In recent years, the Taiwanese government has introduced policies (such as the Entrepreneur Visa and the Employment Gold Card) that aim to increase incentives for foreigners to come to Taiwan to start their own businesses or to recruit high-level international talents. As startup lawyers in Taiwan, we have seen increasing numbers of foreign entrepreneurs and startups landing in Taiwan. Thus, we would like to address 3 frequently asked questions that we believe every foreign entrepreneur must consider before deciding to start a business in Taiwan:
- Which type of company best suits you?
- How does one set up a company?
- How long does it take to set up a company?
Foreigners in Taiwan can set up Companies, Sole Proprietorships, or Partnerships. In this article, we focus on the incorporation of a “company,” which is most frequently inquired by foreigners in practice.
Which type of company best suits you?
There are 3 types of companies a foreigner may choose to start:
- Limited Company
- Company Limited by Shares
- Close Company
We will elaborate on the differences between these three types of companies in our next article. For startups, we usually will recommend setting up a Close Company, considering the convenience of company management and the fact that most shareholders will be like-minded partners with the same goals. However, if there is only one founding shareholder, the founder has no choice but to set up a Limited Company under the Company Act.
How does one set up a company?
Before proceeding with the application process, the applicant must confirm that the shareholders are of non-Chinese (People’s Republic of China) nationality, as the “Statute for Investment by Foreign Nationals” only applies to non-PRC individuals. PRC nationals must follow the “Measures Governing Investment Permit to the People of Mainland Area.”
Secondly, there are certain industries that foreigners may not set up companies in, such as radio broadcasting, power transmission and distribution, etc. Hence, it is suggested the applicant ensures that the business they want to carry out in Taiwan does not fall within that prohibited/restricted scope.
After confirming the above two considerations, the applicant may then proceed with the application for setting up a company by following these steps.
- Company name and pre-check. The applicant has to pick up a few names for the company and submit them to the governmental agency for a quick check. If a name has not been taken by other existing companies, the governmental agency will allow the applicant to reserve the name for your company for 6 months after the approval. In the name reservation process, the applicant must also list the category their business falls under and confirm whether any other special approval is required for carrying out such business.
- Applying for approval from the Investment Commission (IC) of the Ministry of Economic Affairs. The applicant must submit an investment application and attach their investment plan (detailing intended business categories, business plan, investment amount, etc.). The applicant must also provide identification documents of the initial shareholders and directors of the company to the IC.
- Opening a bank account. While waiting for approval from the IC, the applicant may open a corporate bank for their company preparatory office. This preparatory office’s bank account will be used to receive investment funds from abroad after the IC approval is granted.
- Wire transferring the investment amount. Upon receipt of approval from the IC, the applicant may then wire transfer the investment fund to the preparatory office’s bank account. The bank will provide the documents required for the next step (e.g., inward remittance advice and exchange memo).
- Verifying your investment with the IC. The applicant must fill out an investment verification application and attach the required documents so that the IC can verify that the shareholders have actually made the investment.
- Company registration. Fill out the application form to complete the process of registering your company.
How long does it take to set up a company?
It usually takes two to three months to complete the whole process, from name reservation to the completion of the company registration. Based on our experiences, a foreigner is most likely to encounter obstacles during two of the above steps: 2) Applying for approval from the IC and 3) opening a bank account. Common issues include gaps in local banks’ KYC (know-your-customer) process; investment plans changing in the middle of the application process (this could mean that the applicant may need to re-submit the whole application); investment funds being delayed, etc.
Given such, we strongly encourage startup founders to consult a lawyer or accountant before they set up a company so they can plan thoroughly and be prepared from the very beginning. Lawyers and accountants can facilitate the founder’s communication with the IC and provide services such as ownership and article of incorporation planning so that the founders can sail through the process of company registration and swiftly begin their startup journey in Taiwan.
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