Taiwan is a dynamic and fast-growing economy, attracting businesses from around the globe. With its strategic location in Asia, robust infrastructure, and competitive advantages in industries like technology and manufacturing, Taiwan is an ideal place to establish a business. One of the most common forms of business entities for foreign investors is the Limited by Shares Company (also referred to as a “Company Limited by Shares”). This article provides a step-by-step guide to setting up a Limited by Shares Company in Taiwan.
1. Overview of a Limited by Shares Company
A Limited by Shares Company is a legal entity in Taiwan where shareholders’ liability is limited to the capital they have subscribed. This structure is beneficial for businesses seeking investment from multiple shareholders while protecting individual assets. It is similar to a corporation or private limited company in other jurisdictions. The company can issue shares to raise capital, and the ownership of these shares determines control over the company.
2. Advantages of Setting Up a Limited by Shares Company
Some key advantages of a Limited by Shares Company in Taiwan include:
- Limited Liability: Shareholders are only responsible for the company’s debts up to the amount they have invested.
- Separate Legal Entity: The company exists as a separate entity from its shareholders, allowing for perpetual succession and greater flexibility in ownership transfer.
- Shares are freely transferable: Companies have the flexibility to transfer shares to investors to raise funds required for business expansion.
- Foreign Ownership: Taiwan allows full foreign ownership of companies, meaning foreign investors can fully control the business without needing a local partner.
3. Key Requirements for Establishing a Limited by Shares Company
To set up a Limited by Shares Company in Taiwan, the following requirements must be met:
- Minimum Shareholders: At least two individuals’ shareholders or one legal person shareholders are required to form a Limited by Shares Company. Shareholders can be individuals or corporate entities, and there are no nationality restrictions except mainland China.
- Directors: At least one director is required. The directors can be of any nationality except mainland China.
- Supervisors: The law mandates the appointment of at least one supervisor, who is responsible for overseeing the company’s financial matters. The supervisor cannot also be a director or shareholder. However, if the shareholder is a single legal person, there is no need to set up a supervisor.
- Capital Requirement: There is no minimum paid-up capital requirement for most industries. However, in some regulated industries, such as banking or insurance, a higher minimum capital requirement may apply.
- Business Scope: The company’s business scope must be clearly defined when registering. Certain industries may require additional permits or licenses.
- Registered Address: The company must have a registered office in Taiwan. This can be a physical office or a virtual office space.
4. Steps to Set Up a Limited by Shares Company
Here’s a step-by-step process for establishing a Limited by Shares Company in Taiwan:
Step 1: Company Name Reservation
The first step is to choose a name for your company. You must submit an application to the Ministry of Economic Affairs (MOEA) to reserve the company name. The name must be unique and not already in use by another entity in Taiwan.
Step 2: Submit Incorporation Documents to MOEA Investment Commission
Submit company establishment documents to the Investment Committee of the Ministry of Economy to obtain investment permission from foreign investors. The required documents include:
- Company name reservation approval
- Shareholders’ identification documents
- Company’s business plan
- Details of the directors and supervisors
Step 3: Open a Preparatory Bank Account and Deposit Capital
Once the Chinese company name and foreign investor permissions are ready, you will need to open a bank account in Taiwan to deposit the company’s paid-in capital. Although there is no minimum capital requirement for most industries, it is recommended to deposit an appropriate amount based on the company’s operational needs. A capital verification report from an accountant may be required for the incorporation process.
Step 4: Submit Incorporation Documents
Once obtained the foreign investor permissions and remit the company capital. Then submit company establishment documents to Commercial Registry department in the region where the company address is located.
Step 5: Open an Official Corporate Bank Account
Once the company is fully registered, you can proceed to open a corporate bank account to facilitate day-to-day business transactions. This account is separate from the initial capital account and will be used for ongoing business activities.
Step 6: Apply for Tax Registration
After incorporation, the next step is to register for taxes. This includes applying for a business registration certificate and obtaining a tax code. All companies in Taiwan must register for corporate income tax, VAT (Value Added Tax), and other relevant taxes based on the nature of their business.
5. Post-Incorporation Compliance
Once the company is set up, ongoing compliance is essential to ensure smooth operations. Key compliance requirements include:
- Filing of Financial Statements: Taiwan requires companies to file audited financial statements annually. The financial statements must comply with Taiwan’s Generally Accepted Accounting Principles (GAAP).
- Corporate Income Tax Filing: All companies in Taiwan must file annual corporate income tax returns. The corporate tax rate is 20%.
- Business Tax (VAT) Filing: Depending on the company’s business activities, it must file VAT returns either monthly or bi-monthly.
6. Conclusion
Setting up a Limited by Shares Company in Taiwan is a relatively straightforward process, but it involves careful planning and adherence to local regulations. This structure offers significant advantages, including limited liability, capital-raising opportunities, and full foreign ownership. By following the steps outlined above and ensuring compliance with post-incorporation requirements, foreign investors can successfully establish and operate their businesses in Taiwan.
For further assistance with company registration or business advisory in Taiwan, it is recommended to consult with legal and accounting professionals familiar with local regulations to ensure a smooth and compliant setup process.
