and 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 investment-related statutes clarified investment review criteria for mergers and acquisition transactions. Other amendments were proposed in 2015, but were not passed, including one that would replace a pre-investment approval requirement with a post-investment reporting system for investments under a USD 1.0 million threshold. Ex ante approval would still be required for investments in restricted industries and those exceeding the threshold. In 2015, Taiwan authorities ceased consideration of a private equity investment’s impact on capital markets and its resulting thin capitalization as review criteria. The MOEA in October 2016 released a supplementary document to clarify criteria that are listed on the Investment Commission’s Frequently Asked Questions website, located in Chinese only at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=5dRl9fU97Fk= . The Investment Commission is currently drafting amendments to the Statute for Investment by Foreign Nationals to simplify the investment review process.

All foreign investment related regulations, application forms, and explanatory information can be found at Investment Commission’s website, at http://run.moeaic.gov.tw/MOEAIC-WEB-SRC/OfimDownloadC.aspx 

The Invest in Taiwan Portal also provides other relevant information of interest to foreign investors, such as labor, entry and exit regulations, at http://investtaiwan.nat.gov.tw/showPage?lang=eng&search=1031003 

Competition and Anti-Trust Laws

Taiwan’s Fair Trade Act was enacted in 1992. Taiwan’s Fair Trade Commission examines business practices that might impede fair competition.

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 previous or 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.

Dispute Settlement

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.

Bankruptcy Regulations

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. In 2015, there were 162 rulings on bankruptcy petitions.

Investment Incentives

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 Asian 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. For a detailed list of investment incentives programs, please refer to the Invest-in-Taiwan website at http://investtaiwan.nat.gov.tw/showPage?lang=eng&search=1031001 .

Foreign Trade Zones/Free Ports/Trade Facilitation

The first free trade/free port zone began operation in 2004 at Keelung, Taiwan’s northern port. Another four were established in 2005 at Taoyuan International Airport and the international harbors in Kaohsiung, Taichung, and Taipei. In May 2010 and August 2013, the Executive Yuan approved free trade zones at Suao and Anping ports, respectively, bringing total free trade zones in Taiwan to seven. Taiwan 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.

Taiwan seeks to promote the unique advantages its ports offer as hubs for the Asian regional market. In June 2013, the London Metal Exchange (LME) board approved Kaohsiung Port as an 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, citing the Employment Service Act’s Qualifications and Criteria Standards (Article 46.1.1 to 46.1.6), in which hiring requirements depend on a company’s operation history and revenues. In 2014, the authorities lifted the minimum monthly salary requirement for foreigners hired as academic research assistants or who were recent graduates of Taiwan colleges.

In October 2016, the Executive Yuan approved regulations addressing the barriers to the recruitment and retention of foreign professionals. The new rules would aim to simplify the policies related to visas, residence, insurance, naturalization, and retirement for foreign workers in Taiwan. The draft rules underwent a 60-day public comment period that concluded on March 6, 2017. Taiwan does not mandate any forced localization or performance requirements, and does not ask software firms to disclose their source code.

Real Property

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, is also a problem. The United States is actively working with Taiwan authorities to address these issues.

Taiwan took affirmative steps in 2016 toward establishment of a pharmaceutical patent linkage system, which is expected to enhance protection of innovative pharmaceuticals by preventing market approval of generic competitors to patent-protected medicines. In September 2016, the Executive Yuan submitted draft amendments to the Pharmaceutical Affairs Act (PAA) and Patent Law, establishing the legal framework for patent linkage. Additional amendments to the PAA will provide three years of regulatory data protection for new indication drugs. The proposed Patent Law amendments would also strengthen protection for all forms of patents by extending the grace period for filing a patent to 12 months. Separate amendments to the Copyright Act submitted to the Legislative Yuan in September 2016 would provide criminal procedures and penalties in cases of circumvention of the technological protection measures; allow for prosecution with complaint for certain categories of copyright piracy; and provide specific protections for encrypted program-carrying satellite and cable signals, including civil remedies and criminal penalties. A separate set of comprehensive amendments to the Copyright Act is currently pending Executive Yuan review.

Taiwan’s National Police Agency reported that the value of trademark and copyright seizures in 2016 totaled NTD 14.4 billion (USD 432 million), down from the NTD 19.5 billion (USD 630 million) in 2015. Taiwan Customs reported that the number of cases involving seizures of imported counterfeit branded goods declined from 199 cases in 2015 to 169 cases in 2016, with the majority of the violations involving computing, communication, and consumer products. Customs officials attribute the rise in seizures to increased detection of small parcel air freight shipments of counterfeit goods purchased from PRC e-commerce sites. The authorities prosecute IP infringement. Affirmed IP infringement cases by the Prosecutors’ Offices of the District Courts totaled 7,436 cases in 2016, a six percent decline over the previous year.

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’s patent application review period has shortened from an average of 41 months in 2013 to 21 months in 2016, following the implementation of Patent Prosecution Highway (PPH) agreements with the United States, Japan, Spain, and the Republic of Korea in 2011, 2012, 2013, and 2015, respectively, with 1,553 requests to the United States filed by the end of 2016.

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.

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/ .

Capital Markets and Portfolio Investment

Taiwan authorities welcome foreign portfolio investment in the Taiwan Stock Exchange (TWSE) and Taipei Stock Exchange, with foreign investment in 2016 accounting for 38 percent of TWSE capitalization. To add to the offshore banking units that have been in operation since 1983, Taiwan in recent years launched offshore securities and offshore insurance units, aiming to attract a broader investor base. The Financial Supervisory Commission (FSC) has switched to 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 2016, there were 892 companies listed on the TWSE, with total market trading volume of USD 610 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 was down to 64.6 percent in 2016, and regulators have expressed concern about maintaining liquidity in small-cap stocks. 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 39 banks servicing the market. The sector’s non-performing loan ratio has remained below one percent since 2010, with a sector average of 0.28 in December 2016. 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 13.25 percent as of September 2016, 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, already averages about 132.8 percent as of September 2016. Taiwan’s banking system is mostly deposit-funded and has little exposure to global financial wholesale markets. Regulators have encouraged local banks to expand to overseas markets, especially Southeast Asia, and to minimize exposure in the PRC. Taiwan Central Bank statistics show that Taiwan banks’ PRC exposure on an ultimate risk basis steadily declined to USD 57 billion in the third quarter of 2016, after peaking at USD 94 billion in the third quarter of 2014. Taiwan’s largest banks in term of assets are the wholly state-owned Bank of Taiwan, which has USD 154 billion in assets, followed by the state-controlled Taiwan Cooperative Bank, with USD 101 billion in assets. Taiwan’s eight state-controlled banks jointly held nearly USD 710 billion, or 50 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 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.

Foreign Exchange and Remittances

Foreign Exchange

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.

Remittance Policies

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, but has announced plans to establish a USD 330 million quasi-sovereign investment company to promote investment in innovative and other target industries.

Taiwan launched privatization programs in 1989, transforming many SOEs into private industries. 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. 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 it does not intend to privatize Taipower, but plans to restructure it as a new holding company under Electricity Act revisions passed in January 2017 that will gradually liberalize power generation and distribution. Other SOEs such as the CPC Corporation (formerly China Petroleum Corporation) and Taiwan Tobacco and Liquor remained industry giants after their sectors were opened to competition. CPC 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. MOEA holds a 45.7 percent stake in AIDC and intends to lower its stake to 34 percent by 2017. The Labor Insurance Bureau ceased to be an SOE in 2014, but remained under the Ministry of Labor (MOL).

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 sitting on the board.

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, Taiwan Fertilizer, Taiwan Salt, CSBC Corporation (shipbuilding), Yang Ming Marine Transportation, and eight public banks. In February 2017, the Executive Yuan approved amendments to the Statute for Industrial Innovation, now pending legislative approval, to mandate an R&D quota for SOEs.

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.

A list of all central government, majority-owned SOEs can be viewed at: http://www.ndc.gov.tw/cp.aspx?n=62BAE2178539778F&s=79D6E650314D0CB5 

Privatization Program

There are currently no new 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. Taiwan authorities have reportedly identified CPC Corporation, Taipower Company, and Taiwan Sugar as privatization targets. The Enforcement Rules of the Statute of Privatization of Government-Owned Enterprises may be viewed at: http://law.moj.gov.tw/Eng/LawClass/LawContent.aspx?PCODE=J0120045 .

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.

Companies with more than NTD 10 billion (USD 330 million) in capital and firms with direct impact on consumers such as food processing, restaurants, chemicals, and financial services were mandated to prepare annual social responsibility reports as of 2015. According to the TWSE, 77 percent of Taiwan’s top 100 companies have published social responsibility reports, and 30 percent (or 255) of all total listed companies have issued reports. In August 2014, the TWSE launched the Taiwan Top Salary 100 Index, a government effort to promote corporate social responsibility and expand the use of profit-sharing for the benefit of employees. In June 2015, TWSE launched a Taiwan Corporate Governance 100 index. Taiwan Index Plus, an indexing subsidiary under the TWSE, will launch the Taiwan Sustainability 100 Index in 2017.

Taiwan’s Securities and Futures Act mandates that all publicly-listed companies establish a compensation committee. Taiwan Index Plus, an indexing subsidiary under the TWSE, will launch the Taiwan Sustainability 100 Index in 2017.

In response to a series of food safety and environmental protection problems in recent years, 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. 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 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.

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. A Cabinet-level anti-money laundering office, formed in March 2017, announced plans to issue new rules in June 2017 to require the mandatory reporting of financial transactions by individuals with close links to Taiwan politicians. The U.S. government is not aware of cases where bribes have been solicited for foreign investment approval.

UN Anticorruption Convention, OECD Convention on Combating Bribery

Taiwan is not a party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

Agency Against Corruption, Ministry of Justice
Overall Planning Division
No. 318, 2nd floor, Song-jiang Road, Taipei

Transparency International Chinese Taipei


Taiwan is a relatively young and vibrant multi-party democracy. The January 2016 presidential and legislative elections were peaceful and orderly, as was the transition of power between administrations. There are no recent examples of politically motivated damage to foreign investment.

Taiwan’s unemployment rate edged up from 3.78 in 2015 to 3.92 percent in 2016, while the unemployment rate for people aged between 15 and 24 years was 12.12 percent. MOI data show that 44 percent of Taiwan’s population aged above 15 years is at least college-educated, but a MOL survey found that only 21 percent of Taiwan enterprises indicated a college diploma as a prerequisite. The size of Taiwan’s labor force is decreasing as the society ages, with residents over 65 years of age expected to account for 20 percent of the total population by 2025. As of the end of 2016, there were 624,000 foreign blue-collar workers in Taiwan, of which 387,000 were working in the industrial sector. Industry groups claim 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. Skilled white-collar labor, especially in the information technology sector, remains a strength of Taiwan’s talent pool. However, Taiwan’s low wage growth compared with neighboring economies poses a challenge for talent recruitment and retention. 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, and local workers have expressed concern about displacement by lower-cost foreign workers. 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 flexibility is the main reason Taiwan firms hire temporary workers. Financial and logistics industries hire temporary workers for entry-level administrative positions such as customer services representatives, administrative clerks, security guards, and janitors. SOEs also hire contract workers. Companies in specific hardship (i.e., labor-intensive) industries are entitled to a higher foreign labor quota.

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 83 in 2012 to 698 in 2016. 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 authorities accept about 20,000 cases per year. Starting in 2011, an arbitration mechanism was introduced to preempt disputes through a professional and neutral mediation system, which resolved about 97 percent of all cases in 2016.

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 sought to increase the frequency and coverage of labor inspections. MOL has proposed a law that would allow temporary workers to receive the same pay as full-time employees in equal positions.

Taiwan authorities have adopted a series of measures to improve labor welfare, including raising the minimum wage, an executive order requiring a mandatory day off after six days on shift, and annulling the rule requiring migrant workers to return home every three years. In December 2016, amendments to the Labor Standard Act mandated one set rest day and one flexible rest day for all workers over a seven-day period, increased overtime compensation, and established an overtime ceiling. In seeking new revisions, foreign and domestic businesses opposed to the law have cited its lack of clarity, inflexibility, and potential to raise costs.

There were two notable labor disputes in 2016. Employees at Ta Chong Bank in January announced plans to strike in protest over the bank’s sale by its foreign private equity owner to a Taiwan-based financial company, but the new buyer and seller reached agreement before the proposed strike date. On June 24, flight attendants at state-controlled flag carrier China Airlines went on strike for two days to protest new rules on the calculation of work hours, causing the cancellation of 112 flights. In response to the strike, Taiwan authorities appointed a new chairman at China Airlines and agreed to flight attendants’ demands.

Link to the U.S. Department of State Human Rights Report on Taiwan: http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm?year=2016&dlid=265374

Taiwan and the United States have an Overseas Private Investment Corporation (OPIC) agreement. The agreement, signed in 1952, is called the Agreement Dealing with Guaranty of American Investment of Private Capital in Taiwan. There are no active OPIC projects in Taiwan.

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
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2016 529,676 2016 519,150 IMF
Foreign Direct Investment Host Country Statistical Source** USG or International Statistical Source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2016 23,772 2015 15,005 BEA
Host country’s FDI in the United States ($M USD, stock positions) 2016 14,529 2015 6,968 BEA
Total inbound stock of FDI as % host GDP 2016 27.9 2015 14.3 UNCTAD

* Taiwan GDP statistical source: Directorate General of Budget, Accounting, and Statistics (DGBAS).

** Taiwan FDI statistical source: MOEA. Taiwan FDI data reflect approved investments and do not take into account disinvestment.
Table 3: Sources and Destination of FDI

IMF Coordinated Portfolio Investment Survey data are not available for Taiwan.
Table 4: Sources of Portfolio Investment

IMF Coordinated Portfolio Investment Survey data are not available for Taiwan.

Michael Pignatello
Deputy Chief, Economic Section, American Institute in Taiwan
No. 7, Lane 134, Sec. 3, Xinyi Road, Taipei 110659 Taiwan

2017 Investment Climate Statements: Taiwan
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The Lessons of 1989: Freedom and Our Future