The Republic of China (Taiwan or ROC) is a civil law jurisdiction, with the judicial power vested in the judges of the district courts, high courts and supreme courts, which handle civil, criminal and administrative lawsuits. The judge is responsible for directing the proceedings, investigating the evidence, finding the facts and determining the legal consequences (such as assessing damages). In general, the judicial system is governed by the rule of law and considered to be impartial and just.
Taiwan welcomes and encourages foreign direct investment (FDI). Under the Statute for Investment by Foreign Nationals (SIFN), which was promulgated on 14 July 1954 and further amended on 19 November 1997, all foreign investment must be approved in advance by the Department of Investment Review (DIR; formerly known as the Investment Commission) of the Ministry of Economic Affairs (MOEA).
Prohibited or Restricted Sectors
FDI is generally permitted in Taiwan, except in certain specific businesses and industries in which foreign investments are prohibited or restricted – such as aviation and telecommunications – due to concerns about national security, public order, environmental protection and public health, etc
To provide a clear guideline on restricted and/or prohibited foreign investment, the DIR has promulgated the “Negative List”, which sets forth the sectors in which foreign investment is either restricted or prohibited. Sectors that are not on the Negative List are open to foreign investment without any restriction (other than the requirement to obtain foreign investment approval in advance).
PRC Investors
However, it is important to note that investors from the People’s Republic of China (PRC) are subject to different, stricter rules and regulations, and greater regulatory scrutiny. PRC investors may only invest in certain permitted businesses listed in the “Positive List” promulgated by the DIR. In determining whether an investor is a foreign investor or a PRC investor under Taiwan law, the criteria outlined in 7. Foreign Investment/National Security will apply.
In recent years, the Taiwan government has put a lot of effort into attracting FDI into Taiwan by providing subsidy programmes for certain key industries, such as renewable energy and AI technologies. Moreover, discussions are underway regarding the promulgation of certain guidelines and regulations to mitigate the potential risks associated with AI technologies, such as algorithmic bias and black-box effects.
In addition, in response to the rising global concern on climate change issues, regulations and policies on the renewable energy industry and greenhouse gas (GHG) reduction have also been promulgated and enacted. It is advisable for FDIs to be aware of related issues or other questions regarding the strategies for the implementation of GHG emission reduction and conducting the renewable energy industry. Furthermore, Taiwan has proved to be a key player in the world’s semiconductor supply chain, and it will facilitate more FDI via relevant policies (such as providing tax incentives).
In the near future, it is expected that the economy of Taiwan will grow steadily and Taiwan will continue to attract the attention of investors around the globe.
Transaction Structures
The acquisition of a Taiwan company is commonly structured as an acquisition of the shares in such company (a so-called “share deal”) or an acquisition of the assets/business in such company (a so-called “asset deal”). Share deals include mergers, share exchanges or share swaps, while asset deals can be implemented via a spin-off, for example.
Minority investments can also be structured as a share deal. In a share deal, the purchaser may subscribe for the new shares issued by the target company or purchase outstanding shares from an existing shareholder.
Acquisitions of public companies in Taiwan may trigger the mandatory tender offer requirements prescribed under the Securities and Exchange Act (SEA) – ie, anyone who plans to individually or jointly acquire 20% or more of the total issued and outstanding shares of a public company within 50 days must initiate a public tender offer and comply with additional disclosure requirements and restrictions.
Key Considerations
The review of foreign investments by the DIR is one of the crucial considerations for a foreign investor in selecting a transaction structure. Under a share deal, an investor will assume the entire operations, rights and obligations of the invested entity, and a Foreign Investment Approval (FIA) from the DIR will be required. By contrast, if a foreign investor plans to acquire a specific business line or certain assets from a Taiwanese seller, an asset deal may be considered and no FIA will be required, but the foreign investor will need to establish a local presence in Taiwan (eg, a subsidiary or a branch office) to hold such business line/assets, and the set-up of the subsidiary will be subject to the DIR's FIA as well.
A potential tax implication is also one of the key considerations for foreign investors when designing the transaction structure. For example, in an asset deal, the profit gained by a Taiwan company (including a company invested in by foreign investors) from its sales of movable assets will be subject to income tax at 20%; conversely, capital gains derived by foreign investors from the disposal of shares in Taiwan companies are exempt from income tax and will be subject to a securities transaction tax at 0.3%, provided that such Taiwan companies have issued share certificates.
For domestic M&A transactions, the major regulatory approvals of which an investor should be aware include a potential pre-closing antitrust filing. See 6. Antitrust/Competition for a detailed description.
Certain sector-specific approvals and foreign ownership restrictions may apply to foreign investors. For example, M&A transactions involving financial institutions may be subject to additional scrutiny by the Financial Supervisory Commission (FSC), and M&A transactions involving the energy industry or the transfer of factory ownership may require the relevant environmental permits and must comply with the applicable zoning regulations.
In general, aside from FDI-related and sector-specific regulations, the M&A of a private company would not be subject to other prior regulatory review/approval under the Company Act or the Business Mergers and Acquisitions Act (the “M&A Act”). However, a listed company would also need to comply with certain approval, reporting or public announcement obligations as imposed by the Taiwan Stock Exchange (TWSE) or the Taipei Exchange (TPEX).
Corporate Governance Framework in Taiwan
In Taiwan, corporate governance rules are mainly stipulated under the Taiwan Company Act and the rulings rendered by the MOEA. In addition, listed companies must comply with the SEA, rulings rendered by the FSC, and other rules promulgated by the TWSE/TPEX (depending on the stock market to which a company belongs). There are also sector-specific corporate governance requirements and norms; for example, banks and other financial intuitions must comply with the regulations promulgated by the FSC for the financial industry. In general, the corporate governance framework and practices in Taiwan are similar to Western standards.
Commonly Used Legal Entities in Taiwan
In terms of legal entity forms, limited liability companies and companies limited by shares are most common in Taiwan.
Limited liability company
A limited liability company is a company established by one or more member(s), with the liability of members limited to the respective amounts of their capital contribution.
Company limited by shares
A company limited by shares is a company established by two or more shareholders, or by at least one single government, juristic or corporate shareholder, and its capital must consist of shares. The liability of each shareholder of a company limited by shares is limited to the amount of the share capital for which each shareholder subscribes. Only a company limited by shares can go public.
In 2015, the Company Act introduced a new type of company limited by shares: a “closely held company limited by shares” (normally referred to as a CHC), which is a private company with no more than 50 shareholders. A CHC’s Articles of Incorporation (AOI) must impose restrictions on the transfer of its shares. Under the 2018 amendment of the Company Act, a regular company limited by shares may adopt more flexible designs of preferred stocks, and can now structure its corporate governance and shareholders’ rights with similar flexibility via preferred stock arrangements.
Branch office
A foreign company may also register a branch office in Taiwan. A branch office is a branch unit that is part of the foreign company and does not have an independent legal personality.
Key Consideration in Selecting the Type of Legal Entity
If a foreign investor wishes to establish a joint venture with a partner in Taiwan and, in view of the trust between the parties, restrict the partner from transferring the shares in the joint venture to a third party, a CHC may be used (the Company Act prohibits any restriction on the transfer of ordinary shares in a regular company limited by shares).
Subsidiary v Branch
A foreign company may choose to establish a Taiwan subsidiary or register a Taiwan branch office based on its expected operations in Taiwan. A Taiwan subsidiary is an independent legal entity, under which the foreign investor only bears limited shareholder liability. A Taiwan subsidiary may possess property under its own name and the foreign company may thereby benefit from the protection of assets partitioning. Conversely, a Taiwan branch office is not an independent legal entity, and the liabilities of the Taiwan branch would be extended to the foreign company.
The differences between a Taiwan subsidiary and a Taiwan branch are generally as follows:
In Taiwan, the relationships between companies and minority shareholders are generally governed by the Company Act (and any shareholder agreements among the shareholders). The Company Act offers various statutory protections to minority shareholders, for example:
In the event of security fraud, insider trading or other misconduct by the directors or supervisors of a public company that causes damage to multiple investors, the Securities and Futures Investors Protection Center is entitled to, and often will, initiate a class action on behalf of the investors, pursuant to the Securities Investor and Futures Trader Protection Act, to facilitate the protection of minority shareholders.
A public company in Taiwan is subject to both periodic and non-periodic disclosure obligations under the SEA and its sub-laws. The relevant information must be filed with and disclosed through the Market Observation Post System (MOPS) maintained by the FSC.
A public company’s top ten shareholders and any shareholder who holds 5% or more of such company’s outstanding shares will be disclosed in its annual report. In addition, a public company must report to the FSC and disclose the information of any shareholder holding 10% or more of its shares. Such shareholders must notify the public company of changes in their shareholdings before the fifth day of each month; thereafter, the public company must report such change to the FSC before the 15th day of every month. According to the amendments to the SEA dated 10 May 2023, the threshold triggering for the aforementioned reporting and disclosing requirement has been lowered from 10% to 5%, with effect from 10 May 2024.
Private companies are not subject to the SEA and the aforementioned disclosure requirements. However, both private companies and public companies must notify the MOEA within 15 days of any change in their registered company information, as required under the Company Act. In addition, the designated items (including names, nationalities, registration date, ID numbers, numbers of shareholding or capital contribution) of the directors, supervisors, managers and shareholders directly holding more than 10% of the total shares must be reported annually on the website maintained by the MOEA, or within 15 days of any change thereto.
In Taiwan, funds can be accessed via capital markets and bank financing.
A company whose shares are publicly offered, registered on the Emerging Stock Market (ESM) or listed on the TWSE or the TPEX may obtain financing from the capital market by issuing shares or bonds. The regulator for the securities market is the FSC. The TWSE was established in 1961 and is the primary equities market in Taiwan, renowned for maintaining an orderly market and a cost-effective trading capability since its inception. The TPEX was founded in 1994 and has actively assisted companies from emerging and hi-tech industries as well as small to medium-sized enterprises in listings and fundraising, greatly expanding the scope of Taiwan’s securities market. The TPEX established the Emerging Stock Board (ESB) in 2002, which has developed into a preliminary market before an initial public offering (IPO).
In 2021, the TWSE and the TPEX respectively launched the Taiwan Innovation Board (TIB), and the Pioneer Stock Board (PSB) under the ESM (a separate new board in addition to the ESB), aiming to facilitate fundraising by innovative businesses in the capital market, exclusively for qualified investors. However, as from 1 January 2024, the PSB ceased to exist, and the companies registered on the PSB and ESB were integrated into a single market under the ESM. In response to this change, since 1 January 2024, companies applying to register on the ESM have been able to choose to adopt either the general public issuance or simplified public issuance procedure, and the ESM has become open to all investors.
The TIB can be traded only by qualified investors that meet one of the following criteria:
To apply for public offering or listing of shares, a company must observe the TWSE/TPEX listing rules, the SEA and other applicable laws and regulations promulgated by the FSC from time to time.
Securities Regulation
The SEA is the main legislation governing the offering, issuance and trading of securities, and stipulates civil and criminal liabilities for misconduct in respect of securities. The FSC has the authority to promulgate the necessary rules and regulations to supplement the SEA. The TWSE/TPEX’s listing and disclosure rules also apply. The Company Act applies to all companies incorporated in Taiwan, regardless of whether they are listed companies or otherwise, but if there is any discrepancy between the SEA and the Company Act in respect of a public company, the SEA will apply.
Foreign Investment in Listed Securities
According to the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals, which was most recently amended on 11 February 2014, foreign investors wishing to invest in securities registered on the ESM or listed on the TWSE or the TPEX, or other securities approved by the FSC, must register with the TWSE before making any investment. Such foreign investors are commonly known as foreign institutional investors (FINIs) or foreign individual investors (FIDIs).
Nevertheless, if a foreign investor intends to acquire 10% or more of the shares in a company that is listed on the TWSE or the TPEX, or registered with the ESM through a single transaction, it should apply for an FDI from the DIR instead of going through the FINIs or FIDIs route.
Certain Restrictions on the Purchase and Sale of Public Securities
The transfer of shares in a public company by a corporate insider is subject to restrictions in terms of to whom the shares may be transferred, the number of shares that may be transferred, and when a transaction may be made. A corporate insider is defined under the SEA as a director, supervisor, managerial officer or a shareholder holding more than 10% of the total shares of an issuer. Any person planning to acquire 20% or more of the total issued shares of a public company within a period of 50 days must do so through a tender offer, unless any statutory exception applies.
Foreign investment funds are subject to the same foreign investment regulatory review process as other foreign investments, but they are usually more harshly scrutinised by the DIR, which will cautiously examine whether a foreign investment fund should be deemed a PRC investor.
Merger Control Regime in Taiwan
Merger control in Taiwan is regulated by the Taiwan Fair Trade Act (TFTA), and the competent authority is the Taiwan Fair Trade Commission (TFTC). Supplementary rules on merger control include:
Requirements for Notification
If an FDI involves a transaction that falls under the definition of a “combination” and also meets certain thresholds as prescribed by the TFTA, a prior notification (merger filing) to the TFTC will be required.
According to the TFTA, “combinations” include:
Whether “control” exists should be evaluated on a case-by-case basis, since there is no definitive definition thereof.
Notification will be required for a combination in the following circumstances:
Particular Sectors and Foreign Mergers
In Taiwan, there is no other legislation for mergers relating to particular sectors. However, under several of the TFTC’s guidelines on sectoral control of certain industries affecting public welfare, such as airlines, banking/finance or 4C industries, certain specific factors will be taken into account by the TFTC when reviewing a merger involving that particular industry.
For the filings for foreign mergers, the relevant legislation used to be the Taiwan Fair Trade Commission Disposal Directions (Guidelines) on Extraterritorial Mergers, pursuant to which the TFTC took the local effect into consideration when determining whether it would exercise jurisdiction. Since the abolition of such guidelines by the TFTC on 30 June 2023, except for the non-notifiable types of combination, a foreign merger which meets any of the filing thresholds must be notified to the TFTC in accordance with the TFTA, and the waiver of jurisdiction will no longer be applicable. In June 2023, the TFTC also passed amendments to the “Combination Types to Which Paragraph 1, Article 11 of the Fair Trade Act Does Not Apply”, which include an additional non-notifiable type of combination involving foreign enterprises that jointly establish or operate a joint venture outside of Taiwan, and the joint venture does not engage in economic activities within Taiwan. Nevertheless, the TFTC notes that, “[the joint venture] not engaging in economic activities within Taiwan” means that it is not engaging in any economic activities that involve supply and demand of goods or services in Taiwan. For example, the products produced by the joint venture are sold only outside of Taiwan or sold exclusively to its foreign parent company, without affecting the supply and demand in Taiwan. The so-called “economic activities” include the sale of goods or services, provision of quotations, bargaining and conclusion of sales, and contracts or engagement with counterparties in connection with the sale.
Substantive Test
If the TFTC concludes, after considering all relevant factors, that the overall economic benefits of the merger outweigh the disadvantages resulting from competition restraint, clearance will be granted.
Competition Concerns
The competition concerns that the TFTC will investigate vary depending on the type of combination. For example, if the combining enterprises engage in a horizontal combination, the TFTC will take the following factors into consideration:
Different factors will be considered if the combining enterprises engage in a vertical combination or a conglomerate combination.
Review Timeline
After the initial filing is submitted, the TFTC will issue a request for information whenever it requires any supplemental information from the parties. The 30 business-day waiting period starts to run only after the TFTC deems that all the required documents and information have been submitted. The parties may proceed with the proposed transaction if the TFTC does not make any objection to this within said 30-day period. If it is deemed necessary, the TFTC may shorten the 30-day waiting period, or extend it up to 90 business days.
According to the Merger Guidelines, the TFTC may impose the following remedies as conditions to a clearance.
The TFTC has the right to impose other types of remedies on a case-by-case basis. The Merger Guidelines also point out that the TFTC may seek the parties’ opinions on the possible remedy before making a final decision.
TFTC’s Ability to Prohibit or Interfere with Transactions
The TFTC exercises this power by issuing a binding decision at the end of the regulatory process. Such decision will generally fall under one of the following three categories:
If the TFTC prohibits a combination, it will state its reasons in its decision regarding the anti-competition disadvantages to the Taiwan market caused by the proposed transaction.
Consequences of Non-compliance With Notification Rules
Implementation of a transaction must be suspended until clearance is obtained. Failure to notify a combination that meets a filing threshold (or to fulfil the conditions attached to a clearance, or to implement a combination prohibited by the TFTC) may cause the TFTC to impose penalties, including the prohibition of the combination, divestiture, transfer of the business acquired and/or removal of personnel designated by the enterprises. The TFTC is also authorised to impose an administrative fine of between NTD200,000 and NTD50 million. Penalties imposed on parties for violation of merger control rules will be published by the TFTC.
Taiwan has two tracks for FDI review: one for foreign investors and the other for PRC investors.
Foreign Investors
According to the SIFN, the form of foreign investment (by a foreign investor) may include:
Furthermore, a foreign investment may be made with a variety of assets, including:
Prior to making any investments in Taiwan (except for the establishment of a branch office or representative office), a foreign investor must obtain an FIA from the DIR, which generally takes six to eight weeks, depending on the scale, industry and complexity of the investment structure. A longer review period may be required for major M&A transactions or investments in sensitive industries.
In practice, one of the main factors that the DIR takes into account is whether a foreign investor meets the definition of a PRC investor (as discussed in 7.2 Criteria for Review). It takes longer and is more difficult for a PRC investor to obtain PRC Investment Approval (see below for more details). Once an FIA is granted, the foreign investor must remit the capital into Taiwan and complete the investment within one year, and thereafter apply for the DIR’s capital verification within two months after the full equity investment amount is received.
PRC Investors
PRC investors are subject to specific regulations, and any investment made by them is subject to receiving an advance PRC Investment Approval from the DIR. According to the Regulations Governing Investments by Nationals in the Mainland Area (the “PRC Investment Regulations”), as with foreign investments, PRC investments may also be made with a variety of types of assets. The forms of PRC investments include:
Once a PRC Investment Approval is granted, the PRC investor must remit the capital in full into Taiwan and complete the investment, and thereafter apply for the DIR’s capital verification within two months.
Foreign Investments v PRC Investments
When reviewing an application for an FIA or PRC Investment Approval, the DIR will first determine whether an applicant is a “foreign investor” or a “PRC investor” based on the following rules.
A PRC investor refers to:
The “30%” mentioned above should be examined and determined based on each upper-level shareholder individually.
With respect to the “control test”, according to a Letter dated 30 December 2020 (Ref No: Jing-Shen-Zi-10904606720) issued by the MOEA, a company will be deemed to have control over another company if it:
A foreign investor refers to any foreign investor other than a PRC investor. A Hong Kong/Macau investor is subject to the same foreign investment regulations as a foreign investor. Nonetheless, the recent tense cross-strait relationship between Taiwan and China has led to heightened scrutiny by the DIR of applications from Hong Kong companies, particularly since Hong Kong’s enactment of its national security law. It will take more time to process DIR applications filed by Hong Kong investors than those filed by foreign investors from other areas.
Foreign Investments
No foreign investment in any of the following businesses is permitted:
Under the authorisation of the SIFN, the DIR published the Negative List, which sets forth the sectors in which foreign investment is either restricted or prohibited. Restricted sectors include forestry and the manufacturing of transport equipment and parts. Prohibited sectors include the manufacturing of nitroglycerin for military use; the manufacturing of gunpowder fuses, agents of fire and fulminating mercury; and the manufacturing of cadmium smelting. Those sectors not on the Negative List are generally open to foreign investment without any restriction other than the requirement to obtain an FIA in advance.
For foreign investors, the criteria for reviewing partnerships and joint ventures, acquisitions by foreign governments or government-affiliated entities, and non-controlling minority investments are similar.
PRC Investments
PRC investors are subject to more stringent scrutiny than foreign investors, with respect to their investments in Taiwan. In terms of the business scope, PRC investors may only invest in businesses explicitly stated on the “Positive List” promulgated by the DIR from time to time under the authorisation of the PRC Investment Regulations. Moreover, according to the PRC Investment Regulations, even if a PRC investor wishes to invest in a sector that is on the Positive List, the DIR has the discretion to restrict or block the investment application made by a PRC investor if:
In practice, the DIR has wide discretion in determining whether a PRC investment falls under the above three restricted categories. Given the discretionary power of the DIR, investments made by a PRC investor are subject to greater uncertainties than those made by a foreign investor.
No PRC government or affiliated entities may make investments in Taiwan.
There is no separate national security review regime; however, the DIR will review an application for FIA or PRC Investment Approval based on all factors, including national security concerns, which is often a more sensitive issue when it comes to applications for PRC Investment Approval. During the review process, the DIR may consult the opinion of other authorities, such as the National Security Bureau.
The DIR has ample discretion to impose conditions on the FIA or PRC Investment Approval, which is usually out of concern regarding the background of the investors and the industry sectors involved. Such conditions include, for example, the prohibition of any technology transfer due to the transitional service agreement between the seller and the target company, the investor’s guaranty on not going public/listing in the PRC, the investor’s assurance of the employee benefits remaining unchanged post-closing, etc.
The DIR has the power to block the FDI either before or after the investment is made if the FDI is considered one of the prohibited types of investment as outlined in 7.2 Criteria for Review. In such event, the PRC/foreign investor may first file an appeal against such decision with the Executive Yuan, and further initiate an administrative lawsuit if the appeal is dismissed.
The consequences of making an investment without the DIR’s prior approval (including if the approval is first granted and then revoked) are as follows.
To ensure that PRC investors do not circumvent these investment control mechanisms through co-operating with local partners in Taiwan, the PRC Relations Act also provides that any person who offers or allows a PRC investor to use their name to make an investment in Taiwan in violation of the PRC investment rules under the PRC Relations Act, shall also be subject to the same administrative penalties.
Application of Sanctions
According to the Terrorism Financing Prevention Act (TFPA), upon the request of international treaties or protocols regarding counter-terrorism or as necessary for the implementation or enforcement of international co-operation or resolutions made by the United Nations, the Ministry of Justice may – at its discretion or upon a filing from the Bureau of Investigation – designate and announce the sanctions list. Such sanction list will include the persons/entities/associations designated in the resolutions of the UN Security Council regarding terrorism financing or weapons of mass destruction.
Unless otherwise approved by the Ministry of Justice, pursuant to the TFPA no one is permitted to engage in the following activities with the persons/entities/associations named on the sanctions list:
The above restrictions also apply to cases where a third party keeps or manages property or property interests of the sanctioned persons/entities/associations by authorisation, appointment or trust, or due to other causes.
Therefore, if international treaties or protocols in connection with counter-terrorism require a person/entity/association to be sanctioned, or if it is necessary to sanction a person/entity/association for the implementation of UN Security Council resolutions on counter-terrorism, such person/entity/association would very likely be sanctioned by the Taiwanese government as well, pursuant to the TFPA. The current sanctions list of the Ministry of Justice can be found here.
While the SIFN does not explicitly prohibit persons/entities/associations that are on the sanctions list in Taiwan from making FDIs in Taiwan, all FDIs are subject to approval by the DIR, which will very likely deny an application from such person/entity/association due to security concerns.
Real Estate Transactions
The administration of real estate is governed by the Land Act, Building Act and Housing Act, while real estate transactions are mainly governed by the Land Act and the Civil Code. Under Taiwan law, a foreign investor (except for PRC nationals and companies, which are subject to a stricter set of laws and regulations) is permitted to own real estate on a reciprocal basis (ie, depending on whether its country permits Taiwanese investors to acquire real estate there as well – “Reciprocal Countries”) except for certain sensitive lands which are not allowed to be transferred or leased to foreigners. The list of Reciprocal Countries may be updated by the Taiwan Ministry of the Interior from time to time.
In Taiwan, in a land and building sale, the titles to the land and building are transferred to the buyer only when such titles are duly registered under the name of the buyer with the local land office, and the use of the land and building is subject to the zoning rules and occupancy permit-related regulations, respectively. Furthermore, generally speaking, a foreign investor is not subject to an FIA for its acquisition of real estate in Taiwan, unless the purchase price of the real estate is funded through either an equity contribution by the foreign investor into its Taiwanese company or a shareholder loan of one year or longer extended by a foreign shareholder to its Taiwanese company.
Foreign Exchange Regulations
Under the current foreign exchange control laws and regulations in Taiwan, cash dividends declared and payable on the shares of a Taiwanese company or the cash earnings of a Taiwanese branch may be converted from NTD into foreign currency and transferred out of Taiwan to a foreign shareholder or the foreign headquarters freely without any additional Taiwan government approvals relating to foreign exchange, as long as such foreign shareholder or foreign headquarters maintains its status as a foreign investor as approved by the DIR or the MOEA. The Taiwanese company or branch only needs to present the required documentation to the wiring bank in order to initiate the wiring of cash dividends or earnings, which is a straightforward process.
Specific Industry/Sector Restrictions
According to the Negative List, which sets forth the sectors in which foreign investment is either restricted or prohibited, and the Positive List, which sets forth the sectors in which PRC investors are permitted to invest as promulgated by the DIR, the DIR’s review standards and intensity of scrutiny will vary according to the subject investment industries/sectors. See 1. Legal System and Regulatory Framework for further information.
Corporate Income Tax (CIT)
CIT is levied at a flat rate of 20% of total taxable income. Taxable income of up to NTD120,000 is exempt from CIT, and CIT may not exceed one half of the portion of taxable income that is more than NTD120,000.
Alternative Minimum Tax (AMT)
AMT is imposed on the tax-free capital gains from securities trading, among other tax-free income. Where the AMT amount (with an exemption for basic income of NTD600,000 per annum) is in excess of the ordinary income tax amount calculated in accordance with the Income Tax Law, the difference is subject to AMT at a rate of 12%. In addition, with the OECD’s introduction of Pillar 2, it is expected that the Global Anti-Base Erosion Rules will be enforced in 2024. In light of the OECD pillars, although Taiwan is not a member of the OECD/G20, the Ministry of Finance has closely monitored the developments in the latest international taxation. As regards an increase in the AMT rate from 12% to 15%, the Ministry of Finance would take the practical experiences of other countries into consideration in analysing the feasibility and the interrelated facilities of the increase in the AMT rate.
Surtax on Undistributed Earnings
A 5% surtax on undistributed earnings is imposed on any current earnings of a corporation that remain undistributed by the end of the following year. Taiwan branches of foreign companies are not subject to this 5% surtax, however.
Value-Added Tax (VAT)
Sales of goods or services within the territory of Taiwan are subject to 5% VAT.
Stamp Duty
Stamp duty is levied on various types of documents, such as:
Stamp duty rates vary depending on the type of instrument being stamped. As an example, stamp duty on a contract for the sale, transfer and partition of real estate is 0.1% of the transfer value.
Withholding Tax (WHT)
WHT is imposed on certain types of payment made by Taiwan corporations (including salaries, dividends, interest, royalties, etc), with tax rates varying depending on whether the recipient is a Taiwan resident corporation, a Taiwan resident individual, a non-Taiwan resident individual or a non-Taiwan resident corporation.
The withholding tax rates for Taiwan resident corporations paying certain types of income are as follows:
While double taxation agreements (DTAs) are available for transaction counter-parties from several countries, applications for the adoption of such DTAs are subject to the Principal Purpose Test.
A withholding tax of 20% is generally charged on Taiwan-sourced income of foreign companies that have their head office located outside Taiwan. Article 25 of the Income Tax Act states that when a company that has its head office outside Taiwan and that provides certain services (eg, technical services or equipment rental) within the territory of ROC, has difficulty calculating and apportioning costs, it may file an application with the Ministry of Finance to treat 15% of its ROC-sourced income as its deemed taxable income. The CIT rate of 20% is then applied to the deemed taxable income. In other words, with proper authorisation, the withholding tax rate for a foreign company in Taiwan may, under certain specific conditions, be effectively reduced to 3% through the tax incentive scheme. Prior approval should be acquired in order to be eligible for the tax benefit.
Capital Gains Tax
No capital gains tax is currently imposed on the sale of Taiwanese securities under the Taiwan Income Tax Act.
Nonetheless, the sale of shares (or capital contribution) – where a company holds the majority of shares (over 50%) – of directly or indirectly held foreign or domestic profit-seeking enterprises where more than 50% of the value of the shares (or capital contribution) is comprised of building and land within Taiwan acquired after 1 January 2016, is subject to the Joint Property Tax System 2.0 (excluding the sale of listed/OTC or emerging stock).
Securities Transaction Tax
Transfers of shares of listed and unlisted companies are subject to the securities transaction tax. The transferor will be liable for securities transaction tax at 0.3% of the transfer price. This is usually deducted from the purchase price and paid by the transferee/buyer to the appropriate revenue authority on the date of transfer or the next day.
Transfer Pricing
Taiwan has transfer pricing rules that require transactions between related parties to be conducted on an arm’s length basis. The transfer pricing rules regulate that the profit allocation under a business structuring must be in compliance with the arm’s length principle. Sometimes there are intercompany arrangements between a Taiwan legal entity and its parent/affiliate company abroad.
If services (R&D services, maintenance services, etc) are provided within Taiwan, and the costs are borne by the Taiwan entity and deducted from its taxable income, while the benefits are enjoyed by foreign entities, the costs would be deemed as potential tax evasion from a tax perspective. In such cases, the Taiwan entity would be expected to receive compensation with a reasonable mark-up rate for such arrangement. The reasonable range for the mark-up rate depends on the nature of the services provided by the Taiwan entities. Normally, the mark-up rate should be 8% to 10% for general services. Nonetheless, the reasonable mark-up rate may be subject to challenge by the tax authority.
Thin Capitalisation Rules
A profit-seeking enterprise, such as a subsidiary or a Taiwan branch of a foreign company, is subject to thin capitalisation rules. Interest expense from related party debt exceeding a 3:1 debt-to-equity ratio is not deductible for tax purposes. Companies in the financial industry, such as banks, financial holding companies, insurance companies, securities firms, etc, are not subject to the thin capitalisation rules.
Controlled Foreign Company (CFC)
CFC rules came into effect from 1 January 2023. A CFC is defined in Taiwan as a foreign enterprise registered in a low-tax jurisdiction, with more than 50% of its paid-in capital owned by a Taiwan legal entity together with its related parties, either directly or indirectly. If the paid-in capital ownership percentage is less than 50% but the foreign enterprise is effectively controlled by a Taiwan legal entity together with its related parties, either directly or indirectly, then the foreign enterprise will also be deemed to be a CFC.
A low-tax burden jurisdiction is defined as a tax jurisdiction with a corporate income tax rate lower than 70% of the corporate income tax rate in Taiwan (ie, 20% of 70% = 14%). The CFC rules do not apply if one of the following conditions is met:
Once the CFC rules are applied, CFC income should be included in the Taiwan legal entity’s income tax return, and income tax should be levied thereon.
The Labour Standards Act (LSA) stipulates the minimum standards and requirements for all employment relationships, including employee statutory entitlements, statutory causes for the termination of an employment contract, statutory requirements for implementing non-competition obligations, fixed-term employees, etc.
Labour unions may negotiate and sign collective agreements with employers, and may proceed to strike in labour disputes regarding rights. To form a labour union in a Taiwanese company, there must be at least 30 employees (members).
Regardless of the number of employees, every business entity in Taiwan must establish a Labour Management Conference (LMC) to co-ordinate worker-employer relationships and relevant matters (if the company has a labour union, such tasks will alternatively be handled by the labour union). For example, the implementation of overtime work mechanisms and flexible-working hour arrangements is subject to prior approval by the labour union or, in the absence of a union, the LMC.
Wages and Compensation
Employees are usually paid in cash on a monthly basis. Their wages must not fall below the basic wage announced by the government each year; starting from 1 January 2024, the minimum monthly wage will be USD886 (NTD27,470). In Taiwan, it is common to reward employees through contractual or discretionary bonuses, which could be cash, stocks, options or another form.
Under the Company Act, the AOI of a company must state a fixed amount or a percentage of the annual profit for distribution as employees’ compensation, which can be distributed in the form of shares or cash.
Social Insurance Schemes
Except as otherwise prescribed by law, an employer must enrol all employees in the statutory social insurance schemes (ie, labour insurance, employment insurance, labour occupational accident insurance and national health insurance) from the first day of their employment, and pay the premiums on a monthly basis.
Labour Pension Schemes
There are currently two types of statutory pension schemes in Taiwan: one under the LSA (Old Pension Scheme) and the other under the Labour Pension Act (New Pension Scheme).
Under the Old Pension Scheme (which generally applies to local employees hired before 1 July 2005 and to foreign employees), an employer must appropriate labour retirement reserve funds ranging from 2% to 15% of the monthly salary of eligible employees and deposit such amount in a special account at the Bank of Taiwan each month.
Under the New Pension Scheme (which came into effect on 1 July 2005), an employer must contribute an amount equivalent to at least 6% of each employee’s monthly pensionable salary to their individual pension fund account monthly; the employee may also voluntarily contribute a portion (up to 6% of their monthly salary) to the pension fund account.
The acquisition of a Taiwan company can be in the form of a business/asset purchase or a share purchase.
Sale of Business/Assets
There is no automatic transfer of employees in a business/asset transfer. Under the LSA and the M&A Act, any transfer of employees (eg, from the target company to the purchaser) is subject to the consent of each employee. If an employee declines the offer extended by the purchaser, the target company must extend severance pay and other statutory entitlements to such employee when terminating their employment agreement. If an employee consents to the transfer, their seniority accrued at the target company must be recognised by the purchaser. If the target company has a labour union, the union may negotiate more favourable employment terms and conditions with the purchaser.
Purchase of Shares
Typically, in a share acquisition, no employee will be transferred or made redundant if such transaction only involves the change of the shareholder of the employer. The sale of shares in the target company will not entitle its employees to severance pay nor entitle the target company or the new owner to the right to terminate the employment contracts of the employees (unless any separate statutory cause of termination exists).
However, for a share deal structured as a merger where the target company is merged into the surviving company, the process described above under “Sale of Business/Assets” will apply.
Intellectual property is generally not an important aspect in screening FDI in Taiwan, except in certain sensitive industries, such as the manufacture of semi-conductors, military-related technology, etc. In short, when reviewing an FDI application, the DIR will consider all factors and may seek the opinion of other government authorities, if necessary.
As part of the nation’s push to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) and bring its intellectual property framework in line with international standards, Taiwan has conducted a review of its IP rights legislation and taken various actions to strengthen the protection of IP rights through amendments to the Copyright Act, the Trademark Act and the Patent Act in the past few years, thereby establishing a sound legal environment offering comprehensive protection of IP rights.
There is no particular sector in which it is difficult to obtain IP protections or in which only limited protections are offered.
Data protection in Taiwan is primarily governed by the Personal Data Protection Act (PDPA) and the Enforcement Rules of the PDPA. Some central competent authorities have also stipulated rules with regard to the relevant personal data security measures for the relevant industry sectors under their charge.
Taiwan is currently in dialogue with the EU in relation to an adequacy decision under the General Data Protection Regulation (GDPR), and the Taiwan government plans to further amend the PDPA in order to meet GDPR standards. Such amendment would include the adoption of cross-border data transfer restrictions similar to those under the GDPR, the establishment of an independent data protection authority, etc.
The PDPA applies in principle to all data collection and processing activities taking place in Taiwan, without regard to whether the data subjects are Taiwan nationals or not. The PDPA does not explicitly provide for extraterritorial application of the PDPA to offshore entities, and the position of the authorities is that the PDPA does not have the type of extraterritorial effect as spelled out under the GDPR.
A non-government agency will face an administrative fine of up to NTD1,500,000 if the non-government agency fails to comply with the PDPA. Potential legal liabilities also include civil or even criminal liabilities.
8F, No 555, Sec 4
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attorneys@leeandli.com www.leeandli.com/TWAmendments for Relaxation of Merger Control Rules
In June 2023, the Taiwan Fair Trade Commission (TFTC) promulgated the following major amendments to the merger control rules.
Additional type of combination exempted from filing
Prior to June 2023, the TFTC would exercise jurisdiction over a foreign-to-foreign combination only if the subject transaction would have a local effect on the Taiwanese market. In June 2023, the TFTC passed the amendments to the Combination Types to Which Paragraph 1, Article 11 of the Fair Trade Act Does Not Apply, which added a non-notifiable type of combination “where foreign enterprises jointly establish or operate a joint venture outside the territory of Taiwan, and the joint venture is not engaged in economic activities within the territory of Taiwan”. Nevertheless, the TFTC notes that, “[the joint venture] not engaging in economic activities within Taiwan” means that it is not engaging in any economic activities that involve supply and demand of goods or services in Taiwan. For example, the products produced by the joint venture are sold only outside of Taiwan or sold exclusively to its foreign parent company, without affecting the supply and demand in Taiwan. The so-called “economic activities” include the sale of goods or services, provision of quotations, bargaining and conclusion of sales, contracts or engagement with counter-parties in connection with the sale.
To correspond with such amendments, the TFTC abolished the Guidelines on Handling Extraterritorial Combinations in June 2023. Thereafter, except for the non-notifiable types of combination, an extraterritorial combination which meets any of the filing thresholds must be notified to the TFTC in accordance with the Taiwan Fair Trade Act and the waiver of jurisdiction will not apply.
Simplified procedure applies to more types of combinations
In June 2023, the TFTC promulgated the amendments to the Taiwan Fair Trade Commission Disposal Directions (Guidelines) on Handling Merger Filings, specifying that the simplified procedure also applies to the following four types of combinations:
Amendments to Lower the Threshold Triggering the Requirements for Reporting and Disclosing a Substantial Shareholding
To fully and timely disclose any significant changes in a company’s shareholding structure, and strengthen the legal compliance of securities firms and institutions, Taiwan’s president announced the amendments to the Securities and Exchange Act on 10 May 2023 (the “SEA Amendments”). According to the SEA Amendments, the threshold for reporting and disclosing a substantial shareholding that any person acquires, either individually or jointly with others, has been lowered from 10% to 5%. To allow time for shareholders to take corresponding measures to comply with the new rules, the new threshold will only take effect on 10 May 2024.
Amendments to PRC Investment Regulations
In response to dynamic international geopolitical issues and tension in cross-strait relations in recent years, the Taiwan government has gradually imposed more stringent controls over investments from the People’s Republic of China (“PRC Investments”), and seeks to identify PRC Investments disguised as foreign investments. Relevant laws and regulations on PRC Investments have been amended, and related rulings have been promulgated by the authorities to scrutinise PRC Investments, especially to distinguish PRC Investments from foreign investments.
Amendments to the following regulations and rulings have had a significant impact on foreign direct investment (FDI) in Taiwan, and investors should carefully assess their compliance with Taiwan laws and regulations. It is also worth noting that the competent authority in charge of FDI-related matters was reorganised on 26 September 2023 and is now known as the Department of Investment Review (DIR) of Taiwan’s Ministry of Economic Affairs, instead of the Investment Commission.
In general, under Article 73 of the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area (the “PRC Relations Act”), an investment into Taiwan by a statutorily defined PRC Investor is subject to more stringent scrutiny by the DIR of Taiwan’s Ministry of Economic Affairs than investments by other foreign investors. Under the Regulations Governing Investments by Nationals in Mainland China (the “PRC Investment Regulations” – a sublaw of Article 73 of the PRC Relations Act), a PRC Investor includes any individual, juristic person, organisation or any other institution of Mainland China (a “Mainland Person”) or of any third area that is owned or controlled by a Mainland Person (a “Third-Area Company”).
To specify, if a Mainland Person directly or indirectly contributes more than 30% of the total shares or capital contribution of a Third-Area Company (“Equity Control”) or has the power/capability to control a Third-Area Company (“Substantial Control”), such Third-Area Company will be deemed a PRC-invested company and thus a PRC Investor. Such Third-Area Company’s investment in Taiwan will be subject to the PRC Investment Regulations rather than the Statute for Investment by Foreign Nationals (which applies to non-PRC investments).
To filter and scrutinise PRC Investments, and to avoid any circumvention via indirect investment structures or other investment arrangements (ie, PRC Investments in the guise of foreign investments), the DIR promulgated amendments to the PRC Investment Rules (the “Amendments”) and, based on its function and power as the governing authority for FDI, issued relevant rulings (the “New Rulings”) on 30 December 2020. Such Amendments and New Rulings have had a significant impact on both PRC Investments and foreign investments.
Stricter criteria for identifying PRC Investments through a Third-Area Company
The Amendments and the New Rulings did not change the principle that if a Mainland Person holds more than 30% of the shares in a Third-Area Company or has control over the Third-Area Company, such Third-Area Company will be deemed a PRC Investor.
Nevertheless, the New Rulings stipulate a more comprehensive set of criteria for determining Equity Control, whereby said 30% shareholding rule will be applied to each level of the shareholding structure, rather than to the total percentages of direct and indirect PRC Investment simply being multiplied by ownership percentages at each level. In other words, under the New Rulings, a Third-Area Company is deemed a PRC Investor as long as any Mainland Person directly or indirectly holds more than 30% of any holding company of such Third-Area Company. In addition, any subsidiary of such Third-Area Company where more than 30% of the shares are held by such Third-Area Company will also be considered a PRC Investor.
The New Rulings also broaden the definition of Substantial Control. Under the previous criteria for identifying Substantial Control, one of the standards was whether the board of directors (or any equivalent governing body) was controlled by PRC Investors. Under the New Rulings, this standard has been changed to apply to a “board of directors (or any other organ in charge of the directions of the [Third-Area] Company’s operation)”, in order to cover any other organisation that is capable of affecting the operation of the Third-Area Company (such as a sub-committee with decision-making power under the board of directors).
Expansion of the scope of PRC Investment activities that are subject to regulatory approval
The Amendments have also expanded the scope of investment activities requiring the DIR’s approval. Prior to the Amendment, a PRC Investor had to obtain the DIR’s approval before conducting any of the following activities:
The Amendment has expanded this scope of activities to include the following:
Stricter restrictions on PRC Investments by political or military affiliation
The Amendments also expand the scope of PRC military affiliation restrictions.
Prior to the Amendments, investments made by “corporations invested in by the PRC military or having military missions” in Taiwan were prohibited under the PRC Investment Rules. Now, the Amendments further stipulate that any legal entity, group or other institution invested in by governmental, military, administrative or political authorities (institutions) or groups in the PRC or any Third-Area Companies with such investment will be deemed a PRC military affiliation.
Moreover, since the level of risk posed to Taiwan’s national security by investments made by corporations with PRC political or military affiliations may vary from one case to another (eg, depending on the shareholding ratio of such PRC Investors), the competent authority may impose various restrictions on such investments on a case-by-case basis (eg, directorship restrictions or ownership restrictions of the PRC Investor in a Taiwan company, etc). Furthermore, if the DIR believes that the proposed investment will have a significant impact on Taiwan’s national security, it has ample discretion to reject such application.
PRC Branch Regulations v PRC Investment Regulations
Although all PRC Investments require prior approval from the DIR, the scope of PRC Investment under the PRC Investment Regulations does not cover PRC Investors’ direct business activities in Taiwan, nor their establishment of branches or representative offices in Taiwan. Such activities are not subject to the PRC Investment Regulations, but to Article 40-1 of the PRC Relations Act and the Regulations Governing the Establishment of Branches or Representative Offices in Taiwan by PRC Profit-Seeking Enterprises (the “PRC Branch Regulations”) – that is, the sublaw of the PRC Relations Act.
Prevention of PRC business activities in Taiwan via Third-Area Companies
To address increasing public concern over PRC Investors disguising themselves as foreign investors (by using non-PRC intermediaries), Article 40-1 of the PRC Relations Act was also amended, to stipulate that a non-PRC profit-seeking enterprise (ie, a third-area entity) invested in by a PRC profit-seeking enterprise is prohibited from engaging in any business activities in Taiwan without the authority’s prior approval and without establishing a branch or a representative office in Taiwan; otherwise, criminal penalties may be imposed.
The definition and scope of “PRC profit-seeking enterprises” and “non-PRC profit-seeking enterprise invested in by a PRC profit-seeking enterprise” are stipulated under the PRC Branch Regulations, which were amended by the Ministry of Economic Affairs on 17 November 2022.
To prevent a Mainland Person from establishing branches or representative offices via a Third-Area Company and operating businesses in Taiwan, the November 2022 amendment to the PRC Branch Regulations not only changes the name of the PRC Branch Regulations to “the Regulations Governing the Establishment of Branches or Representative Offices in Taiwan by PRC Businesses or Third-Area Companies Invested in by a Mainland Person” but also explicitly includes Third-Area Companies as “PRC profit-seeking enterprises”. Under the prior PRC Branch Regulations, Third-Area Companies were not expressly listed as “PRC profit-seeking enterprises”, although it has been the DIR’s long-standing position and practice to treat such Third-Area Companies as “PRC profit-seeking enterprises” and to require such Third-Area Companies that wish to establish a branch or representative office in Taiwan to apply for the DIR’s prior approval in accordance with the PRC Branch Regulations.
Accordingly, this long-standing practice of the authority is now being expressly stipulated in the PRC Branch Regulations.
Heavier Punishments for Indirect Shareholding Nominee Arrangements That Circumvent Regulations on PRC Investments
In order to maintain the advantage of Taiwan’s hi-tech industries and national economic interests more comprehensively, and to prevent the outflow of Taiwan’s core critical technologies, the PRC Relations Act and the National Security Act (NSA) were amended on 8 June 2022. Such amendments cover PRC Investments under the PRC Investment Regulations and PRC business activities in Taiwan under the PRC Branch Regulations.
Prohibition on Taiwanese individuals offering or allowing the use of their names by PRC Investors
Penalties for investing in Taiwan via Taiwanese nominees
The penalties for violation of Article 73 of the PRC Relations Act and the PRC Investment Regulations are provided under Article 93-1 of the PRC Relations Act. To prevent PRC Investors from disguising themselves as Taiwanese individuals by using nominees to invest in Taiwan, thereby circumventing the PRC Investment Regulations, Article 93-1 of the PRC Relations Act was amended to prohibit Taiwanese individuals from offering their names to, or allowing the use thereof by, PRC Investors for the purpose of investing in Taiwan – ie, to be their nominees.
For a violation of the above requirements, both the PRC Investor and the Taiwanese nominee would be subject to a fine of between NTD120,000 and NTD25 million. In addition, the DIR may order the violator to cease or withdraw such investment or to rectify it within a specified time limit, and it may suspend the violator’s shareholder rights if necessary. If the violator fails to act accordingly, the DIR may impose consecutive fines on the violator until the correction of such violation and may, if necessary, instruct the company registration authority to revoke or nullify the violator’s company registration.
Penalties for engaging in business activities in Taiwan via Taiwanese nominees
The penalties for violating Article 40-1 of the PRC Relations Act and the PRC Branch Regulations are stipulated under Article 93-2 of the PRC Relations Act, which was also amended to raise the criminal liabilities for PRC profit-seeking enterprises conducting business activities in Taiwan by using non-PRC intermediaries or Taiwanese nominees, and for any such Taiwanese nominees.
Pursuant to the amended Article 93-2, a violator will be subject to imprisonment for up to three years (this was one year before such amendment), detention and/or a fine of up to NTD15 million (this was NTD150,000 before such amendment).
Apart from criminal liabilities, a violator also bears civil liabilities; if there are two or more violators, they will be jointly and severally liable for any such civil liabilities. Moreover, the competent authorities will suspend the use of the violator’s company name. If the violator is a juristic person (entity), association or other institution, the person in charge of its act will be punished, and the juristic person (entity), association or institution will also be subject to the foregoing fine.
Heavier Punishments for Theft of Taiwanese Core Technologies
The 8 June 2022 amendment to the NSA also raised the criminal liabilities for the theft of Taiwanese core technologies. Such amendment was prompted by a number of incidents in recent years where the trade secrets of Taiwan’s hi-tech companies have fallen prey to PRC competitors.
Before the amendment, an individual was prohibited from engaging in acts such as initiating, funding, hosting, manipulating, directing or developing an organisation for foreign countries, Mainland China, Hong Kong, Macao or hostile foreign forces (collectively, the “Offshore Entities”). Other acts were also prohibited, such as disclosing, delivering, transmitting, spying on or collecting confidential documents, drawings, images, messages, articles or electromagnetic records to be used in an official capacity by the Offshore Entities. Conducting these prohibited acts may lead to imprisonment of up to more than seven years and a fine of up to NTD100 million. However, before the amendment, the NSA did not include the protection of Taiwan’s critical core technologies, which are also deemed trade secrets.
The newly introduced Economic Espionage Crime under the amended NSA
In order to make the scope of protection of trade secrets comprehensive and consistent, the legislators referred to the terms of the Trade Secret Act and added the “Economic Espionage Crime” to the amendment to the NSA.
Under the amendment, any individual who engages in any act that infringes upon the trade secrets of any national core criticaltechnology (ie, steals Taiwan’s critical technologies) with the following motive will be deemed to have committed an Economic Espionage Crime and will face a maximum of 12 years in prison and a fine of between NTD5 million and NTD100 million:
To further deter criminal behaviour, the following applies:
Moreover, to ensure the maximum range of protection, an “act that infringes upon the trade secrets of any national core critical technology” includes but is not limited to the acquisition, use, disclosure, reproduction and concealment of any national core critical technology.
Definition of “national core critical technologies”
Under Article 3 of the amendment to the NSA, “national core critical technologies” refers to the following technologies, the outflow of which to foreign entities will significantly damage Taiwan’s national security, competitiveness in certain industries or economic development:
In response to changes in the industrial environment or technological circumstances, the content and definition of national core critical technologies will be reviewed regularly by the National Science and Technology Council (NSTC), announced by the Executive Yuan, and submitted to the Legislative Yuan for recordation. To stipulate more specific procedures for reviewing the content and definition of national core critical technologies, the Regulations on the Designation of National Core Critical Technologies (the “Regulations”) were promulgated by the NSTC on 26 April 2023. Under the Regulations, the NSTC will establish the Review Committee of National Core Critical Technologies (the “Review Committee”) responsible for the designation, alternation and other matters relating to national core critical technologies, and the Office of National Core Critical Technologies (the “Office”) responsible for tracking and analysing the development of relevant technologies and making proposals regarding national core critical technologies.
Furthermore, based on Article 9 of the PRC Relations Act, the NSTC also promulgated the Regulations on the Designation of National Core Critical Technologies-Related Projects Commissioned, Subsidised or Funded by Government Agencies (Authorities) (the “Subsidies Regulations”) to clarify the scope of the individual or member who has engaged (or had engaged within the past three years) in national core critical technologies-related research projects funded by government agencies (authorities), and to request such member to submit a prior application and obtain an approval before entering into Mainland China.
On 5 December 2023, the first tranche of national core critical technologies, totaling 22 items, and the competent authority in charge thereof were announced. These items cover technical fields with leading advantages and requiring urgent protection; for example, defence technology, and space, agriculture, semiconductor and information security.
8F, No 555, Sec 4
Zhongxiao E Rd
Taipei 11072
Taiwan
ROC
+886 2 2763 8000
+886 2 2766 5566
attorneys@leeandli.com www.leeandli.com/TW