As international businesses expand their footprint in Asia, Taiwan remains a strategic hub due to its advanced infrastructure, skilled workforce, and proximity to major regional markets. Many foreign companies initially establish a representative office (RO) in Taiwan to conduct market research and liaise with local partners. However, as operations grow, the limited scope of an RO can restrict commercial activities, prompting companies to consider upgrading to a full Taiwan branch.
This article explores the key considerations, legal steps, and strategic advantages of converting a representative office into a Taiwan branch to unlock broader business potential.
What Is a Representative Office in Taiwan?
A representative office serves as a liaison entity for foreign companies looking to explore the Taiwan market. It is ideal for businesses not yet ready to engage in commercial transactions but interested in conducting research, promotional work, and networking.
Key Characteristics of a Representative Office:
- Cannot generate income or issue local invoices.
- Limited to non-commercial activities (e.g., coordination, market research).
- Not subject to corporate income tax.
- No need for capital injection.
- Cannot sign contracts on behalf of the foreign parent company.
Although establishing an RO is relatively straightforward and low-cost, it offers minimal operational capacity. This becomes a major drawback when the business starts to grow and needs to engage in trade, sign contracts, or hire local staff.
Why Convert to a Taiwan Branch?
A Taiwan branch allows your foreign company to operate as a legal extension within Taiwan. Unlike an RO, a branch can actively conduct business, invoice clients, hire employees, and earn revenue. Transitioning from an RO to a branch is a strategic move that signals business growth and a long-term commitment to the Taiwan market.
Key Benefits of a Taiwan Branch:
- Full commercial rights, including sales and profit-making activities.
- Ability to invoice in New Taiwan Dollars (TWD).
- Legally employ local or foreign staff.
- Access to Taiwan’s tax and banking systems.
- Enhanced credibility with local partners and clients.
Important Considerations Before Transitioning
Before upgrading from an RO to a branch, it’s essential to assess your business needs, compliance requirements, and long-term strategy. Here are some key points to consider:
- Regulatory Requirements
A Taiwan branch is subject to local regulations, including tax filings, business license renewals, and labor laws. Ensure your company is ready for the added administrative responsibilities. - Capital Requirements
While there is no minimum capital requirement for a Taiwan branch, injecting a reasonable amount of working capital is advised to cover operational costs and demonstrate financial readiness. - Tax Implications
A branch is subject to Taiwan’s corporate income tax and must file annual tax returns. Understanding tax exposure, double taxation agreements, and deductible expenses is crucial for compliance and planning. - Business Scope
The intended business activities of the Taiwan branch must be clearly defined and consistent with your foreign company’s scope. Any industry-specific licenses or permits should be obtained prior to commencement.
Step-by-Step Guide: Converting a Representative Office (RO) to a Taiwan Branch
In certain cases, a representative office (RO) in Taiwan may convert its organizational structure directly into a branch of the parent company, provided that the nature of business and company goals now require commercial operations. Below is a recommended roadmap for such a transformation:
Step 1: Internal Evaluation and Approval
- Assess internal business needs for conducting profit-generating activities in Taiwan.
- Obtain the parent company’s board resolution approving the conversion of the RO into a branch office.
- Designate a branch manager (must be an individual; foreign nationals are allowed).
Step 2: Modify Registration with MOEA
- Submit an Application to the Ministry of Economic Affairs (MOEA):
Apply to change the company’s registration type from Representative Office (RO) to Taiwan Branch.
- Provide the Required Documents from the Parent Company:
◦Certificate of Incorporation
◦Articles of Association
◦Board Resolution approving the establishment of the Taiwan branch
- Update Company Registration Details:
Amend company name, business scope, responsible person, office address, and other relevant registration details to reflect the branch status.
[Additional Step] Open Preparatory Bank Account for Taiwan Branch
- After receiving the MOEA Approval Letter for Operating Capital, use this approval to open a preparatory bank account under the name of the Taiwan branch at a local bank.
- The parent company remits the required operating capital into this preparatory account.
- Once the remittance is completed, obtain the following documents from the bank:
◦Foreign exchange settlement documents
◦Bank deposit certificate
- These documents are required for capital verification and final branch registration with MOEA.
Step 3: Tax Registration and Banking
- Complete Capital Verification and Final Registration:
After MOEA approves the capital verification, the Taiwan branch registration will be finalized.
- Register with the National Taxation Bureau (NTB):
◦Apply for a Unified Business Number (UBN)
◦Register for Value-Added Tax (VAT) and Corporate Income Tax
- Convert Bank Account:
Convert the preparatory bank account into a formal operating account under the official Taiwan branch name.
Step 4: Industry-Specific Licenses (If Applicable)
Apply for any special licenses or permits required based on the branch’s business activities (e.g., logistics, travel, etc.).
Step 5: Set Up Accounting, Payroll, and Legal Compliance
- Engage a Local CPA Firm:
Handle accounting setup, bookkeeping, payroll system, and tax filings.
- Register for Labor and Health Insurance (if hiring employees):
◦Labor Insurance
◦National Health Insurance
◦Labor Pension
- Ensure Legal and Labor Compliance:
Comply with Taiwan’s Labor Standards Act, Occupational Safety and Health Act, and relevant labor regulations.
Timeline & Estimated Costs
- Estimated Timeline:
Approximately 2 months (depending on document readiness, bank processing, and MOEA procedures)
- Typical Costs Include:
◦Professional service fees (consulting, CPA, legal)
◦Government fees and licensing charges
◦Translation and notarization of foreign documents (if required)
Conclusion
Upgrading from a representative office to a Taiwan branch is a significant step toward full market participation. It enables foreign companies to tap into Taiwan’s vibrant economy, engage with customers more directly, and expand operations more flexibly. With the right preparation and guidance, the transition can position your business for sustainable growth in the region.
If you’re considering this transition, Premia TNC offers end-to-end support—from regulatory consultation to entity setup and operational launch. Contact us to discuss your goals and get expert.
