Taiwan investment strategies for Korean companies

By Jacqueline Fu and Lin Yoting, K&L Gates
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Taiwan’s economy has been resilient through the covid-19 pandemic, ranked as the 21st-largest economy in the world by gross domestic product based on the data collected by the International Monetary Fund. In light of its business agility, professional talent cultivation and technology innovation, Taiwan is ranked sixth-best in world competitiveness in the World Competitiveness Booklet 2023 released by the International Institute for Management Development. In addition, considering the undercurrent of international relations and implementation of sanctions as part of the technology war, the authors have found a growing interest by foreign companies in expanding into Taiwan to build strategic partnerships and reinforce supply chains.

A progressive legal system is also one of Taiwan’s strengths in the investment market. A significant amendment to the Taiwan Company Act took effect in 2018, aiming to increase flexibility in businesses’ operations, create a friendly environment for startups and further align with international practice. Under a regulatory framework that welcomes and promotes foreign direct investment, Taiwan has been considered an ideal destination for overseas investment, evident from increasing inbound investment, reaching a 15-year high of USD13.3 billion in 2022 and soaring by 84% in comparison with 2021.


Jacqueline Fu, K&L Gates
Jacqueline Fu
Managing Partner
K&L Gates
Tel: +886 2 2326 5125
Email: jacqueline.fu@klgates.com

Subsidiary or branch office. The most common ways for a foreign entity to invest in Taiwan include incorporating a new company as its subsidiary, acquiring an existing one, and establishing a branch office. Statistics published by the Department of Investment Review (previously known as the Investment Commission of the Ministry of Economic Affairs of Taiwan (MOEA), indicate that there were about 67,700 cases of inbound foreign investment submitted and approved this year as of July, of which about 2,000 were contributed by Korean enterprises in the form of either investment in setting up a new entity, or into an existing entity.

According to registration records retrieved from the official MOEA website, there are only about 100 branch offices operating actively in Taiwan that were established by Korean corporate entities.

When choosing between a branch office and a subsidiary, the four key factors are illustrated on the page opposite.

Legal forms for a subsidiary. In order of comprehensiveness with respect to the relevant provisions in the above-mentioned act, the two legal forms of subsidiaries commonly invested in by foreign investors are “limited companies” and “companies limited by shares”, under both of which the shareholders’ liabilities are limited to the amount of capital contributed and the total value of the shares subscribed, respectively. Unlike limited companies, which may accept a single member irrespective of identity as a legal or natural person, a company limited by shares should have at least two shareholders or one corporate shareholder. In other words, Korean companies may set up wholly owned subsidiaries in Taiwan.

Limited partnership. A new business form of limited partnership was introduced in 2015, and such legal structure requires at least one general partner managing the operations of the entity, and at least one limited partner playing the role of passive investor. Although the precedents are limited, we have seen foreign investors acting as limited partners, whose liability is limited to the amount of their capital contribution.

On the other hand, in consideration of the fact that the general partners shall be jointly and severally liable for the limited partnership, it is more common to engage a Taiwan management company separate from the group so as to isolate potential risks.


Lin Yoting, K&L Gates in Taipei
Lin Yoting
K&L Gates
Tel: +886 2 2326 5170
Email: Yoting.Lin@klgates.com

Capital and types of contributions. The above-mentioned Taiwan Company Act is the key law governing general corporate matters of Taiwan companies, under which there are two concepts in terms of capitalisation: authorised capital and paid-in capital. The former refers to the maximum amount of capital that the company is allowed to raise, and the latter refers to the aggregate par value or total consideration of shares issued by the company.

The company registration will specify both the authorised capital and the paid-in capital, while only authorised capital should be prescribed in the articles of association of the company.

Except for certain regulated businesses, there is no minimum capital requirement as long as the capital amount is suitable for, and supports, the contemplated business operations of the company.

Other than cash, diverse forms of contribution are recognised under the Taiwan Company Act, including monetary claims held by the investor against the company, and also properties, services, proprietary techniques or know-how that the company requires for its business.

Abolishment of par value requirements. In the past, the Taiwan Company Act mostly prohibited the company from issuing discount shares (except for the subscription to new shares of a public company issued on the exercise of an employee stock option pursuant to the ESOP plan of the company), and fixed the par value of a share at the amount of TWD10 (about 30 US cents), which had long been criticised as a hurdle for startup companies with regard to appealing to potential investors.

The limitation has been gradually relaxed and under the prevailing regulatory framework a company limited by shares is entitled to adopt a system of share issuance either with or without par value.

A company issuing shares with par value no longer faces a fixed number or minimum requirement on the amount of par value. This may ease the difficulty of fundraising by having a lower subscription price or strike price for shares. Nevertheless, companies in Taiwan still tend to issue shares with par value considering the following factors against no-par-value shares. First, for a company with par value, the share subscription proceeds in excess of the par value will be classified as capital reserves, which may be used to distribute dividends.

Second, the registration fee for the increase in capital is calculated based on the paid-in capital, which refers to the aggregate par value (i.e. par value multiplying the number of shares). Therefore, for a company with par value shares, the registration fee is calculated based on the par value multiplying the total number of newly issued and outstanding shares no matter whether the actual subscription price exceeds the par value, while for the company issuing no-par-value shares, the fee will be computed based on the total consideration in exchange of all the shares issued by the company for such a capital increase (i.e. the number of shares multiplying the subscription price).

Classes of shares. The preferences or privileges conferred on the holders of the shares of any class issued with preferred status should be stipulated in the articles of association, including the rights relating to profit sharing (the sequence, amount and ratio of allocation of dividends and the distribution of surplus assets of the company), particular terms pertaining to voting rights (multiple voting rights or veto power over specific matters) and board elections (rights to elect a certain number of seats on the board of directors), and the conversion mechanism for conversion into ordinary shares designed for anti-dilution.

Apart from the above-mentioned privileges, voting rights of preferred shares may be prohibited or otherwise restricted, and it is also a common practice to impose transfer limitations. Such limitations are required to be stipulated in the articles of association, and thus are rather solid in comparison to contractual obligation provided in the shareholder agreement.


Factors Subsidiaries Branch offices
Income tax on dividends Cash dividends distributed from a subsidiary to its parent company subject to withholding tax of 21%, which may be reduced subject to the reciprocity treaty between Korea and Taiwan for avoiding double taxation on certain industries. Withholding tax will not be levied when a branch office remits the profit to its headquarters.
Administrative burden Subsidiaries are required to handle corporate administrative matters including convening annual shareholder meetings and board meetings, composing annual financial statements and submitting annual filing of major shareholder information. There are fewer administrative requirements for branch offices, which reduces time and money spent.
Liability The legal and financial risks of a separate subsidiary with its own balance sheet will be effectively isolated from its parent company. A branch office is not deemed to be a resident or independent legal person separate from the head company, and therefore is normally not qualified to receive subsidies or tax incentives from government authorities. Without independent legal capacity, the liabilities associated with a branch office will be imputed to the head office.
Business flexibility Suitable for enterprises exploring expansion of business into Taiwan. More possibilities of business alliances or financing in terms of the equity interests are available, such as forming a joint venture. Limit enterprises from exploring the expansion of business into Taiwan.


Below, the authors limit the discussion in connection with corporate governance to companies limited by shares only. While certain provisions are required to be stipulated explicitly in the articles or association, the contents of the articles in relation to the following matters can be flexible in substance and in practice.

Board composition, supervisors and meetings. The number of directors should be provided under the articles, regarding which the minimum requirement was abolished by the amendment to the Taiwan Company Act in 2018. It is no longer compulsory to establish a board as the top authority of the company; accordingly, a board comprising at least three directors could be replaced with one or two directors exercising such powers delegated to the board. The articles should also specify the number of supervisors, whose main function is monitoring directors’ improprieties in the interest of the shareholders. The company shall elect at least one supervisor having a domicile within the territory of Taiwan.

The Taiwan Company Act in particular provides much room for corporate autonomy for companies limited by shares organised by a sole corporate shareholder. To establish a straightforward decision-making mechanism, the position of supervisor is not mandatory, and a director delegated by the sole shareholder is entitled to exercise duties and power in lieu of a shareholders’ meeting.

Under a simplified structure, a sole director would be fully authorised to handle all of the matters that used to be decided by the meetings of the board and the shareholders, which is more efficient.

The Taiwan Company Act also provides more accessibility and cost efficiency in terms of methods and procedures for meetings, such as board meetings convened by video-conference. As long as this is specified in the articles, the board could pass the resolutions by written consent based on a unanimous consent for such a method, and shareholders’ meetings could be held either physically or by a visual communication network. Similarly, the shareholder could exercise its voting rights via a proxy, in writing, or by way of electronic transmission.

Profit sharing and remuneration. The frequency of dividend distribution to shareholders shall be specified in the articles. After proper reservations for tax estimates, employee compensation estimates, legal reserves and coverage for losses, the distribution can be made annually, semi-annually or even quarterly.

The Taiwan Company Act does not require the company to specify profit sharing for directors; by contrast, it is mandatory to prescribe profit sharing for employees in the articles even if there will be no employee engagement at the beginning of the business commencement. Nevertheless, the authors have not seen situations where such statutory employee profit sharing has hindered investors from aligning group remuneration policies, since the Taiwan Company Act requires only a fixed amount or fixed ratio without a minimum requirement for the amount or percentage.

Although the articles require provision be made regarding remuneration payable to directors and supervisors, specific figures are not required; normally, indicating a general principle such as typical pay levels adopted by peer companies shall suffice.

Generally speaking, the articles of a Taiwan company set out a basic framework for corporate governance instead of setting out limitations constraining its autonomy.


General process. For a foreign investor to incorporate a Taiwan subsidiary, the central region office of the MOEA, the Department of Investment Review, the commerce office of the relevant local government, and the local municipal tax authorities are the main authorities. The procedures required are broadly as follows:

  1. Pre-inspection and reservation. The name and business items shall be proposed to and approved by the MOEA central office. The application can be submitted online, and the basic information of the applicant and the responsible person of the newly formed entity will be required.
  2. Foreign investment approval application with the Department of Investment Review. The required documentation includes a power of attorney, which must be notarised in its jurisdiction, and application forms where business operation plan and funding plan must be provided. It is mandatory to submit the investor’s identification documents such as certificate of incorporation, a shareholding structure chart and a declaration of the qualifications of the foreign investor.
  3. Bank account opening. To save time, it is advisable to open a bank account for the preparatory office while the Department of Investment Review is reviewing the first filing. Since regulations with respect to anti-money laundering are increasingly stringent in Taiwan, bank account opening has recently become a cumbersome procedure. In general, the bank might request an interview with a representative of the preparatory office in person. So, to ensure a smooth procedure, it is strongly advisable to initiate the discussion with the bank about the requirements earlier, or to delegate a representative who is able to travel to Taiwan easily.
  4. Capitalise the entity. After the bank account is ready, the initial investment shall be remitted from the investor into the company, and be verified by both the Department of Investment Review and a CPA with a written report.
  5. Completion of the business registration and the tax registration. On receipt of the final foreign investment approval, business registration with the commerce office (or the MOEA, if the paid-in capital exceeds TWD500 million, which is about USD17 million), and tax registration with the tax authorities shall be completed in sequence. Required documentation typically includes the articles, consent letters to act as directors/supervisors, a lease agreement and other relevant documents related to the official office to be registered with the authorities. Similar to bank account opening, the tax authorities are entitled to, at their discretion, require that the chairperson appear before them to receive the final tax registration. Therefore, it is recommended to appoint an initial chairman who may visit Taiwan for completing the tax registration.
  6. Filing for company transparency platform. To implement anti-money laundering policies in line with international trends and to enhance corporate information transparency, companies in Taiwan are obligated to submit, via the internet, the basic information of the directors, supervisors, managers and major shareholders holding more than 10% of the issued shares or capital contribution on the “corporate transparency platform” operated by the Taiwan Depository & Clearing Corporation, designated by the MOEA.

Investment commission – foreign investment approval and investors’ identities. Depending on the jurisdiction or nationality of the offshore investor, the incorporation or the acquisition of a Taiwan company will be subject to different requirements and procedures, to be reviewed by the Department of Investment Review.

Offshore investors are primarily divided into two groups – foreign investors and mainland area investors – and the regulations are derived principally from the Statute for Investment by Foreign Nationals and the Statute for Investment by Overseas Chinese, respectively.

The main difference is that for investments by foreign nationals (such as Korean companies), the Department of Investment Review adopts a foreign investment negative list, which means that except for a limited number of industries that prohibit foreign ownership, or which impose maximum foreign ownership, a Korean company may invest in almost all industries in Taiwan. However, please note that investments by mainland area investors are subject to different regulations and, when making an application for investment, a foreign investor such as a Korean company must provide evidence to prove that it is not a defined mainland area investor.

Licences and other government approvals. For a regulated business facing licensing requirements in Taiwan, further approvals from competent authorities will be required before the commencement of the business, or even prior to the incorporation.

For instance, when incorporating a travel agency, one has to deal with matters governed by the Ministry of Transportation and Communications to secure approval for travel agency establishment, completing travel agency registration, obtaining a travel agency licence, and submitting a notification of business commencement. It is advisable to reach out to legal professionals first to arrange the complete process and avoid wasting time and effort.

With respect to mergers and acquisitions, transactions will be further governed by the Business Mergers and Acquisitions Act of Taiwan, the treatment of employees will be subject to the Labour Standards Act, and the combination filing and other requirements under the Fair Trade Act need to be considered if there is an antitrust concern that might impede fair competition. It is strongly advisable to consult with a legal expert at the beginning, when contemplating potential investments.


While the authors have provided a high-level overview of things to consider before investing in Taiwan, it is essential to develop tailor-made plans with seasoned professionals that take specific investment objectives and business operations into account. This will help to ensure a solid foundation is laid before business operations are launched in Taiwan and that, to the extent they can be, all potential risks are mitigated and major legal issues are addressed.

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