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Taiwan’s stimulus vouchers explained

In response to the Covid-19 outbreak earlier this year, Taiwan’s government announced a second stimulus program to encourage consumer spending (the first program ran between July and December 2020). While most of the information about the program is in Chinese, some foreign nationals are eligible to receive stimulus vouchers. Here, we explain what the stimulus program involves, who is eligible and how eligible recipients can apply, receive, and spend the vouchers.

Voucher Program

2021′s stimulus program involves the government issuing TWD 5000 (approx. USD 180) in vouchers to eligible citizens and residents. Unlike the TWD 3000 stimulus vouchers last year, these vouchers are free and do not require users to pay TWD 1000 to receive them. Vouchers are issued in either paper or digital format. Paper vouchers can be used at restaurants, stores, hotels and other participating businesses nationwide before 30 April 2022. They will be issued in the following formats: TWD 200, TWD 500 and TWD 1000. Digital vouchers come in three formats; those linked to credit cards, those linked to stored value cards, and those linked to mobile payment platforms. They can also be used to make purchases on participating eCommerce sites.

Eligibility

The following people are eligible to receive stimulus vouchers:

  1. Taiwanese nationals, including nationals without household registration but with a Taiwan residency card or national ID
  2. Foreign spouses of Taiwanese nationals
  3. Alien Permanent Residence Card (APRC) holders
  4. Foreign diplomats

Vouchers for foreign diplomats will be issued directly by the Ministry of Foreign Affairs. At the time of writing, other foreign nationals in Taiwan, including ARC and Employment Gold Card holders, are unfortunately not included in the program.

Important Dates

  1. Digital vouchers can be applied for anytime between 22 September 2021 and 30 April 2022.
  2. Paper vouchers can be applied for online from 25 September 2021.
  3. Paper vouchers can be applied for from convenience stores from 9am on 25 September to 10pm 1 October 2021 and collected between 8 October and 21 October 2021. A second application period runs from 9am on 25 October to 10pm on 31 October with vouchers collected between 8 November and 21 November 2021.
  4. Paper vouchers can be applied for at most branches of Chunghwa Post from 4 October 2021 and collected between 12 October and 30 October 2021.
  5. All vouchers must be spent by 30 April 2022.

How to Apply

The vouchers can be applied for from the easy-to-remember web address 5000.gov.tw.

Paper vouchers can also be applied for in store during the above application periods by using iBon or FamiPort service machines at convenience stores or by visiting branches of Chunghwa Post. Likewise, paper vouchers can be collected at convenience stores or branches of Chunghwa Post during the collection periods provided above. When applying for paper vouchers online, you will be asked which convenience store location you wish to collect your vouchers from. Expect to see additional promotions from participating businesses encouraging you to spend your paper vouchers with them.

To prevent overcrowding at stores and post offices, the government is encouraging the online application and use of digital vouchers.

For digital vouchers, click through links are provided for each participating bank, stored value card issuer or mobile payment platform. Users will then be able to complete the linking of the vouchers to their desired card. There are additional promotions available from each bank or card issuer to encourage users to link their vouchers. For example, banks are offering cashback or lottery promotions for linking to their credit cards. Stored value cards such as iPass, iCash2.0 and EasyCard are offering extra credit when you link to their cards. Mobile payment platforms such as LINE Pay Money are offering points or other benefits for linking vouchers. Please refer to individual bank, card issuer or mobile platform’s dedicated stimulus voucher page for more information.

Choose wisely. Once you have linked your vouchers to a digital payment method, you can not change to paper vouchers, nor can you change to another digital payment method.

Additional Promotions

There are a total of eight add-on promotions run by different government agencies to encourage spending in designated industries. The majority of these are lottery draw promotions. They are:

  1. 好食劵 – for restaurants, night markets and food stalls
  2. 國旅券 – for the tourism industry (hotels, hostels and hot springs, etc)
  3. i原券 -   for businesses recognized by the Council of Indigenous Peoples
  4. 農遊券 – for agriculture, fishing and forestry businesses
  5. 藝FUN券/ArtsFunNext – for the arts
  6. 動滋券 – for sports
  7. 客庄券 – for businesses recognized by the Hakka Affairs Council
  8. 地方創生券 – for businesses recognized by the National Development Council

The first 4 million people who register for the digital vouchers will automatically receive the add-on vouchers for restaurants, night markets and food stalls. For the others, people must register separately. Lotteries will be drawn each week between 11 October and 5 November. Winning participants will be notified by text message. An overview of the add-on promotions and each lottery draw period can be found here. Please refer to each add-on promotional website for more details. Some individual program websites were not available at the time of writing. We will add links once they go live.

Local governments have also announced additional promotions to encourage spending in their areas. For example, Taipei City’s program requires users to download the TaipeiPASS mobile application.  TaipeiPASS promotions are available to all users including ARC holders, and are not limited to Taipei City residents. Vouchers can be used at participating restaurants, hotels, hostels, night markets, sports facilities, movie theaters and other businesses in the city. Validity periods and eligibility requirements for vouchers issued by local governments may differ from those set by central government. Taipei City’s voucher program information page is available here.

Spending Restrictions

Vouchers can be used in most businesses nationwide. Vouchers can also be used to pay hospital registration fees, school tuition fees, community college fees, buxiban/cram school fees, 30 or 60-day TRA train tickets, phone bills, gas bills and even purchasing products sold at temples. Because the aim is to stimulate consumer spending, vouchers can not be used to pay for stocks, water and electricity bills (run by state-owned enterprises), fines, health insurance, tax, government fees or stored value transactions. Digital vouchers can not be used on foreign eCommerce sites.

Spend wisely. It is up to the individual store whether they will give change.

Our Takeaway

While the government is encouraging the use of digital vouchers, we believe that like last year, most people will opt for the paper vouchers as they provide greater flexibility. Because they come in TWD 200, TWD 500 and TWD 1000 values, consumers can spread their spending around at different locations. They are also more convenient if you wish to donate them or give them to others. Happy spending!

When is a wet signature required in Taiwan employment agreements?

Following our article regarding electronic signatures in Taiwan which focused on commercial agreements, this article outlines four types of employment documents that may not be executed with electronic signatures.

For people who have not yet read our article regarding electronic signatures, the basic point is that under Taiwan law, a written “wet” signature or chop is not necessarily required to form a valid contract.

Article 153 of the Civil Code states that a contract would be validly constituted if the relevant parties have expressed their intention to form a contract and agreed to all the essential terms. There is no requirement that contracts bear “wet” signatures or chops, or even be in written form.

Taiwan adopted its Electronic Signatures Act (the “ESA”) in 2001. The ESA specifically addresses the use of electronic documents, and electronic and digital signatures. The ESA basically establishes a default rule that electronic documents, electronic and digital signatures are legally valid, provided that (i) the relevant parties have agreed to the use of such electronic documents and signatures and (ii) no laws, regulations, or other requirements of government or regulatory agencies require otherwise.”

The ESA applies to most employment related documents. However, according to the authorization of the ESA, the Ministry of Labor (“MOL”, the employment regulator) has provided a list including the circumstances to which the ESA does not apply (i.e. electronic documents and electronic signatures cannot be used in those circumstances) or only applies under certain conditions.

The following four types of employment documents are those that may not be executed electronically.

1. Post-employment non-compete agreements

Post-employment non-compete agreements are required to be executed in writing pursuant to the Enforcement Rules of the Labor Standards Act. The MOL prohibits these agreements being executed electronically. Therefore, a post-employment non-compete agreement should be executed with a wet signature. If an employment agreement includes a post-employment non-compete clause, the employment agreement should also be executed with a wet signature in order to effectuate the non-compete cause.

2. Employment agreements for apprentices

Apprentices refer to a person whose objective is to learn technical skills in a job category prescribed by the labor authorities. Employment agreements for apprentice positions are required to be executed in writing under the Labor Standards Act and may not be executed electronically.

3. Employment agreements with foreign nationals in certain employment roles

Employee agreements where foreign nationals are employed in (1) marine fishing/netting work, (2) household assistance and nursing work, or (3) other works designated by the central government in response to national major construction project(s) or economic/social development needs, should be executed in writing pursuant to the Employment Service Act and may not be executed electronically.

4. Flexible work hour agreements

Under Article 84-1 of the Labor Standards Act, employers may enter into agreements with employees establishing different working hours from the Labor Standards Act requirements. These agreements should be executed in writing and may not be executed electronically.

For all the above agreements, we recommend that you preserve one original with all parties’ wet signatures on it to avoid any future disputes.

If you have any questions or require additional information on electronically executing your employment documents in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.

Franchising in Taiwan: Fair Trade Act and disclosure obligations

In our four previous articles we discussed issues related to general intellectual property protection, due diligence on potential franchisees, and the drafting (governing law) and enforcement (preliminary injunctions) of franchise agreements. In this, our final article on franchises in Taiwan, we briefly outline the franchise disclosure requirements under Taiwan’s Fair Trade Act (公平交易法, the “FTA”) and the Disposal Directions (Guidelines) on the Business Practices of Franchisors (公平交易委員會對於加盟業主經營行為案件之處理原則, the “Guidelines”) promulgated by the Fair Trade Commission (公平交易委員會, the “FTC”).

Similar to the United States and Europe, Taiwan requires disclosure by the franchisor of certain franchise information to the franchisee prior to the establishment of a franchise arrangement between them. The Guidelines set forth required disclosure content, including:

  1. Initial Costs – the initial costs and fees which the franchisee will incur prior to opening the franchise (e.g., marketing fee contributions and training fees);
  2. Recurring Costs – the recurring and continuing costs and fees which the franchisee may expect to incur in connection with operating the franchise (e.g., royalty fees);
  3. Intellectual Property – details and restrictions about franchisor’s intellectual property rights, such as trademarks and patents, licensed to the franchisee;
  4. Operational Assistance – the content and method of operational assistance which the franchisee can expect to receive from the franchisor;
  5. Other Franchise Locations – any plans of the franchisor to establish additional franchise locations (under the same system) in the franchisee’s area of operation;
  6. Other Restrictions – any other restrictions which will be placed on the franchisee; and
  7. Termination/Amendments – any terms related to the amendment or termination of the franchise contract.

The disclosure document must be written. It can be delivered as a hard copy or in electronic form. Regardless of the form in which the disclosure document is delivered, we recommend obtaining a delivery receipt or some other proof of delivery. While the Guidelines do not mandate a particular language be used with respect to the disclosure document, we are of the view that such disclosure documents should be written in a language well understood by the franchisee. In Taiwan, if in doubt about the English (or other foreign language) capabilities of a potential franchisee, we recommend translating the relevant disclosure document into Traditional Mandarin Chinese. Unless otherwise agreed with the franchisee, the disclosure document should be delivered ten (10) days (or such other amount of time reasonably necessary for the franchisee to read and understand the content of the disclosure document) prior to the signing of any franchise agreement.

Failure to comply with the franchise information disclosure requirements under the Guidelines may violate the FTA if such failure were to be found “sufficient to affect the trading order”. The FTC has a rather opaque, multi-pronged test for determining whether failure to deliver a franchise disclosure document rises to the level of being sufficient to affect the trading order. While we will not go into detail as to the FTC’s analysis in this area, it is worth noting that recent FTC decisions indicate a trend towards finding that disclosure failures are sufficient to affect the trading order and thus result in a violation of the FTA.  Such violations could result in penalties ranging from NT$50,000 (approx. US$1,790) to NT$25,000,000 (approx. US$900,000).

In short, we encourage all franchisors to prepare and deliver a franchise disclosure document which complies with the Guidelines.

If you have any questions in connection with the preparation of such a disclosure document, please contact Greg Buxton at gbuxton@winklerpartners.com.

Covid-19 support for small businesses and startups in Taiwan

In 2020 at the onset of the COVID-19 pandemic, Taiwan’s government introduced a Special Act (Special Act for Prevention, Relief, and Revitalization Measures for Severe Pneumonia with Novel Pathogens) to provide subsidies and grants to support impacted businesses in Taiwan. Since an increase in domestic infections in May 2021, and the moving to a Level 3 alert, meaning restaurants, entertainment venues and other businesses had to close, the government on 24 June introduced further support. The government adjusted the alert level down to Level 2 on 27 July.

This article summarizes the latest support available for small businesses and startups. Small businesses refer to companies with under 200 employees or paid in capital of NT$100 million (approx. US$3.6 million) or less.

Subsidies for small businesses

Generally, small businesses in Taiwan in some industries whose turnover has been negatively impacted by over 50% in either May, June, or July 2021, can apply for subsidies. The government will subsidize the business with NT$40,000 (approx. US$1,428) per employee as a one-off payment.

In addition, if subsidiaries in these industries are forced to close because of Covid restrictions and are unable to pay basic salary to their employees, they can apply for a closed-down subsidy. The government will subsidize businesses with NT$10,000 (approx. US$357) per employee. The government will also offer NT$30,000 (approx. US$1,071) in subsidies and NT$10,000 (approx. US$357) drawn from employment stability funds to each employee working at impacted businesses.

The Executive Yuan has requested that applications are examined leniently to protect as many affected businesses as possible. Businesses can only choose one of the options mentioned above to apply for the subsidies.

Bailout Loans

The government has prepared a total of NT$ 1.2 trillion (approx. US$ 42.8 billion) in bailout loans, of which NT$800 billion (approx. US$ 28 billion) is new funds introduced on 24 June. The loans are also designed for individual laborers, small businesses, referring to a company with under 200 employees, or small-scale profit seeking enterprises. The details are as follows.

For most enterprises impacted by the pandemic, the government will provide bailout loans with a maximum amount set at NT$150 million (approx. US$5.36 million) for turnover or capital expenditures. The government is also providing bailout loans covering operational costs (such as salary, rent, and so on) up to a maximum of NT$6 million (approx. US$214,290).

Loans for Startups provided by the NDC

The National Development Council (NDC) will provide loans to startups up to a maximum of NT$26 million (approx. US$928,570) per applicant.

Loans for Small Businesses provided by the Central Bank

The government will provide project financing for businesses applying for loans up to NT$16 million (approx. US$571,430) from Taiwan’s Central Bank.

For more information on the impact of Covid-19 on businesses in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.

This update was written by Christine Chen and trainer lawyer Kai-yu Chang.

Covid-19 support for international enterprises in Taiwan

In 2020 at the onset of the Covid-19 pandemic, Taiwan’s government introduced a Special Act (Special Act for Prevention, Relief, and Revitalization Measures for Severe Pneumonia with Novel Pathogens) to provide subsidies and grants to support impacted businesses. Taiwan raised its alert level to Level 3 in mid-May 2021 forcing restaurants, entertainment venues and other businesses to close. The government then introduced more support on 24 June. This article summarizes the newest support available for international enterprises.

Subsidies

International enterprises with Taiwan subsidiaries in some industries whose turnover has been negatively impacted by over 50% in either May, June, or July 2021, can apply for subsidies. The government will subsidize the business with NT$ 40,000 (approx. US$1,428) per employee as a one-off payment.

In addition, if subsidiaries in these industries are forced to close because of Covid restrictions and are unable to pay basic salary to their employees, they can apply for a closed-down subsidy. The government will subsidize businesses with NT$10,000 (approx. US$357) per employee. The government will also offer NT$30,000 (approx. US$1,071) in subsidies and NT$10,000 (approx. US$357) drawn from employment stability funds to each employee working at impacted businesses.

The Executive Yuan has requested that applications are examined leniently to protect as many affected businesses as possible. Businesses can only choose one of the options mentioned above to apply for the subsidies.

Bailout Loans

The government has prepared a total of NT$1.2 trillion (approx. US$42.8 billion) in bailout loans, of which NT$800 billion (approx. US$28 billion) is new funds introduced on 24 June. The details are as follows.

For most enterprises impacted by the pandemic, the government will provide bailout loans with a maximum amount set at NT$500,000,000 (approx. US$17.8 million) for turnover or capital expenditures. The government is also providing bailout loans covering operational costs (such as salary, rent, and so on) up to a maximum of NT$6,000,000 (approx. US$215,000).

For more information on the impact of Covid-19 on businesses in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.

This update was written by Christine Chen and trainer lawyer Kai-yu Chang.

Electronic signatures in Taiwan

Signing a document is the most common way to indicate that a party accepts the terms and conditions of an agreement, acknowledges consent, or attests to the accuracy of information provided. The ongoing pandemic has accelerated a pre-existing trend towards exchange of electronic documents and signatures. This article examines the use and validity of electronic signatures in Taiwan in the context of cross-border transactions.

At the core of any cross-border transaction is one or more transaction agreements (the “Transaction Agreement”). A Transaction Agreement is typically a contract between or among private parties and usually may be governed by the law of the parties’ choosing.

Many transactions in which Winkler Partners participates involve a foreign purchaser of a local Taiwan company or business. In these situations, the Transaction Agreements may be governed by laws other than those of Taiwan law. Generally, Taiwan courts and arbitral tribunals will recognize and apply foreign law to contracts involving Taiwan counterparties, except in certain limited circumstances. Thus, if the governing law selected by the parties allows for the delivery of electronic documents and signatures to create a validly binding contract, a Taiwan court or arbitral body would most likely find such an agreement so executed to have legal and binding effect in Taiwan.

In some instances, the Taiwan party has market power sufficient to require that the Transaction Documents be governed by Taiwan law. In such cases, it is obviously necessary to understand Taiwan law on the subject of electronic documents and signatures if the parties expect to close the transaction virtually. We would also strongly encourage even those participating in transactions governed by foreign law but whose electronic Transaction Agreements may need to be enforced in Taiwan, to familiarize themselves with Taiwan laws related to electronic documents and signatures. It is our experience that Taiwan courts and arbitral bodies will understandably often interpret foreign law through the lens of Taiwan law.

With respect to private Transaction Agreements, under Taiwan law, a written “wet” signature or chop is not necessarily required to form a valid contract. Pursuant to Article 153 of the Civil Code, a contract would be validly constituted if the relevant parties have expressed their intention to form a contract and agreed to all the essential terms. There is no requirement that contracts bear “wet” signatures or chop, or even be in written form. By law, some contracts must be in written form; however, the use of written contracts and the form of their execution is largely a matter of evidence, i.e., how does a party prove that the other party(ies) to the contract agreed to the terms thereof.

Against the generally permissible backdrop created by the Civil Code, Taiwan adopted its Electronic Signatures Act (the “ESA”) in 2001. The ESA specifically addresses the use of electronic documents and electronic and digital signatures. The ESA basically establishes a default rule that electronic documents and electronic and digital signatures are legally valid, provided that (i) the relevant parties have agreed to the use of such electronic documents and signatures and (ii) no laws, regulations, or other requirements of government or regulatory agencies require otherwise.

This leaves most transactions in the situation where the Transaction Documents would be legally and validly executed and enforceable under Taiwan law if delivered and executed by electronic means provided that the parties agreed to such electronic delivery and execution. Referencing our earlier point regarding evidencing an agreement, we recommend using proven technologies such as Docusign or others that meet certain requirements and are authorized “certification service providers” in respect of digital signatures. Otherwise, issues may arise related to establishing the validity of signatures and, therefore, the agreement.

The general rule is that electronic documents and electronic and digital signatures are legally valid in Taiwan. However, certain legal and practical concerns preclude the broad adoption of such document delivery and execution methods. These concerns could all be generally categorized as problems of inertia.

In the private sector, Taiwan banks and large corporations, in particular, tend to be very conservative and may insist on wet chops and signatures. Although you may be correct as a legal matter that electronically executed agreements are valid and enforceable in Taiwan, sometimes it is not worth the time, energy, or cost to argue the point.

On the government side, many regulations and regulatory agencies continue to require wet ink chops or signatures on documents submitted, in particular notarized documents and powers of attorney.  So, while private Transaction Agreements may be validly delivered and executed by electronic means, many other transaction documents may still require wet ink chops or signatures. There are a number of such documents which our team encounters on a regular basis, the most common being corporate registration documents which must be filed with the Ministry of Economic Affairs (the “MOEA”). However, it is encouraging and worth noting that the MOEA has recently begun accepting shareholder consent letters, appointment letters, and certain other documents which have been executed solely by means of electronic signatures.

In sum, we strongly recommend that if you are expecting to engage in a transaction involving Taiwan counterparties or Taiwan governmental agencies and wish to close the transaction via electronic means, you should carefully examine all the necessary transaction documents and determine which ones, if any, can realistically be delivered and executed in electronic form.

If you have any questions or require additional information on electronically executing your transaction in Taiwan, please contact Greg Buxton at gbuxton@winklerpartners.com.

Taiwan enhances parental leave policies

According to the Central Intelligence Agency (CIA)’s latest report on total fertility rates around the world, Taiwan was ranked last out of 227 countries. To reverse Taiwan’s declining fertility rate, the government has taken some steps to address this issue, most recently by amending rules related to parental leave, wage allowances and additional time off for antenatal appointments. These changes came into effect on 1 July.

Parental Leave

Previously, parents could only apply for 6 months’ continuous parental leave at least one time before their child reaches three years old. The total parental leave given must not exceed 2 years. Under the new rules, parents will no longer be bound to this 6-month period, instead they can choose anywhere between 1 and 6 months off. However, each period of parental leave should not be less than 30 days and each parent can only take up to 2 periods of this kind of short-term parental leave.

Parents applying for parental leave must file an application in writing (or other appropriate internal channel) with their employer at least 10 days before they plan to take leave. In addition to the increased flexibility around parental leave, the government has also increased the childcare allowance from 60% to 80% of the parents’ insured wages under the Employment Insurance Act. Parents must be enrolled in the insurance scheme to qualify.

Paid time off for antenatal appointments

Previously, employees were able to book up to 10 antenatal appointments, with medical fees covered by National Health Insurance (NHI). This has now been increased to 14 appointments during pregnancy.

Because of this additional allowance, the government also plans to amend the “Act of Gender Equality in Employment” to increase the amount of paid leave given to attend antenatal appointments. If the draft amendment is passed, paid time off will increase from 5 days currently to 7 days.

Even though the amendment is yet to become law, any employers who grant paid leave for the 6th and 7th days will be reimbursed by the government.

It remains to be seen whether these measures will encourage more people to have children and whether the measures go far enough to reversing Taiwan’s declining birth rate.

For more information on labor laws in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.

Update on COVID-19 entry restrictions as of 27 June 2021

Back in March this year, Taiwan loosened entry restrictions and reduced quarantine periods due to the island’s successful efforts at keeping the COVID-19 pandemic at bay. However, since the outbreak of domestic infections in mid-May, Taiwan has now strengthened its entry and quarantine measures in response. The Level 3 epidemic alert currently in effect is expected to end on 26 July. However, restrictions on certain sectors, such as dining and sports venues (except swimming pools), will be partially lifted starting 13 July. Social distancing must still be maintained, and masks must be worn at all times outside the home except when eating or drinking.

Suspended visa applications

Entry to Taiwan has been suspended for foreign nationals who do not hold a valid Alien Resident Certificate (ARC), including those who hold a valid visitor/ resident visa. Visa applications have also been suspended in Taiwan and overseas.

Exceptions for entry are permitted on a case-by-case basis for emergencies and on humanitarian grounds. When applying for a special entry permit from an overseas ROC mission, the Taiwan Central Epidemic Command Center (CECC) will do the final review of the application and decide whether to grant special permission. If the applicant meets the requirements, the overseas ROC mission will issue a visa with the special entry permit.

Enhanced quarantine procedures

Beginning 27 June 2021, enhanced quarantine procedures have been put in place due to the emergence of the Delta variant. These include:

  1. Arriving travelers from “key high-risk countries” (including those who have visited or transited through those countries in the past 14 days) must quarantine at a group quarantine facility for 14 days. Costs are covered by the Taiwanese government. Currently, key high-risk countries include the UK, Brazil, Israel, India, Indonesia, Peru, and Bangladesh.
  2. Flight crews of Taiwanese airlines arriving from key high-risk countries must also quarantine for 14 days but they have the choice to quarantine at a designated quarantine hotel or at a company dormitory that meets related regulations.
  3. Travelers from other countries not named in the high-risk list are required to stay in a quarantine hotel or group quarantine facility for 14 days after arrival. They must also undergo a PCR test (cost covered by the government) before the end of their quarantine period.
  4. It is currently not possible to quarantine at home or in a private dwelling.

Increased testing

All arriving travelers in Taiwan must now be tested three times for COVID-19 before the end of their quarantine period. This new requirement was implemented on 2 July 2021 to further tighten measures to combat the spread of the highly transmissible Delta variant. The type of testing differs depending on where the traveler is arriving from.

  1. Travelers arriving from key high-risk countries must undergo PCR testing upon check in at the quarantine facility, a rapid home test between the 10th and 12th day and another PCR test at the end of the quarantine period.
  2. Travelers arriving from other countries must undergo a deep-throat saliva test and PCR test upon arrival, a rapid home test between the 10th and 12th day and a second PCR test between the 12th and 14th day of quarantine.

All arriving travelers must take a quarantine vehicle arranged by the Ministry of Transportation to their quarantine location, and those who test positive will be subjected to genome sequencing. It is no longer possible for friends or family members to collect arriving travelers at Taiwan’s airports or ports.

Travelers planning on entering Taiwan should check the latest announcements from the CECC’s official website before arranging travel.

For questions about immigration matters in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.

Franchising in Taiwan: governing law

In our previous article we took a look at obtaining preliminary injunctions in Taiwan. Now, we turn to governing law. Governing law and dispute resolution clauses are often relegated to the end of commercial agreements together with other “boilerplate” provisions. Franchise agreements are typically no different. However, these two provisions can have a significant impact on a franchisor’s ability to enforce its contractual rights in Taiwan.

International brand owners almost invariably insist on using a single governing law across all their franchise agreements worldwide. This is understandable as it promotes consistency in administration and enforcement of the franchisor’s contractual rights. However, by electing to litigate or arbitrate a dispute outside of Taiwan, a franchisor may inadvertently be erecting substantial impediments to enforcing its rights in Taiwan.

Taiwan is not a signatory to the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents nor the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Although a successful plaintiff or claimant in a foreign proceeding can typically get its foreign judgment or award enforced in Taiwan, the process can take a significant amount of time. The foreign judgment or award would also be subject to challenge in Taiwan courts.

Challenges to foreign judgments would be brought under Article 402 of Taiwan’s Code of Civil Procedure. Challenges to foreign arbitral awards would be brought under Articles 49 and 50 of Taiwan’s Arbitration Act. Without going into too much detail, the most common successful challenges we encounter are challenges based on failure to provide proper notice to the defendant or respondent. Most Taiwan courts have held that if notice were delivered to the parties pursuant to the laws and/or arbitration rules by which the foreign proceeding was bound, the requirements of proper notice would be fulfilled. However, we note that in a minority of cases, some Taiwan courts required actual receipt of notice, and found foreign judgments and arbitral awards unenforceable in Taiwan on the grounds that the defendant or respondent did not receive such notice. If franchisors insist on having a single, foreign governing law and dispute resolution venue, we strongly recommend direct personal service of all related notices and documents. This single precaution greatly reduces the risk that Taiwan courts may reject requests to enforce the related foreign judgment or arbitral award.

If a franchisor is willing to consider amending its form franchise agreement, we recommend including a non-exclusive jurisdiction clause at least with respect to the franchisor, allowing the franchisor to initiate an action or seat an arbitration in its home jurisdiction or in Taiwan at the franchisor’s election. If the governing law of the franchise agreement were foreign law, such a provision would lead to Taiwan courts or arbitral tribunals applying foreign law, which they would do but which typically adds significant time and expense to the proceedings.  Therefore, we also suggest considering applying Taiwan law should the dispute resolution venue be located in Taiwan.

Of course, many factors affect any decision as to governing law and dispute resolution venue.  Franchisors rightly examine issues related to ease and cost of pursuing any action and the location of the counterparty’s assets. We suggest that if the franchisee has a substantial portion of its assets located in Taiwan, the franchisor should consider maintaining at least the option to pursue proceedings in Taiwan under Taiwan law.

In our next article we will look at fair trade and disclosure. If you have any questions or require additional information on franchising in Taiwan, please contact Greg Buxton at gbuxton@winklerpartners.com.

New developments in Taiwan’s electronic payment market – what you need to know

This is a translation of the original Mandarin Chinese article by Yi-Kai Chen and Christine Chen, which can be found here. Translation by Paul Cox.

Taiwan’s Legal Regime for Electronic Payments, Past and Present

An extensive amendment to the Act Governing Electronic Payment Institutions (“Electronic Payment Act”) was passed by Taiwan’s Legislature on 25 December 2020 and will take force on 1 July 2021. The competent authority for the Act, the Financial Supervisory Commission (FSC), has indicated that the revision and adoption of harmonizing secondary legislation will be completed by the end of June and will take force at the same time as the amended Act.

Glancing back at the history of electronic payments in Taiwan, some businesses began foraying into the electronic payment and third-party payment realms as early as 2001. In the ensuing years, though, the lack of a law specifically addressing electronic payments caused uncertainty and instability in regulatory supervision and legal compliance. Finally, the Electronic Payment Act was passed into law in 2015.

In Taiwan today there are five institutions engaging exclusively in electronic payment business, and many banks and electronic stored value card issuers that operate electronic payment services among their multiple lines of business. Electronic payment is a briskly developing sector. The names of the five dedicated electronic payment companies and their e-payment services are PChome InterPay Inc. (PChome InterPay), GAMA PAY Co., Ltd. (GAMA PAY), Jkopay Co. Ltd. (JKOPAY), O’Pay Electronic Payment Co., Ltd. (O’Pay), and ezPay Co., Ltd. (ezPay).

Although more and more businesses have launched e-payment services under the Electronic Payment Act prior to its amendment, the Act as originally passed lacks adequate flexibility and comprehensiveness to accommodate swift developments in the sector. One problem has been that Taiwan has two separate laws regulating electronic payments and electronic stored value cards respectively: the Electronic Payment Act and the Act Governing Issuance of Electronic Stored Value Cards (“Electronic Stored Value Card Act”). Some businesses, however, operate both types of business, and inconsistencies between the two laws have caused inconvenience in legal compliance. These issues prompted the Legislature’s overhaul of the Electronic Payment Act in late 2020. The amended Act allows greater flexibility in the electronic payment sector, accommodates the trend in business toward click-and-mortar (virtual-physical) integration, harmonizes the regulation of electronic payments and electronic stored value cards, and eliminates inconsistencies in supervision. What kind of changes will this extensive amendment likely cause in the e-payment market? And which are particularly worthy of note?

Changes You Should Be Aware Of

1. The Amended Act Integrates the Electronic Payment Act and the Electronic Stored Value Card Act

The most conspicuous change made by the current amendment is the integration of the Electronic Payment Act and the Electronic Stored Value Card Act. The pre-amendment law imposes a dualistic framework distinguishing between payments made using physical electronic stored-value instruments (for example, the EasyCard stored value card), and electronic payments made without a physical stored value instrument. Given the broad trend in business today toward online-offline integration and omnichannel services, the line between the physical and the digital is becoming increasingly blurred, and it now seems superfluous to treat these types of transactions differently.

The amended Electronic Payment Act expressly incorporates the originally separate category of “electronic stored value card issuers.” The current Electronic Stored Value Card Act is to be repealed after the amended Electronic Payment Act takes force. The Legislature, however, has not yet passed a bill for the repeal of the Electronic Stored Value Card Act. If the latter Act has not yet been repealed by the time the amended Electronic Payment Act takes effect, there may ensue a transitional period during which existing electronic stored value card issuers will be subject to simultaneous application of both Acts.

Article 58 of the amended Electronic Payment Act provides that electronic stored value card issuers that were approved by the competent authority before the amendment shall be deemed to have already obtained approval as electronic payment institutions (EPI). However, if an institution does not meet the requirements of the amended Act, it must adjust and come into compliance within 6 months after the amended act takes effect and submit relevant documents to the FSC for the record.

Taiwan currently has four electronic stored value card issuers, and all four concurrently operate electronic payment business under the pre-amendment Electronic Payment Act. The names of these companies and their e-payment services are EasyCard Corporation (EasyWallet), iPASS Corporation (LINE Pay Money), icash Co., Ltd. (icash Pay), and Yuan Hsin Digital Payment Co., Ltd. (Happy GO Pay). These four electronic stored value card issuers are likewise required to comply with regulations governing electronic payments and will need to adjust and bring their operations into compliance with the amended Electronic Payment Act.

2. The Amended Electronic Payment Act Relaxes the Scope of Business of EPIs

(1)   Deregulation of Fund Flows Across Different EPIs

In the past, users of electronic payment services could transfer funds only across the platform of the same EPI. Article 6 of the amended Act allows inter-institutional fund flow services. Now, consumers will be able to transfer funds between different EPIs, i.e., to make “account transfers” between different electronic payment platforms. However, under the constraints of the financial regulatory system, EPIs must route such inter-institutional fund flows through a clearing institution that satisfies the requirements of the Banking Act.

(2) Deregulation of Small-Sum Remittance Transactions

Article 4 of the amended Act allows EPIs to handle small-sum remittance transactions, and to engage in foreign currency trades related to electronic payments.

Along with deregulating small-sum remittance transactions, the amended Act also deregulates the types of currency that users can use to make payments. Under amended Article 23, fund transfers between EPIs and “contracted institutions” (that is, stores offering goods and services) must be made in New Taiwan (TWD) dollars, but consumers are allowed to make payments in Taiwan using TWD or foreign currency. Thus, consumers will now be able to use electronic payment platforms to obtain small sums of foreign currency and use foreign currencies to make electronic payments in and from Taiwan.

(3) Stored Value Cards and Electronic Wallets

In the past, stored value cards invariably took the form of physical instruments. In another step in the direction of virtual-physical integration, the amended Act allows EPIs to operate stored value business with or without the use of physical cards.

(4) Facilitation of Points and Coupons Systems

Now, in addition to providing stores with payment services, EPIs will also be able to help stores build loyalty point and coupon systems. This will give EPIs more room to diversify their business models and explore potential-rich niches in the e-payment sector. We can foresee consumers soon enjoying the benefits of loyalty point and coupon systems offered by stores through e-payment systems.

(5) Expanded Scope of Financial Goods and Services for Which EPIs May Handle Payments

Under Article 4 of the pre-amendment Act, an EPI’s operations of collecting and making payments for actual transactions as an agent may not involve any financial products or services except ones for which the FSC expressly allows agents to handle such operations. The FSC has previously issued orders announcing the types of financial products and services for which EPIs may act as collection and payment agents. However, this “positive list” approach has proven insufficiently flexible in keeping up with rapid advances in financial technology (“fintech”).

The current amendment moves the relevant provisions to Article 6 and deletes the requirement of express approval by the FSC. It does away with the “positive list” and allows EPIs to handle payments for any type of financial product or service for which payment through an agent is not expressly prohibited by law or regulation. This development will greatly increase EPIs’ flexibility and adaptability in the fintech industry and will contribute positively to the development of fintech in Taiwan. Under the new “negative list” regulatory framework, however, EPIs will need to be especially attentive to whether any financial product or service for which they intend to act as payment agent falls in a category prohibited by law or regulation.

3. The Amended Act Enhances Regulatory Supervision

While allowing greater flexibility in the e-payment business, the amended Act also beefs up supervision under the existing regulatory framework. For example, it adopts a differential approach to the minimum paid-in capital requirement, basing it on the scope of business operated by an EPI. The requirement is now set as follows: TWD $100 million for an EPI that operates only the business of collecting and making payments for actual transactions as an agent; TWD $300 million for an EPI that additionally engages in the business of receiving stored funds; TWD $500 million for an EPI that, in addition to both the above, also engages in domestic and foreign small remittance business.

The amended Act also introduces provisions aimed at preventing money laundering and crime. For example, Article 25 requires EPIs to implement identity verification mechanisms for users and contracted institutions and for their beneficial owners using a risk-based approach. Article 36 authorizes the FSC to prescribe rules for the handling of irregular or suspicious transactions.

4. The Amended Act Allows Non-EPIs to Operate Small Remittance Services for Migrant Workers

The amendment has received considerable attention for its opening up of services for handling foreign remittances in small amounts for migrant workers. Operators of these services will not be limited to EPIs only. Under Article 4, paragraph 3 of the amended Act, non-EPIs also may operate foreign small remittance services after obtaining approval from the FSC. The amended Act authorizes the FSC, in consultation with the Central Bank and the Ministry of Labor, to prescribe regulations governing various aspects of these services.

The deregulation of this small remittance business comes in response to an experiment under the Financial Technology Development and Innovative Experimentation Act (Taiwan’s regulatory sandbox law). In the future, any applicant, including a non-EPI, that meets the requirements of the applicable administrative regulations will be allowed to operate these services, which have long been in high demand. The availability of these services will advance the cause of inclusive financing and help protect the interests of migrant workers. The related administrative regulations have not yet been issued, however. Future developments in the supervision and regulation of remittances by migrant workers deserve our ongoing attention.

Some Things to Keep an Eye on After the Implementation of the Amended Act

The amendment to the Electronic Payment Act integrates the electronic stored value card and electronic payment regimes and gives EPIs clearer and more uniform standards for legal compliance. It also expands the scope and flexibility of electronic payment business, giving EPIs greater room to develop and innovate. With these developments, and corresponding adjustments to related supervisory regulations, we can anticipate that consumers will soon enjoy a wider selection of electronic payment platforms and more convenient and fast financial services facilitated by electronic payment mechanisms.

Numerous issues merit continued observation in connection with the amended Act. For example, Article 16, paragraph 1 authorizes the FSC to prescribe the amount of small remittances that EPIs will be allowed to handle. The amount that the FSC ultimately decides to allow will have a crucial bearing on the convenience and availability of this service for consumers and will impact the development of related business.

Also, because of concerns relating to financial institution stability and prevention of money laundering, the remittance business in principle has always been reserved for operation by banks under a high degree of regulatory oversight. The amended Act’s deregulation of the small remittance business by EPIs may be based on a recognition that EPIs, by the nature of their business, already have technology and experience handling fund flows, and so are equipped to handle remittances at reasonable scale. However, the amended Act also allows non-EPIs to operate small remittance businesses, with oversight based on administrative regulations prescribed by the competent authority rather than by the Electronic Payment Act.

This raises possible concerns about the stringency and robustness of these regulations. Given the vast numbers of migrant workers currently residing in Taiwan (approximately 700,000 in early 2021), though the typical amounts of individual remittances by these workers may be modest, the overall demand for remittance services and the total amount of resulting fund flows will be enormous. At a time when Taiwan has actively been following the worldwide trend to strengthen anti-money laundering and enhance related legislation, it will be worth watching whether the use of administrative regulations (rather than primary legislation) can suffice to adequately regulate the massive fund flows from migrant worker remittances. Also worth watching will be whether the eligibility requirements that the FSC imposes on businesses wishing to handle these remittance services can adequately protect the interests of migrant workers and ensure the reliability of remittance operations and the avoidance of money laundering.

For more information on electronic payments in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.

 

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