2024JUL11_Setting up a Company in Taiwan_web.pptx

In July 2024, Xirilaw presented a two-part talk for foreign entrepreneurs in Taiwan. Our goal was to clarify the different types of companies in Taiwan and guide them through the setup process. In the first part, Peter Lin outlined the key differences between the common types of companies for startups. In the second part, Maiya Mai walked through the procedures for foreigners to establish subsidiaries and branch offices in Taiwan.

1. Outline Which type of company suits you? Q1: do you have an existing entity? Q2: do you have any co-founders /investors ? Q3: do co-founders want to transfer shares without restrictions? Let’s Set Up The Company! 202 4 © Xiri Attorneys. All Rights Reserved.

2. Attention: PRC National Investment invested by PRC Investors? ( i ) more than 30% of its shares are directly or indirectly held by PRC Investors? (ii) controlled by PRC Investors? 202 4 © Xiri Attorneys. All Rights Reserved. Taiwan NewCo PRC national Foreign national Foreign company

3. Check Investment Restrictions NOT fall within the prohibited activities listed in the Negative List National Security , e.g., manufacturing of nitroglycerin for military use Public Order , e.g., water supply Good Customs and Practices , e.g., dance hall Public Health , e.g., cadmium smelting Prior Approval is required for the restricted activities in the list 202 4 © Xiri Attorneys. All Rights Reserved.

4. Q1: do you have an existing entity?

5. An existing entity? 202 4 © Xiri Attorneys. All Rights Reserved. Yes Yes No No

6. Group A Entrepreneurs 3 options for Group A : Subsidiary : a company controlled by another company Branch : an extension of the existing company Representative Office : NO business activity is allowed (being a contact window: OK ) 202 4 © Xiri Attorneys. All Rights Reserved.

7. Comparison Subsidiary Branch Separate Legal Entity O X Tax 5% VAT; 20% CIT Withhold 21% of the dividends for the foreign parent company 5% VAT; 20% CIT No need to withhold 21% of the profits Labor Insurance and National Health Insurance O O 202 4 © Xiri Attorneys. All Rights Reserved.

8. Decision Tree for Group A 202 4 © Xiri Attorneys. All Rights Reserved. Yes Yes No No longer

9. Group B Entrepreneurs 3 options of TaiwanCo for Group B : Limited Company Company Limited by Shares Close Company (a special type of Option B) 202 4 © Xiri Attorneys. All Rights Reserved.

10. Comparison Limited Company Company Limited by Shares Close Company # of shareholders at least 1 shareholder At least 2 individuals or 1 corporate shareholder At least 2 individuals or 1 corporate shareholder, but cannot exceed 50 202 4 © Xiri Attorneys. All Rights Reserved.

11. Comparison Limited Company Company Limited by Shares Close Company Voting rights arrangements 1 vote each shareholder; can be in proportion to the amount of capital contribution * * No concept of shares in a limited company. Common shares : must one voting right per common share Preferred shares : multiple voting rights; veto rights Deferred shares : limited rights; no rights 202 4 © Xiri Attorneys. All Rights Reserved.

12. Comparison – cont. Limited Company Company Limited by Shares Close Company Restriction on transfer of interest Transfer requires the consent of more than voting rights of all other shareholders ( at least if the transferor is a director) Common shares: no restriction Preferred/ deferred shares: restriction is allowed if they are in the AoI All classes: restriction is mandatory ; Restrictions should be written in the AoI Limited Company Company Limited by Shares Close Company Restriction on transfer of interest Common shares: no restriction Preferred/ deferred shares: restriction is allowed if they are in the AoI All classes: restriction is mandatory ; Restrictions should be written in the AoI 202 4 © Xiri Attorneys. All Rights Reserved.

13. Comparison – cont. Limited Company Company Limited by Shares Close Company Qualification of Directors M ust be a shareholder of the company Must obtain the approval of at least votes of all shareholders does not need to be a shareholder Limited Company Company Limited by Shares Close Company Qualification of Directors does not need to be a shareholder 202 4 © Xiri Attorneys. All Rights Reserved.

14. Q2: do you have any co-founders /investors? Apply to Group A subsidiary and Group B entrepreneurs

15. Group B Entrepreneurs 202 4 © Xiri Attorneys. All Rights Reserved. No

16. Q3: do co-founders want to transfer shares without restrictions? Apply to Group A subsidiary and Group B entrepreneurs

17. Group B Entrepreneurs 202 4 © Xiri Attorneys. All Rights Reserved. Yes No Yes No Close Company : restrictions are mandatory but customizable Company Limited by Shares : restrictions on preferred shares are optional Limited Company : restrictions are mandatory and statutory

18. Let’s set up the company!

19. Name reservation 202 4 © Xiri Attorneys. All Rights Reserved.

20. Set up a local bank account KYC requirements Taiwanese identification documents ARC (Alien Resident Certificate) Uniform ID Number for Foreigners Check with your bank for the specific requirements and processes 202 4 © Xiri Attorneys. All Rights Reserved.

21. Application Journey Steps Estimated Time Subsidiary Branch Name reservation One to two days V V Set up a local bank account Depends on the actual time needed. V V Apply for the investment approval one to two months V Not applicable. *Assuming there are no PRC investors involved. 202 4 © Xiri Attorneys. All Rights Reserved.

22. Application Journey Steps Estimated Time Subsidiary Branch Fund the local bank account by wire transfer. Depends on the actual time needed. V V Verify capital with the Department of Investment Review (formerly Investment Commission ) . Around one to two week V Not applicable. *Assuming there are no PRC investors involved. 202 4 © Xiri Attorneys. All Rights Reserved.

23. Application Journey Steps Estimated Time Subsidiary Branch Rent an office Depends on the actual time needed. V V Apply for Company Registration Around two weeks. V V 202 4 © Xiri Attorneys. All Rights Reserved.

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