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Taiwan, formally the Republic of China (ROC), is an East Asian republic located in the northwestern Pacific Ocean at the confluence of the East and South China Seas, with the People's Republic of China (PRC) to the northwest, Japan to the northeast, and the Philippines to the south. The ROC's holdings include 168 islands with a total size of 36,193 square kilometers (13,974 sq mi). Taiwan's main island, previously known as Formosa, covers 35,808 square kilometers (13,826 square miles), with mountain ranges dominating the eastern two-thirds and plains in the western third, where its densely populated populace is centered. Taipei, together with New Taipei City and Keelung, constitutes Taiwan's biggest metropolitan region. Kaohsiung, Taichung, Tainan, and Taoyuan are other important cities. Taiwan, with a population of 23.45 million people, is one of the world's most densely inhabited nations.
Taiwanese indigenous peoples' Austronesian-speaking ancestors populated the island some 6,000 years ago. Large-scale Han Chinese immigration to western Taiwan started in the 17th century as a Dutch colony and continued under the Kingdom of Tungning. The island was captured by the Chinese Qing dynasty in 1683 and surrendered to the Japanese Empire in 1895. Following Japan's surrender in 1945, the Republic of China, which had ousted the Qing in 1911, acquired control of Taiwan on behalf of the World War II Allies. The restart of the Chinese Civil War ended in the ROC's fall of mainland China to Chinese Communist Party (CCP) troops in 1949 and retreat to Taiwan. Since then, its effective authority has been restricted to Taiwan and a few smaller islands.
Taiwan underwent a period of fast economic expansion and industrialization known as the "Taiwan Miracle" in the early 1960s. The ROC evolved from a one-party military dictatorship to a multi-party democracy with a semi-presidential government in the late 1980s and early 1990s. Taiwan's export-oriented industrial economy is the world's 21st biggest by nominal GDP and the 20th largest by PPP, with significant contributions from steel, machinery, electronics, and chemicals industries. Taiwan is a developed nation that ranks 20th in terms of GDP per capita. It has a high ranking in terms of political and civil freedoms, education, health care, and human development.
Taiwan's political status is debatable. After UN members agreed in 1971 to recognize the PRC instead of the ROC, the ROC no longer represents China as a member of the United Nations. The ROC maintained its claim to be the only legal representation of China and its territory, however, this has been minimized since the country's democracy in the 1990s. The PRC claims Taiwan and rejects diplomatic ties with nations that recognize the ROC. Taiwan has formal diplomatic relations with 13 of the United Nations' 193 member nations and the Holy See, while many more maintain unofficial diplomatic links via representative offices and organizations that operate as de facto embassies and consulates. Taiwan is denied participation in international organizations in which the PRC participates, or it is allowed to join solely on a non-state basis under different names. Domestically, the major political conflict is between parties advocating for eventual Chinese unification and promoting a pan-Chinese identity and those advocating for formal international recognition and promoting a Taiwanese identity; as the twenty-first century has progressed, both sides have moderated their positions in order to broaden their appeal.
Employees in Taiwan have the right to take yearly leave. The amount of yearly leave is determined by an employee's duration of service, as shown below:
1. Employees with six months or more but less than one year of employment are entitled to three days of leave.
2. Employees with one year or more but less than two years of service are entitled to seven days of leave.
3. Employees with two or more years but less than three years of service are entitled to ten days of leave.
4. Employees with three or more years but less than five years of service are entitled to 14 days of leave.
5. Employees with five or more years but fewer than ten years of service are entitled to 15 days of paid leave.
6. One day is added for every year of service beyond ten years, up to a total of thirty days.
Taiwan recognizes twelve public holidays.
In Taiwan, employees are entitled to two forms of sick leave. They are entitled to 30 days of regular sick leave every year if they are not hospitalized, or one year of sick leave in a two-year period if they are hospitalized. It's worth noting that the total number of sick days taken in a two-year period cannot surpass one year.
Employees earn half-pay if they are sick for up to 30 days in a year. The employer pays the difference when an employee's illness is covered by labor insurance but the compensation is less than half of the employee's income. Employees who have used up all of their sick days might request additional unpaid days off. The employee can take a maximum of one year of unpaid sick leave. There's also the prospect of reclaiming ill pay from the government.
Employees who are expecting a child are entitled to 8 weeks of paid maternity leave, unless they have worked for the firm for less than 6 months, in which case the rate is reduced to 50%.
Employees are entitled to 5 days of paid paternity leave at 100% of their usual wage.
Employees who have worked for the same employer for at least 6 months are eligible for parental leave. The employee's child must be under the age of three, and his or her spouse must also be working.
Bereavement leave. For a spouse or parent, length is 8 days.
For a grandparent, parent-in-law, or child, length is 6 days.
For a sibling or grandparent-in-law, length is 3 days.
In Taiwan, employment is nearly never deemed 'at will.' Termination of employment is subject to certain constraints. Dismissal of an employee is permissible for the following reasons: the employer is closing the business or transferring ownership; the employer's operations are suspended for more than one month due to force; the employer's business nature changes, necessitating a reduction in the number of employees, and there are no suitable job openings for the redundant employees; and the employer's operations are suspended for more than one month due to force.
Employers are required to provide notice and pay severance in each of the aforementioned scenarios. Notice and severance pay are not required in more severe circumstances, such as when an employee misrepresents facts during the employment contract signing process, when an employee commits violence against the employer, the employer's family, or coworkers, when the employee is absent from work for three consecutive days or six days in a month without justification, or when the employee causes intentional damage.
Employers are generally required to provide advance notice of termination to employees. The notice period is between ten and thirty days, depending on the length of service of the employee. No notice is required in a limited number of circumstances.
Taiwan does not require probationary periods. Even if the employment agreement includes a probationary period, if the employer terminates the employee during the probationary period or at the end of the period, the requirements for statutory cause, advance notice, and severance pay still apply.
For each year of service up to six months, severance is equal to 50% of the average monthly wage.
Employees in Taiwan work an average of eight hours per day and forty hours per week, not including overtime. Taiwanese workers are also required to take two days off every seven days. One of these days off is required, while the other is optional. The distinction between these two types of rest days is that an employee cannot agree to work on a required day off, whereas working on a flexible day is negotiable. Overtime is compensated to employees who work flexible schedules.
Working hours cannot exceed 12 in a single day, and monthly overtime is limited to 46 hours. Overtime is paid at a rate of 134 percent for the eighth through tenth hours (daily) and 167 percent for the tenth through twelfth hours (daily). On flexible days, overtime is paid at a rate of 134 percent for the first two hours, 167 percent for the second through eighth hours, and 267 percent for the eighth through twelfth hours.
The minimum wage is NT$24,000 per month or NT$160 per hour.
Taiwan has a government-run single-payer universal healthcare system.
Other typical employee perks include leaving service benefits (LSB), life, accident, and business travel insurance, housing allowances, and festival bonuses, among other things.
Meal allowances are free from individual income tax and may be given up to a maximum of NT$2,400 per month. Housing allowances are mostly given to expatriates and certain high level executives and are tax-free. To recruit and retain local personnel, most international corporations provide these additional perks.
Employees' wives and dependent children are usually entitled to medical benefits.
For a company with a taxable income of up to TWD 120,000, the tax rate is 0. For a taxable income of over 120,000, the tax rate is 20% of total taxable income.
The revenue of a non-resident business generated from Taiwan is taxed. A non-resident corporation with a permanent place of business (FPOB) or business agent in Taiwan is taxed in the same way as a resident corporation (i.e. subject to filing of an annual CIT return based on the same CIT rate provided above). A non-resident firm that does not have an FPOB or a business agent in Taiwan is liable to WHT at the source on its Taiwan-sourced revenue. WHT rates on dividends, interest, and royalties may be lowered if the beneficiary is a tax resident of a treaty nation and the treaty allows for a lower rate.
Individual income tax (IIT) is imposed on Taiwan-sourced income of both residents and non-residents, unless excluded under the Income Tax Act and other legislation.
A non-resident foreigner who spends fewer than 90 days in Taiwan in a calendar year is liable to an 18% withholding tax (WHT) on wage compensation received from a Taiwan-registered business. Tax is not levied on remuneration received from a company incorporated outside of Taiwan.
A non-resident foreigner who stays in Taiwan for more than 90 days but less than 183 days in a calendar year is liable to a flat 18% tax on Taiwan taxable wage income, regardless of where the compensation is received.
For the 2019 IIT return filing, a resident alien is liable to the progressive tax rates shown below:
For a taxable income between 0 and TWD 540,000, the tax rate is 0.
For a taxable income between TWD 540,001 and TWD 1,210,000, the tax rate is 12 percent.
For a taxable income between TWD 1,210,001 and TWD 2,420,000, the tax rate is 20 percent.
For a taxable income between TWD 2,420,001 AND TWD 4,530,000, the tax rate is 30 percent.
For a taxable income of over TWD 4,530,001, the tax rate is 40 percent.
In addition to normal income tax computations under the Income Tax Act, Taiwan levies IBT on persons who are tax residents in Taiwan at a fixed rate of 20%. (including expatriates who stay in Taiwan for 183 days or more in a tax year). If the following conditions are fulfilled, foreign-sourced income is included in the computation of IBT:
(1) The individual is a tax resident of Taiwan.
(2) Foreign-sourced income is equal to or more than TWD 1 million with basic income exceeding TWD 6.7 million.
Business tax applies to all sales of products and services in Taiwan, as well as imports of goods into Taiwan. Business tax systems are classified into two types: value-added tax (VAT) and gross business receipts tax (GBRT) (GBRT).
Unless the legislation states otherwise, sellers and service providers are usually required to pay business tax for sales of products or services inside Taiwan. The business tax will be paid by the goods receivers or purchasers through customs for the importation of products. Business tax must be paid by service purchasers for the importation of services supplied by foreign businesses to Taiwanese customers. However, if the service buyer (corporate entity) is only involved in taxable transactions subject to either 5% or 0% VAT, the service buyer will not be obliged to pay business tax.
The Council of Labour Affairs (CLA) issues work licenses in response to a request from a Taiwanese business.
Work permits are valid for up to three years, although an employer may ask for an extension on an employee's behalf, which must be submitted within four months before the expiry date. When an employee changes jobs after arriving in Taiwan, the new employer is required to file for a new work visa. Furthermore, the prior employer must apply to the Council of Labour Affairs to have the original work permit revoked.
When the permission is granted in another country, it must be checked by a representative from the local Taipei Economic and Cultural Office or Taiwan representative office in the nation where it was issued.
In Taiwan, foreign nationals may work as school or foreign-language instructors, specialized or technical specialists, or as a director, executive, or management of a firm founded or invested in by a foreigner.
Employment contracts in Taiwan may be either verbal or written, although the majority are written. They may be in either the local language or English, as long as both the employer and the employee are comfortable and comprehend the language. Employment contracts should include:
Place of employment
Salary, payment type (check, bank transfer), and length of payment
Mention the start date of employment and the company's rules.
There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.
Creating a Taiwan subsidiary is a difficult undertaking. Before you grow, you'll need to examine a number of variables. Begin by researching Taiwanese business practices to determine that the nation is a good fit for your sector. Taiwan's sectors are essentially deregulated, and the government provides various tax and non-tax incentives to promote increased business investment.
Your firm should also think about any ties or trade agreements that may have an influence on where you choose to establish your Taiwan subsidiary. Varied areas or cities may have different incorporation procedures and prices, which may influence the optimal location for your headquarters.
Finally, think about any language requirements you'll need to meet. Taiwan's predominant language is Mandarin Chinese, while other ethnic groups speak Taiwanese Hokkien or Haka. Although English is widely spoken in Taiwan, it is best to recruit personnel who know Mandarin Chinese or engage a translation to assist with business operations.
You may establish as a subsidiary, partnership, international branch, or representative office under the Taiwanese Company Act. The first stage in establishing a Taiwan subsidiary is to apply for:
1. Your company's name should be searched for and reserved.
2. Acceptance of Foreign Investment
3. Importer/Exporter English name and registration Importer/Exporter English name and registration Importer/Exporter English name and registration
4. Registration of a Business
5. Registration of Factories in Industrial Parks
Taiwan's subsidiary law is based on civil law and is comparable to those of Germany, Japan, and South Korea's.
Foreign investments need Foreign Investment Approval (FIA) from the Ministry of Economic Affairs' Investment Commission (IC) (MEA). Taiwan subsidiary rules impose extra restrictions depending on the kind of business you incorporate – a limited company, an unlimited company, a corporation limited by shares, or an unlimited company with limited liability shareholders. Most businesses are formed as a company limited by shares, although unlimited corporations and companies with limited liability shareholders are less common.
Investments, capital loans, and guarantees are restricted for subsidiaries that incorporate as a corporation limited by shares. Shareholders are exclusively accountable for the amount of capital they provide under this arrangement. To incorporate, you must have at least one shareholder, and there are no minimum capital requirements unless you are in an industry that needs specific licences or authorization.