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In-depth treatment of selected topics in Taiwan law for legal professionals

An update on Taiwan’s regulatory fintech sandbox

The regulatory sandbox was set up in Taiwan two years ago. The Financial Supervisory Committee (FSC) announced that since then, there have been 13 applications with seven of them permitted to start their business under the regulatory sandbox framework.

Two of the seven permitted applications have accomplished their set targets, and therefore, have already “graduated” from the regulatory sandbox. These applications are the KGI Bank’s implementation of an online personal unsecured loan service based on cell phone bill payment records; and Fubon Bank’s interbank transfer and payment system based on blockchain technology. The FSC is considering modifying the regulations based on the result of KGI Bank’s application. Once the regulations have been amended, the business model for KGI Bank’s online personal unsecured loan service may be adopted by other banks.

The FSC has stated that Fubon Bank will probably begin a new sandbox application extending its blockchain technology for international bank transfers. It’s expected that the current regulations for inter-bank or international transfers will not be amended before the filing of the second round of Fubon Bank’s regulatory sandbox application.

The trial operation of innovative financial services is becoming more popular in the financial sector. Those with bank licenses, or those already cooperating with banks, are finding it easier to test out new ventures, which are not in conflict with current regulations, through this channel.

These developments are good news for companies that are looking to take part in Taiwan’s push for innovation and growth. If you or your company would like to know more about the regulatory sandbox or the trial operation for financial sector businesses, you can take a look at our earlier overview here.

If you have specific questions about whether your business qualifies for the sandbox and how to apply, please contact Christine Chen at cchen@winkerpartners.com.

Exploring statistics at the Taiwan Intellectual Property Court: part I overview

Since its inception in 2008, the Intellectual Property Court (“IP Court”) has heard thousands of civil, criminal and administrative actions concerning Intellectual Property Rights (“IPR”). In part one of this report, we examine statistical data from multiple sources*, shedding light on the operations of the IP Court over the past twelve years.

The IP Court

The IP Court was established on 1 July 2008 as Taiwan’s first specialized court with the aim of improving IP law enforcement, the protection of IP rights, and promoting national economic development.

The IP Court exclusively hears IPR cases, mostly relating to the Copyright, Patent, Trademark and Trade Secret Acts. In terms of jurisdiction, the IP Court is the court of first and second instance for civil actions, the court of second instance for criminal actions (i.e. appeals against District Court decisions in the first instance), and the court of first instance for administrative actions.

Number of judges and amount of cases

There are currently 14 judges at the IP Court, including 8 male and 6 female judges. The number of judges has almost doubled from the original 8 presiding at the establishment of the IP Court. The proportion of female judges has gradually increased over the years, with female judges outnumbering male judges from 2014-2016.

Number of judges from 2008 to 2019

Source: Judicial Yuan

Numbers of cases closed by each judge per month

As of March 2020, a total of 16,208 cases, litigation and non-litigation, have been lodged with the IP Court. Of these, the IP Court has closed 15,717 cases. Since 2009, when the IP Court was in full swing, an average of about 2,000 cases have been lodged every year. The peak number was 2,380 cases in 2010. The number of cases gradually decreased from 2010 to 2017, but has again increased in the past two years. Please note that the number of cases lodged in particular year include cases previously lodged but not closed as well as newly lodged cases.

The IP Court closes approximately 70% of cases lodged per year.

We now turn to the average number of cases handled by each IP Court judge per month. In 2009 and 2010, due to the large number of cases and comparatively lower number of judges, the burden on each judge was as heavy as 17 to 20 cases to be closed per month. But after 2011, with the general decrease in the number of cases and increase in the number of judges, the average number of cases per judge went down to 7 to 8 cases per month. There has been an upward trend in the number of cases per judge in the past two years.

Number of cases and average number of cases closed by each judge per month from 2008 to 2019

Source: Judicial Yuan

Proportion of civil, criminal and administrative cases handled

The IP Court hears civil and administrative IPR cases, as well as appeals in criminal IPR cases. Statistics on closed cases show that by proportion, most cases heard by the IP Court are civil suits. From 2008 to 2019, the proportion of civil cases has gradually risen from 41% to 63%. The remaining cases are split equally between criminal appeal cases and administrative cases, with about 20% each in recent years.

Proportion of civil, criminal and administrative cases closed from 2008 to 2019

Source: Judicial Yuan

Average number of days to close a case

The average number of days for a case before the IP Court from lodging to closing gradually increased from 114.87 days in 2009 to 209.14 in 2015, the highest on record. From 2016 to 2018 the average time to a decision was about 200 days, but this dropped to 182.45 days in 2019.

Average number of days to close a case from 2008 to 2019

Source: Judicial Yuan

Comparing the time required to disposition of civil, criminal and administrative cases before the IP Court, it is clear that civil cases are the most time consuming. Since the establishment of the IP Court, the number of days to disposition for a civil case has continuously gone up, peaking in 2015 at 267.68 days. From 2016 to 2019, the IP Court has steadily reduced the length of time it takes for a case to be closed. In 2019, the number of days to disposition of a civil case fell below 200 days.

As for criminal cases, the number of days to disposition has slowly increased from 88.96 days in 2009 to 142.43 days in 2019. The trend for administrative cases is similar, from 130.27 days in 2009 to 190.87 days in 2019.

Overall, criminal cases take the fewest days to a decision, while civil cases take the most. But in the last two years, the number of days to disposition for administrative cases has exceeded or equaled that for civil cases.

Average number of days to close a case from 2008 to 2019

Source: Judicial Yuan

The above statistics provide some interesting insights into the general operations of Taiwan IP Court. We will have a closer look at IP litigation statistics in part two of this report.

For more information on IP matters in Taiwan, please contact Gary Kuo at gkuo@winkerpartners.com.

This article was co-written by trainee lawyer Yi-kai Chen.

*Sources: (1) Judicial Yuan (2) IP Court (3) DATA.GOV.TW.

*Note: Some of the figures provided in this report are calculated using raw data  and may differ from those figures officially reported.

#Metoo Taiwan: how to handle sexual harassment cases at work

The #Metoo movement has increased people’s awareness of sexual harassment in the workplace. By law, companies have an obligation to create safe work environments and prevent sexual harassment from happening.

When employees report claims of sexual harassment, the objectives for the company are to a) determine whether sexual harassment occurred, b) protect the individual(s), and c) prevent it from happening again, all while maintaining a positive working environment. This sounds daunting, but can easily be accomplished by following some simple rules.

We list the following frequent asked questions and answers addressing issues which concern all employers.

What is sexual harassment in the workplace?

Taiwan’s laws define sexual harassment in the workplace into two categories:

1. Unequal targeting of an employee of one gender including pranks, jokes, yelling or other offensive conduct

This includes making sexual requests, using verbal or physical conduct of a sexual nature or with the intent to discriminate based on gender, creating a hostile, intimidating, and offensive working environment that leads to a negative impact on the victim’s personal dignity or physical liberty; or affects job performance, education, training, services, plans, activities, or other normal habits.

2. Unequal treatment of an employee because of the employee’s gender, including unequal discipline

This includes instances where an employer explicitly or implicitly makes a sexual request toward an employee or a job applicant, uses verbal or physical conduct of a sexual nature or with the intent to discriminate based on gender as an exchange for the establishment, continuance, modification of a labor contract or as a condition to their placement, assignment, compensation, evaluation, promotion, demotion, award and discipline.

Companies, local labor regulators and the courts will determine whether the behavior at issue constitutes sexual harassment based on the totality of the circumstances, including the facts of the incident, the work environment, the relationship between the parties, the accused’s testimony and conduct, and the victim’s perception of the incident.

How to prevent sexual harassment?

By law, companies have an obligation to prevent sexual harassment. Posting a sexual harassment policy in the workplace is one option.  Companies with more than 30 employees are statutorily required to announce and post a sexual harassment prevention, correction, complaint, and punishment policy.

In addition, employees should be given sufficient training on sexual harassment prevention and policies. If an employee has suffered or witnessed sexual harassment they should feel encouraged to document it and report it to the company. Fostering an open and transparent work environment can help ensure that employees feel safe and that their concerns are being listened to. Similarly, employees should be informed that the company will take necessary measures to combat harassment and that they risk punitive measures including the possibility that they will lose their job. Employees should also know that employers have an obligation to assist victims file complaints with the police. Sexual assault and other serious offenses carry criminal liability.

What should companies do when they receive a complaint?

Once the company becomes aware of a sexual harassment complaint, it is required to conduct an investigation and implement immediate and effective corrective and remedial measures. The measures include:

(i) trying by all available means to protect the victim’s rights and privacy;

(ii) strengthening maintenance and improvement of the safety and security of the workplace;

(iii) setting up a Sexual Harassment Grievance Committee (“Committee”) to investigate the complaint and make a decision within two months after the complaint is lodged (this can be extended for one more month if necessary); and

(iv) adopting other preventive and improvement measures.

Taiwan’s laws on sexual harassment at work do not have a statute of limitations for complaints. Any complaint should be addressed even though it might refer to conduct from several years ago.

How should the companies conduct an investigation and make a decision?

The key principle is to keep the matter highly confidential. Except for the victim(s) and the accused, the company should carefully select other employees as witnesses to sit in on any interviews held. In addition, all Committee members, the victim(s), the accused, and the interviewees should be informed that they have an obligation to keep all information and discussions confidential and private. Signing a non-disclosure statement would therefore be good practice. Interview records and/or meeting minutes are important documentation to serve as evidence if needed. After the investigation, the Committee should make a written decision including its grounds based on the findings of the investigation.

For confidentiality purposes, different versions of the decision can be prepared for the victim(s) and the accused. The company should give the victim(s) and the accused written notice of the conclusions of the investigation. Both the victims and the accused can file written appeals within a specific period (e.g. twenty days) from the date of receiving the decision if they are not satisfied with it. The Committee should then make a decision on whether to conclude the case or not. After this, no more complaints can be lodged with respect to the same incident.

Can companies terminate employees found to have conducted sexual harassment?

If through the investigation process it is found that the accused’s behavior constitutes sexual harassment, the company can terminate them as this constitutes a serious violation of the work rules. A termination on these grounds must be carried out within 30 days of the completion of an investigation. Advance notice and severance pay are not required in cases of sexual harassment.

Conclusion

Due to their unpleasant nature, sexual harassment complaints are not something many companies will want to deal with. Ignoring the problem however will not make it go away, and will likely make it worse. It is better for companies to be prepared before a claim is brought to their attention. We suggest companies review and check whether their current sexual harassment prevention policy is compliant with relevant laws, that all employees are aware of it, have access to it, and that related training is provided to all staff.

When sexual harassment complaints are raised, it is better for companies to consult with their legal team who will be able to advise on the process and the next steps, prepare necessary documents, review evidence, and even take part in the investigation. Doing so can help the company avoid violating the law and prevent potential legal disputes in the event that a sexual harassment complaint was handled incorrectly.

For more information on employment matters in Taiwan, contact Christine Chen at cchen@winklerpartners.com.

What should you know about food labeling in Taiwan?

When food and beverage products enter the Taiwanese market, is it advisable to use labeling in the original language only, or can you just translate it into traditional Chinese characters based on the original labeling content? Perhaps surprisingly, the answer to each of these questions is, in general, “No”.

This article will shed some light on the legal and linguistic issues involved in labeling items and using promotional claims for food and beverage products (“food products”) in Taiwan.

1. What the law says

The most important law dealing with the labeling of food products in Taiwan is the Act Governing Food Safety and Sanitation (the “Food Safety Act”). However, other laws and regulations may also be applicable depending on the nature of the products. For example, if a beverage contains more than 0.5% alcohol by volume (ABV), it will be classified as an alcoholic beverage, which means it will be governed by the Tobacco and Alcohol Administration Act.

2. What language should be used in labeling

In accordance with the Food Safety Act, labeling of food products should list all information in Chinese, written in traditional Chinese characters. Information can also be supplemented with additional text in English or other foreign languages.

To meet the language requirement, Taiwanese distributors of imported food products typically affix a separate sticker written in traditional Chinese characters in cases where the original packaging is not already localized for the Taiwan market.

Because Taiwanese distributors usually use a white sticker, some brands prefer to label their products themselves, and will discuss this with their Taiwanese distributors in advance. For instance, one well-known mineral water brand prefers to print its own translucent labels in order to maintain its brand aesthetic, and works with its Taiwanese distributor to ensure the labeling information complies with Taiwan law.

3. What information must be included on labels

3.1 General requirements

Compulsory labeling items for food products include: (i) the product name, (ii) a list of ingredients, (iii) net weight, volume, or quantity, (iv) a list of food additives, (v) information about the producer, or the local importer or distributor, (vi) the place of origin, (vii) the expiry date, (viii) nutritional information, (ix) a list of any genetically modified raw materials, and (x) any other information requested by the government.

Among these compulsory labeling items, please note that nutritional information must be included in the format requested by the Taiwan Food and Drug Administration (the “FDA”). The relevant categories are (i) calories, (ii) protein, (iii) fat, saturated fat, and unsaturated fat, (iv) carbohydrates and added sugar, (v) sodium, and (vi) other nutrients mentioned or declared in a claim on the product packaging. The quantities of the various categories can be written either as ratios expressed in terms of standard units (e.g. grams of sodium per 100 grams of the product) or as percentages based on the recommended intake of an average person per day in Taiwan.

Containers or packaging should not include claims or declarations regarding the nutrients contained in the products, unless: (a) claiming such nutrients is permissible, and (b) certain FDA standards are met. For example, declarations such as “low calorie” or “low energy” are not allowed unless the caloric value is lower than 20 kcal per 100 ml. Also, in order to claim that your product “contains Vitamin C”, the quantity of vitamin C should exceed 7.5 mg per 100 ml.

3.2 Specific requirements

The FDA has different labeling rules depending on the ingredients contained in a product. For example, prepackaged food products containing allergens should be clearly labelled with warnings on their containers or packaging. Prepackaged food products that contain genetically modified organisms (GMOs) should display the words “genetically-modified” or “with genetic modification” on the products.

4. Misleading, exaggerated claims, or those implying medical efficacy

The Food Safety Act provides that claims or declarations on labeling, promotional material, or advertising material should not be false, misleading, or exaggerated, nor should they imply medical efficacy. Generally speaking, a claim related to maintaining or improving organ function, tissue function, physiology, or physical appearance would be deemed misleading or exaggerated, except for those specially permitted by the FDA under the relevant regulations. For instance, a claim that a product “strengthens the body’s immune system” may be deemed misleading or exaggerated by the FDA, as this claim references maintenance or improvement of human physiological function. However, such a claim could be replaced with a permissible claim that the product “enhances physical strength”. In any event, the question of whether labeling, promotional material, or advertising material might be false, exaggerated, or misleading will be assessed in its entirety on a case-by-case basis.

For more information on product labeling matters in Taiwan, please contact Ling-ying Hsu at lhsu@winklerpartners.com.

Tips on entering into agreements with Taiwanese companies

Foreign parties entering into contracts with Taiwanese entities are often surprised by the simplicity of the proposed terms. While contracts drawn up between two Western parties are likely to be lengthy and exhaustive, Taiwanese contracts tend to be shorter and lighter on detail. For businesses making their first foray into the Taiwanese market, this unfamiliar style of contract may be cause for alarm, and may raise certain questions – is the other party leaving out certain important terms intentionally? What are our obligations and liabilities under the contract? And how will such a concise agreement be enforced by a court?

If you find yourself asking these or similar questions about a Taiwanese contract you’ve been asked to sign, we have good and bad news for you. The good news is that the other party is not necessarily trying to take advantage of you, and while the contract they’ve draw up might appear to be overly short, this is not unusual in Taiwan. The bad news is that such contracts tend to be short because they only contain the parties’ major rights and obligations, leaving out other potentially important details that would likely have been included if the foreign party had drafted the agreement.

This discrepancy in contractual style is largely due to differences between common law and civil law jurisdictions, as well as to differences in how Taiwanese and Western parties may view the role of the contract. In common law jurisdictions, the law is generally silent regarding the parties’ obligations, whereas in civil law jurisdictions the law already defines the parties’ obligations to some extent. Furthermore, for many Western companies the goal of a contract is to make the obligations and liabilities of the parties as explicit as possible, providing an exhaustive set of rules for how the parties’ relationship will be governed, and attempting to account for every possible eventuality. By contrast, for Taiwanese parties the contract itself is often viewed as something more like a memorandum of understanding between the parties, with the idea being that the parties can hash out the remaining details over the course of their cooperative and trust-based relationship.

In attempting to bridge this gap, instead of providing a lengthy version of revisions, foreign parties negotiating with Taiwanese entities might consider drafting a point-form summary of their proposed additions to the agreement as a start. This approach can give the Taiwanese party an overview of those added terms and conditions, making them easier to understand.

In addition to a point-form summary, foreign parties who are unsure of how to proceed in negotiations with a Taiwanese entity might consider adopting the following rules of thumb:

1. Make the wording of your clauses as concise and understandable as possible, and avoid using redundant lists of synonymous terms as a way of exhaustively covering a single concept. For example, if you want to include a requirement that your Taiwanese partner not deploy your technology or copyrighted work in any way, consider just stating this directly in plain language, rather than saying that you shall not “use, develop, extend, enhance, or deploy” the work, etc. While foreign parties may be used to this kind of “legalese”, it could be confusing and unfamiliar for a Taiwanese party.

2. Make efforts to ensure that the parties’ obligations are feasible, and do not include any unrealistic requirements that neither party will actually comply with in practice. For example, if you would like to include a requirement that your Taiwanese partner submit any and all marketing materials for your approval before their use, be sure that you also have a workable mechanism in place for them to do so. If you do not expect to actually enforce such a requirement in practice, consider leaving it out entirely.

3. Emphasize the key points of your proposed additions to the agreement. If you regard some aspect of an additional clause as being particularly important, make this clear in the wording of the clause itself. For example, if you would like your Taiwanese partner to keep certain specific information strictly confidential, it might be better to explicitly identify the information you are concerned about, rather than to rely on a blanket confidentiality requirement.

4. Localize your agreement to ensure that it does not violate any laws in Taiwan that could render the clause invalid or unenforceable. For example, the Fair Trade Act prohibits imposing restrictions on the resale price of goods, and the Personal Data Protection Act requires notice and consent to collect, process, and use personal information.

For large foreign entities using standard templates for their contracts, it might seem inconvenient or inefficient to customize an agreement in the ways suggested above. That said, localizing an agreement in this way can reduce the risk of a bad outcome in your contractual relationship with a Taiwanese party. It is also advisable to highlight the major obligations that you would like your Taiwanese partners to pay attention to in your email correspondence with them.

For more information on contract matters in Taiwan, please contact Ling-ying Hsu at lhsu@winklerpartners.com, or Peter Dernbach at pdernbach@winklerpartners.com.

Working in Taiwan as a creative professional part II: the Employment Gold Card for special professionals in culture and the arts

This is the second of two FAQs on how creative professionals can live and work in Taiwan after the Act for the Recruitment and Employment of Foreign Professionals came into force in February 2018. We have updated this FAQ to reflect changes made between February 2018 and March 2020.

Part I focused on how to obtain a freelance artist work permit. Part II focuses on how to obtain an Employment Gold Card as a special professional in the field of culture and the arts. Click on the question to be taken to the answer, click back to return to the list of questions.

1. What is the difference between the freelance artist work permit and an Employment Gold Card for a special professional in the field of culture and the arts?

2. What kinds of special professionals in the field of culture and the arts are eligible to apply for an Employment Gold Card?

3. What does broadcasting mean?

4. What does cultural administration mean?

5. Is there a minimum salary requirement for special professionals in culture and the arts?

6. What are the basic qualifications for performing arts?

7. What international arts organizations, key positions, international arts events, and awards does the Ministry of Culture recognize for performing arts?

8. What are the basic qualifications for visual arts?

9. What international arts organizations, key positions, art events, recognized awards and international arts events does the Ministry of Culture recognize for visual arts?

10. What are the basic qualifications for publishing?

11. What international media/publishers, academic awards and literary awards, and international publishing events does the Ministry of Culture recognize for publishing?

12. What are the basic qualifications for film/broadcasting/popular music?

13. What is an example of a major award from Taiwan? The United States? Europe?

14. What if I have won a major award but it is not on this list?

15. What are the basic qualifications for crafts?

16. What crafts competitions or organizations are recognized?

17. What are the basic qualifications for cultural administration?

18. How do I show outstanding performance in arts and culture to be recognized as a special professional in cultural administration?

19. What international arts and culture NGOs qualify?

20. What if I don’t meet any of the basic qualifications for recognition as a special foreign profession in culture and the arts?

21. What if my application is rejected? Are there any other paths to working in Taiwan as a professional in culture and the arts?

22. What are the benefits of obtaining an Employment Gold Card as a special professional in arts and culture?

23. Will I be eligible to enrol in Taiwan’s national health insurance program?

24. How many special professionals in the field of arts and culture have received Employment Gold Cards?

25. How do I apply?

26. What kind of documentation should I submit to show my qualifications?

27. Does my documentation to be translated into Chinese?

28. How long does the application process take?

29. Who will review my application?

30. Can I renew my Employment Gold Card?

31. Can I become a permanent resident based on an Employment Gold Card?

32. Where can I read the law and regulations myself?

33. Who can I contact in the government if I have questions?

34. If I obtain an Employment Gold Card overseas, how long do I have to enter Taiwan?

Special Professionals in Culture and the Arts FAQ

1. What is the difference between the freelance artist work permit and an Employment Gold Card for a special professional in the field of culture and the arts?

In general, the freelance artist work permit is for practicing artists. A special professional in the field of arts and culture could be an artist but more typically would be a professional with expertise in culture and the arts such as an event organizer, a NGO or government art administrator, or a literary agent. While there is some overlap, special professionals in culture and the arts encompass a broader range of professionals.

There are also some benefits to being a special professional that artists do not enjoy such as a possible income tax deduction and the ability to sponsor parents and grandparents for longer visitor visas. See Question 20 below.

An Employment Gold Card is also slightly more convenient because it combines a work permit, resident visa, and Alien Residence Certificate (ARC) on one card. As a result, the successful applicant does not need to make separate applications for a work permit, visa, and an ARC. In contrast, a freelance artist will need to make three separate applications.

2. What kinds of special professionals in the field of culture and the arts are eligible to apply for an Employment Gold Card?

Special professionals who work in the following fields are eligible:

(a) Performing Arts,

(b) Visual Arts,

(c) Publishing,

(d) Film/Broadcasting/Popular Music,

(e) Crafts, and

(f) Cultural Administration

3. What does broadcasting mean?

Broadcasting means television and radio work.

4. What does cultural administration mean?

Cultural administration means arts management or arts administration.

5. Is there a minimum salary requirement for special professionals in culture and the arts?

This has been the subject of some confusion. Unlike other kinds of special professionals, current or past salary is not a qualification for special professionals in culture and the arts. For example, one way that special professionals in finance or science and technology can qualify is to have or have had a monthly salary of at least NT$160,000. There is no equivalent salary qualification for being recognized as a special professional in culture and the arts.

6. What are the basic qualifications for performing arts?

(a) Membership in an international arts organization,

(b) Key position in government or a private organization related to culture or the arts,

(c) Key position at a leading arts or culture event,

(d) Recipient of recognized award,

(e) Judge on panel for recognized award, or

(f) Special approval by the Ministry of Culture.

7. What international arts organizations, key positions, international arts events, and awards does the Ministry of Culture recognize for performing arts?

The Ministry of Culture has listed examples in the document that can be downloaded at the bottom of this page. The key point is that these are non-exhaustive lists of examples. You can and should apply with similar organizations, positions, awards, or events. In general, alternatives will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples. Examples on the list include:

(a) American Theatre Wing (international arts organization),

(b) Manager (key position),

(c) Festival d’Avignon (international arts event)

(d) National Dance Award (award)

8. What are the basic qualifications for visual arts?

(a) Membership in an international arts organization,

(b) Key position in government or a private organization related to culture or the arts,

(c) Key position at a leading art event (such as major art exhibition or biennial),

(d) Recipient of recognized award,

(e) Judge on panel for recognized award, or

(f) Special approval by the Ministry of Culture.

9. What international arts organizations, key positions, art events, recognized awards and international arts events does the Ministry of Culture recognize for visual arts?

The Ministry of Culture has listed examples in the document that can be downloaded at the bottom of this page. The key point is that these are non-exhaustive lists of examples. You can and should apply based on similar organizations, positions, awards, or events. In general, alternatives will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples. Examples include:

(a) National Endowment for the Arts (international arts organization),

(b) Director (key position),

(c) Art Taipei (event), or

(d) New York Arts Directors Club Annual Awards.

10. What are the basic qualifications for publishing?

(a) High level position at major international media company or publisher,

(b) Literary agent with at least 10 years of experience in publishing or mass media,

(c) PhD in publishing and an international academic award,

(d) National or international literary prize,

(e) Curator for major international publishing event, or

(f) Special approval by the Ministry of Culture.

11. What international media/publishers, academic awards and literary awards, and international publishing events does the Ministry of Culture recognize for publishing?

The Ministry of Culture has listed examples here. The key point is that these are non-exhaustive lists of examples. You can and should apply based on other publishers, media, positions, awards, or events. In general, these alternatives will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples.

Please see Academia Sinica’s list of international academic research awards for awards recognized for purpose of qualification 9(c) PhD in publishing and international academic award. Examples on the Ministry’s list include:

(a) The Financial Times (media),

(b) Random House (publisher).

(c) Managing editor (key position), or

(d) Man Booker Prize (literary award).

12. What are the basic qualifications for film/broadcasting/popular music?

(a) Received major award for motion pictures, broadcasting, or popular music from Taiwan, from the applicant’s native country, or a major international award for the same,

(b) High level executive with at least five years of relevant experience at a medium-sized or large film, broadcasting, or popular music company,

(c) Has made special contributions to film, broadcast, or popular music and have at least five years of relevant experience, or

(d) Special approval by the Ministry of Culture.

13. What is an example of a major award from Taiwan? The United States? Europe?

Kaohsiung Film Festival awards are major awards from Taiwan. An example of US awards are New York Festivals  TV & Film Awards. European major awards include the MTV Europe Music Awards and the BRIT Awards. Download the document at the bottom of this page and check the ‘Required Documents’ section for Film, Broadcast and Pop Music.

14. What if I have won a major award but it is not on this list?

You can make a case for your award with the Ministry of Culture. Submit your award certificate, documentation about the award (web information is fine), and a short statement about why it is an important award.

15. What are the basic qualifications for crafts?

(a) Award in national or internationally recognized crafts competition,

(b) Recognized as a Living National Treasure by a recognized Taiwanese or international organization, or

(c) Special approval by the Ministry of Culture.

16. What crafts competitions or organizations are recognized?

The Ministry of Culture has listed examples here. The key point is that this is a non-exhaustive list of examples. You can and should try to have other awards or organizations recognized by the Ministry. In general, these will need to have a level of prestige and international recognition similar to those on the Ministry’s list of examples. Examples on the Ministry’s list include:

(a) Faenza Prize (competition award),

(b) The World Crafts Council (organization), or

(c) International Ceramics Competition Mino, Japan.

17. What are the basic qualifications for cultural administration?

(a) Position in a government department of arts and culture and evidence of outstanding performance in work related to arts and culture while holding the position,

(b) Expert or research position at a registered culture and the arts organization and evidence of outstanding performance in work related to arts and culture while holding the position,

(c) Position at an international arts and culture NGO involving arts and culture and evidence of outstanding performance in work related to arts and culture while holding the position, or

(d) Special approval by the Ministry of Culture.

18. How do I show outstanding performance in arts and culture to be recognized as a special professional in cultural administration?

Submit a letter of recommendation from the department, organization, or NGO.

19. What international arts and culture NGOs qualify?

See the list of UNESCO partnership NGOs here.

20. What if I don’t meet any of the basic qualifications for recognition as a special foreign profession in culture and the arts?

You can apply under the catch-all “Special approval by the Ministry of Culture” in each of six categories of special professionals in culture and the arts. This is to cover professionals in these fields who have other qualifications. Indicate on your application that you want the reviewing agencies to consult with the Ministry of Culture. See Question 29.

21. What if my application is rejected? Are there any other paths to working in Taiwan as a professional in culture and the arts?

Yes. If you are a practicing artist you may be able to qualify for the freelance artist work permit. Please see Part I of this FAQ. Otherwise you will need to find a qualified employer to hire you for Class A specialized (professional) or technical work if your background is in media, film, television, or arts management. If you are a practicing artist, a qualified employer can apply for a Class F artist work permit on your behalf. Please check the Workforce Development Agency’s EZ Work website for information on the requirements.

22. What are the benefits of obtaining an Employment Gold Card as a special professional in arts and culture?

(a) Ability to work in your field independently or change employers if you applied for the Employment Gold Card yourself rather than having an employer apply on your behalf,

(b) 50% deferrable income tax deduction on annual income over NT$3 million for first three years in Taiwan, and

(c) Ability to sponsor parents and grandparents for visits of up to one year. A visit may be extended.

Please see the Regulations Governing Reduction and Exemption of Income Tax of Foreign Special Professionals §3 for details of eligibility for the deferrable income tax deduction.

23. Will I be eligible to enrol in Taiwan’s national health insurance program?

Yes, but you will meet a six month residence period first if you do not have an employer. To meet the residence requirement, you must be physically present in Taiwan for a total of six months although you may make one trip abroad for no more than 30 days. The time spent abroad does not count toward the six months residence requirement.  If you are hired by an employer, you are immediately eligible for health insurance.

24. How many special professionals in the field of arts and culture have received Employment Gold Cards?

65 Gold Employment Cards were issued to special professionals in the field of Arts and Culture in the first two years of the program. In addition, employers successfully applied for 54 five year work permits for special professionals in the field of Arts and Culture based on the same qualifications.

25. How do I apply?

You or your employer must apply online through the National Immigration Agency’s Employment Gold Card platform.

26. What kind of documentation should I submit to show my qualifications?

Please see the various documentary requirements in the document available at the bottom of this page.

27. Does my documentation need to be translated into Chinese?

English language documents do not need to be translated. Documents in languages other than English or Chinese need to be translated into English or Chinese.

28. How long does the application process take?

The application review period is 30 days although this can be extended if more documents are required. In practice, it currently takes most applicants 1-2 months.

29. Who will review my application?

Applications are reviewed by the National Immigration Agency, the Ministry of Labor, and the Ministry of Foreign Affairs. In special cases, these reviewing agencies may consult with the Ministry of Culture.

30. Can I renew my Employment Gold Card?

Technically no. However, you can apply for a new Employment Gold Card before the current one expires. Your qualifications will be reviewed again.

31. Can I become a permanent resident based on an Employment Gold Card?

Yes. Currently you will become eligible to apply for permanent residence after five years of continuous residence based on a series of Employment Gold Cards. You must be present in Taiwan for at least 183 days each year. Your spouse and minor children will become eligible for permanent residence five years after you become a permanent resident if they meet the foregoing residence requirement.

32. Where can I read the law and regulations myself?

You can read the Act for the Recruitment and Employment of Foreign Professionals here. The articles that apply specifically to special foreign professionals are §4(2), §§7-9, and §13. You can read the basic qualifications for special professionals in culture and the arts here in the document available at the bottom of this page. The National Immigration Agency also has a helpful FAQ.

33. Who can I contact in the government if I have questions?

The current designated contact at the Ministry of Culture for a special professional in culture and the arts is:

(a) Ms.Chen Yu-qi (陳鈺淇): (02)8512-6772 for questions about qualifications.

The current designated contacts at the National Immigration Agency for Employment Gold Cards are:

(a) Mr. Yang Ying-cong (楊英聰): (02)2388-9393 #2558 (legal questions)

(b) Ms. He Zhi-ying (何芷瑩): (02)2388-9393 #2426 (for questions about applying through the online portal)

The current designated contact at the Ministry of Labor for Employment Gold Cards is:

(a) Mr. Huang He-qun  (黃胡群): (02)2380-1720

The current designated contact at the Ministry of Foreign Affairs for Employment Gold Cards is:

(b) Ms. Zhang Jia-hong (張嘉紘): (02)2343-2901

Please check this list of contact windows on the official website for the Act for the Recruitment and Employment of Foreign Professionals. The list also has email addresses.

34. If I obtain an Employment Gold Card overseas, how long do I have to enter Taiwan?

According to the Ministry of Foreign Affairs, you can enter (and re-enter) Taiwan so long as the Employment Gold Card is valid.

Legal issues to consider when choosing a SaaS business model

For companies offering software solutions to clients, one of the earliest and most important decisions will be whether to adopt a business model based on software licensing, or to instead opt for a “Software as a Service” (SaaS) approach. Under a licensing-based approach, the company provides a copy of its software to the customer, who may then use the software independently, subject to the terms of the licensing agreement. Under a SaaS approach, the customer is not provided with an actual copy of the software, but is instead allowed to access it remotely and use it according to the terms of a service agreement with the provider.

While the license-based approach was the dominant model for many years, recent trends in the industry indicate a shift towards SaaS as the preferred model. Following on the first major SaaS success story of Salesforce, a number of major software providers that traditionally relied on software licensing started pivoting towards SaaS, with a major example being Microsoft’s decision to offer its signature line of Office products as an online service known as Office 365. Along with Salesforce and Microsoft, other major tech companies in the field of SaaS include Amazon, Google, Fujitsu, Symantec, and IBM, just to name a few. The SaaS sector overall is booming, growing by more than 20% annually, with the global SaaS industry expected to be worth more than US$130 billion by the end of 2020.

Given the industry-wide trend towards SaaS, prospective founders of new companies will want to know the pros and cons of using a SaaS approach for their business. It is certainly not without its downsides – for example, many SaaS businesses take significant losses in the early stages of their development, as the investment made to acquire an initial customer base is only recovered slowly through regular subscription payments. That said, SaaS is appealing for other reasons, perhaps the most important being that many consumers would rather pay a regular fee for remote access instead of a single lump sum for installation of an expensive piece of licensed software, especially now that near-constant availability of internet access has become the norm in most developed economies. The age of licensing agreements and expensive, single-purchase software may be coming to an end.

Business considerations aside, what are some of the legal issues to consider before adopting a SaaS approach? Perhaps unsurprisingly, they are many and varied, and may differ from the typical issues that arise under a license-based approach. As a straightforward example, service outages are unavoidable with SaaS, including outages for scheduled maintenance. If the service contract is not worded properly, these outages could constitute a breach of contract by the provider. Service outages of this kind are generally not an issue for licensed software. It is therefore important to tailor the service contract specifically for SaaS, rather than simply adapting a pre-existing licensing agreement template. Ultimately, a well-crafted SaaS agreement – often presented to the customer as a so-called “clickwrap” contract which can be entered into with a single mouse click – may look quite different from a traditional software licensing arrangement.

Another legal issue which is increasingly important for SaaS providers is that of data security and digital privacy. SaaS users generally disclose at least some personal information to the provider when using the service, the extent and sensitivity of which can vary greatly depending on the nature of the services being provided. There is also the possibility that users may disclose information of a non-personal nature that is nonetheless highly confidential, such as when companies outsource their email, payroll, or document management systems to a SaaS provider. Whatever the nature of the confidential information being disclosed, this creates a potentially major source of liability for the SaaS provider that is unlikely to be an issue with licensed software. Moreover, the storage and transfer of such information through online networks often has an inter-jurisdictional aspect that may increase the provider’s exposure to liability for non-compliance with unfamiliar regulatory regimes in other countries. This creates a need to adapt and update data protection practices to comply with regulatory changes across all jurisdictions where the SaaS is available, which may create unforeseen expenses for the company – a lesson which many SaaS providers recently learned when the European Union’s General Data Protection Regulation (GDPR) entered into force. Even SaaS providers with no physical presence in Europe and no familiarity with European law should consider whether they are GDPR-compliant when offering their services to European clients.

There are also legal issues which can be avoided or mitigated by using SaaS instead of a licensing agreement. One much-touted advantage of SaaS is the supposed avoidance of taxes that would otherwise apply to licensing royalties, but this advantage requires closer scrutiny. While it is true that licensing royalties are generally taxable, the notion that revenue from SaaS will never be subject to tax is incorrect, and will depend on the jurisdiction where the services are offered. SaaS may be taxed differently in the various jurisdictions where it is available, even when those jurisdictions are within the same country. For example, according to currently available information, there are many jurisdictions in the United States which impose sales tax on SaaS (such as California, Illinois, and New Jersey), as well as others which do not impose such tax (such as Texas, Washington State, and New York). The situation is similar when offering SaaS across national borders. An American SaaS provider unaccustomed to dealing with a national value-added tax (VAT) will have to take VAT into consideration when expanding into Europe, where all EU member states are required to meet minimum VAT standards. VAT in the EU used to depend on the location of the seller, which notably led Apple to domicile the European wing of iTunes in Luxembourg for its relatively low VAT. However, when the EU later changed its VAT requirements to make the rate dependent on the location of the purchaser rather than the seller, VAT increased for most iTunes transactions in Europe. As changes like this continue to happen, the global landscape of SaaS taxation will continue to evolve.

Ultimately the benefits and drawbacks of SaaS will be case-specific, and will depend on factors such as the nature of the software, the nature of the customer base, the domicile of the provider, and the jurisdictions where the service will be offered, among other considerations. If you are trying to decide whether SaaS would be the right fit for your company, seek the advice of legal counsel before making a decision. And if you are already operating in the SaaS market, it is crucial that you retain legal counsel to protect you from liabilities of which you may not be aware.

For further information, please contact Greg Buxton at gbuxton@winklerpartners.com and Peter Lavelle at plavelle@winklerpartners.com.

Labor Incident Act: three takeaways for employers

Taiwan’s Labor Incident Act (“LIA”) was announced on 5 December 2018 and will come into force on 1 January 2020.[1]

The core principles of the LIA are speed, appropriateness, professionalism, effectiveness and fairness, with the given aims of readjusting the structure of the employee-employer relationship, reducing the barrier to litigation for employees and strengthening their employment rights.

It’s important to note that labor disputes that arise before the implementation of the LIA can still be dealt with under the new law, as long as they have not been completed (i.e. by settlement or final and binding judgment) by that date. Businesses employing people in Taiwan should therefore take advantage of this period and prepare ahead of time for the implementation of the LIA. Below, we outline three main points worth considering.

Scope

Please keep in mind that the scope of the Labor Standards Act and Labor Incident Act are not the same. Labor Standards Act  is a substantial law which provides the basis for employment relationships between employers and employees. The Labor Incident Act is procedural law which outlines how employment disputes should be handled.

Employers should be aware that the scope given for disputes to be settled under the LIA is quite broad. The law defines disputes as civil in nature, covering the rights and obligations between employers and employers, or those disputes where employment rights have been infringed upon.

However, due to the law’s basis for expanding the rights and obligations of both parties, the definition of “employee” and “employer” is relaxed, and the fact that related civil matters can be combined with or added to labor disputes, as well as allowing for counterclaims to be made during the litigation process mean that with this new scope comes increased risk. Two things that deserve special attention include:

  1. In addition to regular employers, recruitment agencies, dispatch employee companies, those that recruit people in trainee positions or similar roles are, under the LIA, considered employers. As an example, if there is a discrimination , sexual harassment or occupational safety dispute brought by a job applicant or dispatched employee, then this falls within the scope of the LIA.
  2. Secondly, the court will consider the work rules, labor-management conference decisions, labor norms and so on as the basis for trials, alongside the rights and obligations provided for by law.

Review all relevant documents

Businesses should use this time to review labor contracts and work rules and ensure that all employee records are up to date and maintained according to the law. As businesses bear the responsibility for proof, they should determine that employee records are complete (employee lists, attendance records, salary information etc.) and make sure that all contracts, work rules and other internal guidelines clearly define the obligations and rights under the employee-employer relationship. Clear definitions of what constitutes “wages” and “work hours” should be given.

1. Wages

Disputes over wages occur when it is difficult to judge the amount of money that a company should provide to an employee. It is a recurring payment, for a service performed, or given as a favor (ex gratia payment), for example retention bonuses. The determination of wages will affect how salary, pensions and/or severance pay are calculated.

Under the LIA, employees are only required to prove that payments occurred as part of an employer-employee relationship. It is the responsibility of the employer to prove that bonus payments are not wages. Businesses should therefore set rules that cover bonus payments, including eligibility, payment conditions, calculations and payment terms to serve as evidence should any disputes arise in the future.

2. Work hours

Disputes over work hours usually involve the calculation of overtime. Whether or not the employee was granted permission to work outside of their normal work hours has in the past been difficult to determine. The LIA similarly provides that employees are considered to have obtained approval for any work conducted outside of their normal working hours. Employers are obligated to prove that approval was not obtained by the employee before overtime commenced.

Businesses should therefore include overtime application procedures in their employment contracts, in the work rules or other overtime guidelines. Attendance record control should also be strengthened to serve as evidence in the event a dispute arises.

Focus on prevention

Now that the cost of recourse through the courts has been lowered for employees, it is essential that employers are aware of the increased burden of proof they have to meet. To avoid costs associated with the lengthy mediation and litigation process, businesses should try to prevent cases reaching the courts. As an example, businesses should determine whether a cause for termination is lawful, and whether they have enough evidence to support their claims should a dispute be brought, and whether they have followed the law regarding terminations, before they terminate the employee. If a business is unsure, they should consult with legal counsel before they take any steps.

Once the LIA is implemented a judge will be appointed to take part in both the court-led mediation and litigation stages, and because the judge will disclose their impression in certain circumstances during mediation, it will be clear whether an employer will be successful or not during subsequent litigation. Mediation therefore will become the critical stage once the LIA is implemented. It goes without saying that it is advisable that businesses retain legal counsel before a dispute occurs or at least before the dispute enters the mediation phase.

Employees are ever more aware of their rights, and there are more avenues for recourse than before, once the LIA becomes law businesses should spend time considering how management of their employees can be adjusted to minimize disputes. By preventing disputes from occurring in the first place, the employee-employer relationship can be a harmonious one, which in turn is good for business.

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


[1] During the legislative process, the name of the Act was translated as either the Labor Dispute Act or the Labor Incident Act in news reports. We have updated the name used in our articles based on the official English translation given on the Ministry of Justice’s website.

Closed companies: still a useful option?

We published an article last year highlighting the amendments to Taiwan’s Company Act (the “Act”) which came into effect on November 1, 2018.  The changes to the Act were extensive and, among other things, greatly enhanced flexibility in structuring Taiwan company fundraising and shareholder control arrangements. During the preparation of the amendments to the Act, a number of commentators questioned whether “closed companies”, created by legislation enacted in 2015, continued to be necessary as the amendments worked to bestow upon typical private companies many of the benefits previously only available to closed companies.

While we agree that these amendments to the Act do close the gap between the more commonly used private company and a closed company, there remain some significant advantages to using a closed company. Set forth below are some of these differences:

1. Shareholders may exercise voting rights by written resolution. Being able to execute written resolutions instead of holding an actual shareholders meeting makes it easier and more efficient to manage a closed company.

2. Restrictions on transfer of shares can be stated in the Articles of Incorporation.  As opposed to a standard private company which can only place restrictions in its Articles of Incorporation on the transfer of preferred shares, a closed company can, in its Articles of Incorporation, restrict the transfer of any type or class of shares. We note that shareholders of a standard private corporation can restrict the transfer of non-preferred shares by agreement; however such an agreement would not be publicly available and thus would not be binding on bona fide third party transferees. In addition, transfers made in violation of such an agreement would give rise to monetary damages but would not be void ab initio as they would be if such transfers were disallowed in the company’s constitutive document.

3. There are no preemptive rights for employees and existing shareholders. Under the Act, when a standard private company issues new shares, (i) a certain number of shares must be reserved for subscription by employees of the company and (ii) existing shareholders would have preemptive rights with respect to any shares not reserved for employees. There is no similar requirement with respect to closed companies.

4. Directors and supervisor voting arrangements can be tailored. The Act requires the shareholders of a standard private corporation to use cumulative voting when electing its directors and supervisors. However, a closed company may use straight voting or any other voting method that the company deems best suited to its particular needs so long as such a voting method is clearly set forth in the company’s Articles of Incorporation.

5. Equity capital may be contributed by service. Shareholders of a closed company can contribute equity capital in the form of services rendered to the company.  Such service contributions are not available to standard private companies. This attribute of closed companies makes them particularly attractive to startups whose founders may lack significant capital resources. It is important to note, however, that there are some limitations on the amount of equity capital which can be contributed as services to a closed company. Total service equity cannot exceed one half of the total shares issued with respect to a closed company whose paid-in capital is under NT$30 million. For a closed company whose paid-in capital is equal to or exceeds NT$30 million, service equity is limited to one half of the first NT$30 million worth of shares issued plus one quarter of any additional shares issued.

We continue to recommend considering closed companies when clients are evaluating which type of entity is appropriate for their businesses in Taiwan. Even after the recent amendments to the Company Act, closed companies retain a number of attributes that make them well-suited in certain circumstances.

For more information, please contact Greg Buxton at gbuxton@winklerpartners.com.

Regulations governing ratings for cybersecurity responsibility levels

Article 7(1) of the Cybersecurity Management Act authorizes the Executive Yuan to define standards for rating cyber security responsibility levels. These standards are set out in the Regulations Governing Ratings for Cybersecurity Responsibility Levels (the “Rating Regulations”). The Rating Regulations took force on January 1 2019.

While the Rating Regulations consist of just 12 articles, there are ten tables appended to the Rating Regulations that contain detailed requirements for cyber security management.

The Regulations define five ratings from A to E. A is the strictest rating with the highest requirements while E is the lowest. Rating Regulations §2.

Critical Infrastructure operators (“CI Operators”) are rated A or B depending on an evaluation by the CI Operator’s regulator. Factors considered in the evaluation include the number of users, market share, region, replicability, and the impact of a failure of the CI operator’s information system. Rating Regulations §4(6) and §5(5).  For example, critical infrastructure includes industries such as energy, transport, telecoms, the banking system and certain medical facilities.

The specific requirements for each rating level are set out in tables attached to the Rating Regulations. Each table covers three aspects of cyber security: management, technology, and awareness/training.

Management

All CI Operators are required to rate their information systems within one year of designation. Systems must be evaluated for secrecy, integrity, usability, and legal compliance.  The standards for high, medium, and low ratings are defined in the attached Table 9.  CI Operators are also required to implement the security measures set out in the attached Table 10 within one year. These security measures are grouped in the following categories: access control, auditing/accountability, operational continuity plan, identity, system and service obtainability, system and communication protection, and system/information integrity.  Rating Regulations, Table 10.

Management requirements for a CI Operator with an A rating include implementing the CNS 27001 information security standard within two years and having at least four dedicated information security specialists. CI Operators with a B rating must also implement CNS27001 within two years but are required to have just two information security specialists. Rating Regulations, Tables 2 and 4.

Technology

Technology requirements include security testing, security checkups, threat detection management mechanisms, and security protections. For example, an A rated CI Operator is required to do system penetration testing once each year. In contrast, a B rated CI Operator is required to do system penetration testing once every other year. Rating Regulations, Tables 2 and 4.

Awareness and Training

Awareness/training requirements include required training for security personnel and ordinary users as well as certification requirements for security specialists. For example, CI Operators with  A or B Ratings are required to train ordinary users for three hours per year. Rating Regulations, Tables 2 and 4.

 

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