How to Set Up a Subsidiary Company in Taiwan?

Expanding your business into Taiwan can be a smart move for companies looking to tap into Asia’s advanced manufacturing base, world-class tech talent, and efficient infrastructure. Setting up a subsidiary here allows you to operate as a local business while maintaining full ownership and control.

This guide walks you through setting up a subsidiary company in Taiwan, from choosing the right subsidiary structure to registering with local authorities and staying compliant.

Key Takeaways

• Registering a subsidiary in Taiwan typically takes 68-88 days, with a streamlined process managed through the Ministry of Economic Affairs (MOEA).
• Taiwan offers a flat corporate income tax rate of 20%, with potential incentives for specific industries like tech, R&D, and green energy.
• Foreign businesses can establish a subsidiary without appointing a Taiwanese resident as director, offering more flexibility in corporate governance.
• Foreign investors are allowed to own 100% of a subsidiary in most sectors, without the need for a local partner or shareholder.
• Taiwan upholds robust intellectual property laws and transparent legal processes, making it a reliable destination for safeguarding proprietary technologies and business assets.

What are the Types of Subsidiaries in Taiwan?

When setting up a subsidiary company in Taiwan, businesses can choose from several structures based on ownership and partnership goals:

• Wholly-Owned Subsidiary: Fully owned by the parent company. It operates as a separate legal entity under Taiwanese law, giving the parent full control.
• Joint Venture: Formed in partnership with a local entity or another foreign firm. Ownership, control, and profits are shared based on the agreement.
• Branch Office (not technically a subsidiary): Although not a separate legal entity, this is an option for companies looking to operate under the parent company’s name in Taiwan.
• Limited Company (Co., Ltd.): A standard subsidiary structure in Taiwan, it allows both local and foreign investors to participate. The company is a separate legal entity from its shareholders, with limited liability based on their capital contribution.
• Representative Office: This non-commercial entity cannot engage in profit-making activities. It’s used for liaison, market research, and administrative purposes. It does not qualify as a subsidiary but is a stepping stone toward setting one up.

Step-by-Step Guide to Setting Up a Subsidiary in Taiwan

Setting up a subsidiary company in Taiwan involves a clear set of legal and administrative steps. Here’s a simplified and actionable guide:

1. Determine the Subsidiary Structure: You can choose between a limited company and a company limited by shares based on ownership goals and future business plans.
2. Reserve the Company Name: Submit a name reservation application to the Department of Commerce. Ensure the name is unique and aligns with Taiwanese naming regulations.
3. Prepare Incorporation Documents
   Collect the following:
   • Certificate of incorporation of the parent company
   • Board resolution authorising the formation of the subsidiary
   • Articles of incorporation for the new entity
   • List of directors, supervisors (if required), and shareholders
4. Register with the Ministry of Economic Affairs (MOEA): Submit all required documentation and receive company registration approval.
5. Apply for a Uniform Business Registration (UBR) Number: This is the company’s tax ID and is required for invoicing and taxation purposes.
6. Open a Corporate Bank Account: Deposit the minimum capital as required. Once the funds are confirmed, a local bank will issue a capital verification certificate.
7. Complete Tax Registration: Register with the National Taxation Bureau for VAT, business tax, and other applicable taxes.
8. Obtain Additional Licenses (If Applicable): Depending on your business sector, you may need special permits or licences (e.g., for fintech, manufacturing, or medical sectors).
9. Register with Labour and Health Insurance: If employing local staff, enrol with the Bureau of Labour Insurance and the National Health Insurance Administration.
10. Comply with Ongoing Reporting and Compliance Requirements: Maintain proper bookkeeping, submit annual reports, and comply with local tax filings.

Key Benefits of Establishing a Subsidiary in Taiwan

Expanding into Taiwan offers strategic advantages for businesses looking to grow in Asia. Setting up a subsidiary in Taiwan can unlock numerous operational and financial benefits for international companies:

• Full Control Over Operations: A subsidiary in Taiwan, especially a Wholly Foreign-Owned Entity (WFOE), allows the parent company to maintain complete control over its business decisions, branding, staffing, and strategy. 
• Limited Liability Protection: A subsidiary operates as a separate legal entity from its parent company. This structure ensures that liabilities incurred in Taiwan do not affect the parent company’s global assets, thereby minimizing financial risk and protecting shareholders.
• Access to Local Incentives and Tax Benefits: Taiwan offers various tax incentives to foreign investors, especially in high-tech and strategic industries. Subsidies, R&D grants, and investment allowances may be available. 
• Favourable Business Environment: Taiwan ranks high in terms of ease of doing business, with efficient company registration processes, strong IP protections, and transparent legal systems. 
• Closer Market Access in Asia: A Taiwanese subsidiary provides a strong operational base within Asia, allowing companies to serve clients in neighbouring countries with shorter supply chains, reduced logistics costs, and culturally aligned customer service.

Essential Documents for Registering a Subsidiary

Here is a checklist of key documents required during the business incorporation of a subsidiary in Taiwan:

• Certificate of Incorporation of the parent company (translated into Chinese)
• Board resolution approving the establishment of the subsidiary
• Articles of incorporation of the new Taiwanese entity
• Personal ID/passport copies of directors, supervisors, and shareholders
• Company name approval letter from the MOEA
• Registered business address proof (e.g., lease agreement)
• Capital verification certificate from a local bank
• Tax registration forms (including VAT and business tax)
• Power of attorney for local legal representative (if applicable)

Legal Structures Available for Subsidiaries in Taiwan

Taiwan offers several legal business structures for subsidiaries:

• Limited Company (Ltd.): Popular among small to mid-sized businesses. Requires at least one shareholder and one director.
• Company Limited by Shares: Suitable for larger businesses seeking future investment or public listing. Requires at least two shareholders.
• Branch Office: Operates under the foreign parent’s name. Not a separate legal entity, but still requires registration.
• Representative Office: Can’t engage in profit-making activities. Used for market research or liaison purposes.

Taxation Rules and Incentives for Subsidiaries in Taiwan

Understanding Taiwan’s tax framework is crucial for any company planning to establish a regional subsidiary. Here is what you need to know about taxation rules and incentives in Taiwan:

Corporate Income Tax (CIT)

• Taiwan imposes a standard corporate income tax rate of 20% on taxable profits exceeding TWD 120,000.
• Income below TWD 120,000 is tax-exempt.
• Subsidiaries, as separate legal entities, are taxed independently from their parent companies.
• A 10% surtax applies to undistributed earnings, aimed at encouraging profit reinvestment or distribution.

Value-Added Tax (VAT)

• Taiwan applies a 5% VAT on most goods and services.
• Subsidiaries engaged in commercial activities must register for VAT and submit monthly returns.
• Exported goods and certain international services may qualify for zero-rated VAT.

Withholding Tax

Payments made by a subsidiary to foreign entities may be subject to withholding tax:

• Dividends: 21% (can be reduced under tax treaties)
• Interest: 15%
• Royalties: 20%

Transfer Pricing Regulations

• Taiwan enforces transfer pricing rules to prevent profit shifting between related entities.
• Subsidiaries must ensure transactions with the parent company comply with arm’s length principles and may need to submit documentation upon request.

Tax Filing and Compliance

• Annual income tax returns must be filed by May 31 following the end of the calendar year.
• VAT returns are filed monthly or bimonthly, depending on business scale.
• Financial statements must comply with Taiwan’s Generally Accepted Accounting Principles (GAAP) or IFRS(for public companies).

Incentives and Tax Benefits

1. Investment Tax Credits

• Foreign-invested subsidiaries engaged in technology R&D, smart manufacturing, or green energy may be eligible for tax credits of up to 15% of qualifying expenditures.

2. Tax Holidays for Key Industries

• Certain high-tech or innovative businesses can apply for income tax exemption, subject to Taiwan’s Ministry of Economic Affairs approval.

3. Science Park and Export Processing Zone Benefits

• Subsidiaries in designated zones may benefit from property tax reductions, land-use benefits, and streamlined customs clearance.
• These zones also offer subsidised R&D support and infrastructure access.

4. Double Taxation Agreements (DTAs)

• Taiwan’s DTAs with countries like the U.S., Japan, India, and EU member states provide reduced withholding taxes and improved tax certainty for cross-border transactions.

These rules are essential in setting up a subsidiary in Taiwan, and also if you want to understand how to start a parent company in Taiwan.

Regulatory and Compliance Requirements

When setting up a subsidiary company in Taiwan, you must:

• File audited annual financial statements with the Ministry of Economic Affairs (MOEA).
• Submit corporate tax returns by May and VAT filings every two months.
• Enrol employees in Labour and Health Insurance, and remit premiums monthly.
• Report changes in company details (address, capital, directors) promptly.
• Comply with industry-specific regulations, if applicable.

To set up a foreign subsidiary in Taiwan, comply with legal and financial regulations. Reserve a unique Chinese company name, define business scope per TSIC codes, and appoint a local representative with a Taiwanese address. Secure a physical office and sufficient capital (industry-dependent). Obtain MOEA investment approval, register the company, and open a preparatory bank account for capital deposit. Finally, acquire a Unified Business Number and VAT registration (if applicable).

Do You Need a Physical Address for a Subsidiary in Taiwan?

Yes. A physical address is required for company registration, and P.O. Boxes are prohibited. Here are the key details:

• Legal Requirement: The business must provide a valid, physical address in Taiwan that is zoned for commercial use. This is essential for receiving official communications, tax notices, and government correspondence.
• Virtual Offices Not Accepted: Virtual or PO box addresses are not typically accepted for legal registration. The MOEA typically requires a real, verifiable address for conducting business activities.
• Lease Agreement or Ownership Proof: During registration, you must submit proof of the lease agreement or property ownership. The lease should list the company’s name and be valid at the time of application.
• Zoning Compliance: The location must comply with local zoning laws—some residential or industrial zones may not be eligible for office registration. If unsure, it’s best to consult local authorities or a legal expert.
• Address for Tax and Employment Registration: This address is also used to register with the National Taxation Bureau and enroll in labour and insurance schemes if the subsidiary hires employees.

This information will also help you in understanding how to set up a parent company with subsidiaries in the Taiwan market.

Operational Setup for a Subsidiary in Taiwan

Setting up operations for a subsidiary in Taiwan involves building the infrastructure, legal compliance, and local capability to ensure the business can function effectively. Here’s a breakdown of the key operational setup steps:

• Hire local staff with contracts that comply with Taiwan’s Labour Standards Act.
• Rent an office space; deposits usually equal 2–3 months’ rent.
• Use local IT/accounting systems compatible with T-GAAP and Mandarin-language interfaces.
• Set up supply chain logistics and ensure customs compliance if importing/exporting.
• Provide bilingual training and respect local business etiquette.

How to Open a Business Bank Account for a Subsidiary in Taiwan

When figuring out how to form a subsidiary in the Taiwan market, it is also essential to understand banking activities. Here are the steps to open a corporate account:

1. Choose a bank (local or international).
2. Submit documents:
   • Subsidiary registration and Articles of Incorporation
   • Company seal, board resolution
   • Tax ID and office lease proof
   • ID of authorised signatories
3. Signatories usually require in-person visits.
4. Deposit initial capital to activate the account.
5. Complete KYC procedures for anti-money laundering compliance.
6. Apply for online banking, multi-currency accounts, or credit services.

Once active, the account can be used for operations, payroll, and international transactions.

Is an Operating Agreement Necessary for a Subsidiary in Taiwan?

While not legally required, an operating agreement (or internal management document) is highly recommended, especially for limited liability companies. It outlines the ownership structure, voting rights, roles, and responsibilities of directors or shareholders. This document helps avoid disputes, ensures smoother decision-making, and reinforces corporate governance, which is especially important for foreign-owned subsidiaries reporting back to a parent company.

Opening a Branch vs. a Subsidiary in Taiwan: What’s the Difference?

Opening a subsidiary in Taiwan or opening a branch are two types of incorporation models. These can be very different and require a unique plan of action. Here is a look at their difference in further detail: 

Branches are suitable for limited operations; subsidiaries are better for long-term investment and local hiring.

How Commenda Can Help You Expand in Taiwan

Figuring out how to establish a subsidiary company in the Taiwan market involves understanding government processes, language barriers, and complex compliance rules. Commenda simplifies the entire process with an end-to-end solution designed for foreign businesses.

Here’s how Commenda supports your expansion:

• Entity Registration with the MOEA: Commenda handles the full business registration process with Taiwan’s Ministry of Economic Affairs (MOEA), including name reservation, approval of Articles of Incorporation, and company seal registration, ensuring everything meets local legal requirements.
• Document Preparation and Translation: All official documents must be submitted in Traditional Chinese. Commenda handles document drafting, translation, notarization, and legalisation, reducing delays caused by formatting or language errors.
• Tax ID and Business Bank Account Setup: Commenda assists in obtaining your Unified Business Number (UBN) and guides you through the KYC-heavy bank account opening process.
• Compliance and Regulatory Advisory: Taiwan has strict rules on labour insurance, tax filings, and annual audits. Commenda provides ongoing support for:
  • Payroll setup and tax registration
  • Labour and National Health Insurance (NHI) enrolment
  • VAT and corporate tax filing timelines
  • Annual financial statement auditing
• Virtual Office and Local Representative Services: If you don’t have a physical location yet, we offer virtual office addresses for registration and mail handling. They also provide local representative services, fulfilling the requirement for a tax contact or local signatory when needed.

Talk to an Expert today and get started!

FAQs

Q. How much does it cost to set up a subsidiary in Taiwan?
Setup costs typically range from USD 6,640 to 17,690, including government fees, legal services, translations, and notary costs. Additional costs apply for office rental or virtual address services.

Q. How long does it take to register a subsidiary in Taiwan?
It takes around 41 days, including the reservation of the company name, registration, issuance of a tax ID, and opening of a bank account.

Q. Can a foreigner fully own a subsidiary in Taiwan?
Yes. 100% foreign ownership is allowed in most industries, except for restricted sectors (e.g., media, telecommunications) that require special approval.

Q. What are the common challenges when opening a subsidiary in Taiwan?

• Language barrier (most documents must be in Mandarin)
• Opening a local bank account often requires in-person visits
• Understanding local tax and labour laws

Q. Do subsidiaries in Taiwan need a local director or representative?
No, but they must appoint a local responsible person for tax purposes. This individual may be a resident or assigned via a service provider.

Q. What are the annual compliance requirements for subsidiaries in Taiwan?

• Annual audited financial statements
• Corporate income tax filing (by the end of May)
• Bi-monthly VAT returns
• Labour and health insurance contributions

Q. Can a subsidiary hire employees directly in Taiwan?
Yes. A registered subsidiary can directly employ local or foreign staff, but must comply with Taiwan’s Labour Standards Act and enrol staff in NHI and Labour Insurance.Q. What happens if a subsidiary fails to meet compliance rules in Taiwan?
Non-compliance can result in fines, suspension of operations, tax penalties, or deregistration. Repeated violations may affect visa renewals or business permits.