Covid-19 measures for Taiwan employees and the self-employed announced

In the midst of the Covid-19 pandemic, the Taiwan government has announced subsidy programs for impacted employees and the self-employed. This article was updated on 20 April to reflect newly announced subsidy programs available for self-employed workers.

Reassurance Employment Plan for employees

On 27 March 2020 the Taiwan government announced a Reassurance Employment Plan (安心就業計畫) aimed at countering the negative impact of the ongoing Covid-19 pandemic on the Taiwanese job market. The measures, which apply retroactively to 15 January, include government subsidies for employees who have wages and working hours reduced due to a contraction in their employer’s business. Agreements reached between employees and their employer must be in writing, and include wage and hour reductions for a period of more than 30 days in order to qualify for the subsidy. Employees can apply for the subsidy at their local labor authority. Certain categories of foreign nationals, for example those with dependent ARCs or APRCs working in Taiwan, are eligible for this subsidy.

Employers may decide to report the agreement to the local labor regulator. However, even if the employer does not complete the report, the employee can notify the local labor regulator, who may review the agreement to confirm whether it meets the subsidy criteria. If so, the employees can then receive the subsidy.

The subsidy calculation formula is the average monthly insured salary (the maximum amount is NT$45,800) for the 12 month period prior to the effective date of the agreement minus the agreed monthly salary specified in the agreement (must be at least NT$23,800) multiplied by 50%. The maximum monthly subsidy amount is NT$11,000. Employees may receive the subsidy for at most 6 months. The program applies only to full and part-time employees that receive salary on a monthly basis (i.e. not hourly wage employees). As an example, if an employee is usually paid NT$45,800, and the agreed monthly salary in the agreement is NT$23,800, then the subsidy available will be NT$11,000= (45,800-23,800)*50%.

Subsidy program for the self-employed

On 20 April 2020, a subsidy program for the self-employed (including independent contractors) was officially announced. The subsidy is NT$10,000 per month. The self-employed may receive subsidies for up to 3 months. The self-employed are eligible to apply for the subsidy if the following conditions are met: (i) they hold Taiwan citizenship; (ii) they have enrolled in the labor insurance scheme through a professional union on or before 31 March 2020; (iii) their insured salary in March was NT$24,000 or less; (iv) their taxable income in 2018 was NT$408,000 or less; and (v)  they are ineligible to apply for other subsidies issued by government authorities (such as the ones offered by the Ministry of Transportation and Communications or the Ministry of Culture).

Eligible self-employed workers can submit an application form along with a copy of their bank passbook to their professional union.

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

Taiwan benefit corporation legislation proposals

We last wrote about benefit corporation legislation in Taiwan back in 2017, and since then there has been some movement on this topic. On 6 July 2018, the Legislative Yuan requested that the Ministry of Economic Affairs (MOEA) coordinate with stakeholders to evaluate whether a special chapter covering social enterprises and benefit corporations should be added to the existing Company Act or whether separate legislation should be introduced. The MOEA was given a year to produce a report on this topic and present it to the Legislative Yuan before August 2019. A summary of the report’s key points is outlined below:

Social Innovation Enterprise as a catch-all term

In their report, the MOEA use the term “social innovation enterprise” (社會創新組職) as an umbrella term for all organizations with a declared social or environmental purpose, whether they are companies, sole proprietorships, partnerships or cooperatives.

No special chapter in the Company Act

  • The Company Act is for companies, and is unsuitable for different organizations
  • The Company Act states that a company is a profit-making enterprise and that the responsible person should give priority to the maximization of shareholders’ interests. If the interests of third parties other than shareholders are pursued, this might violate the company’s obligations
Difficulty in passing special legislation

  • Social innovation enterprises come in many forms, which agency would provide oversight?
  • How should the responsible person implement social or environmental obligations? How would violations of the law be handled?
  • Should these enterprises be required to allocate surpluses for social good?
  • Should third-party standards be used or should such enterprises be certified by a third party? As there is no consensus across industry, the MOEA believes that legislation would be difficult to implement.
Administrative guidance in the short term

  • Issuing guidance through administrative notices provides for flexibility, and could quickly be revised or updated according to the operational needs of different types of business.
  • Strengthening and expanding an existing platform for social enterprises (Social Innovation Enterprise Registration Database). This would provide resources and support for enterprises with a declared social or environmental goal, while building consensus for possible legislation further down the road.

We will monitor developments as the MOEA continues its dialogue with business and academia on benefit corporation legislation in Taiwan.

For more information on this topic, email Christine Chen at cchen@winklerpartners.com.

Further movement on Taiwan STO regulations

We published an earlier article regarding proposed regulations to be promulgated by the Taiwan Financial Supervisory Commission (the “FSC”) concerning security token offerings (“STO”).  At the end of June, the FSC released more information on what the final regulations may include.

The latest proposals do not vary significantly from the earlier proposed regulations except with respect to the two issues set out below:

  1. Increase in individual investor limit.  The cap on the amount an individual professional investor can invest in a single STO was raised from NT$100,000 (approximately US$3,000) to NT$300,000 (approximately US$9,000).
  2. Addition of limitations on STO platforms.  The more substantial change from the proposed regulations was the addition of limitations on the dollar amount and frequency of STOs allowed to be conducted on individual STO platforms.  The latest proposals provide that an individual platform may conduct STOs only up to an accumulated volume of NT$100 million (approximately US$3 million).  After a platform has conducted STOs aggregating NT$100 million, it may no longer conduct STOs.  Each STO platform must also wait at least one year between each STO conducted.  These two additional limitations will very likely dissuade most, if not all, potential STO platform providers from entering the market.

We will continue to watch this space in hopes that more business-friendly regulations will eventually materialize.

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

Proposed regulations governing Taiwan STOs

At the end of 2018 we wrote an article regarding crowdfunding in Taiwan. We questioned whether in the future Taiwan might allow companies to raise funds through ICOs conducted via crowdfunding channels. Current indications are that the Taiwan Financial Supervisory Commission (the “FSC”) intends to regulate such ICOs, commonly referred to as security token offerings (“STO”), separately from crowdfunding. However, the general regulatory framework to be applied to STOs bears a significant resemblance to the existing crowdfunding rules.

On April 12 of this year, the FSC held a forum to discuss the key elements of the proposed STO regulations. The following proposals were discussed:

  1. Exemption from registration. An STO through which an issuer attempts to raise NT$30 million (approximately US$1 million) or less (a “SmallCap STO”) would be exempted from the registration requirements of Article 22 of Taiwan’s Securities and Exchange Act. STOs in excess of NT$30 million would be subject to the requirements of Article 22 and required to enter Taiwan’s regulatory sandbox.
  2. Permissible securities. STOs would only be permitted with respect to two types of securities: (a) fixed-interest debt and (b) profit participation rights. It is important to note that profit participation rights are not tantamount to equity share rights. Profit participation rights would not convey any of the control rights associated with share ownership, but merely convey rights to economic participation.
  3. Permissible investors. Only professional investors would be allowed to invest in SmallCap STOs, and individual investors would be limited to investing NT$100,000 (approximately US$3,000) per STO.
  4. Exhange trading. It is envisioned that security tokens issued in an STO would be exchange tradeable. Trading of SmallCap STOs would have a daily trading volume limit of fifty percent (50%) of the original issue. Securities issued in other STOs may be tradeable in the future pursuant to regulations formulated in connection with Taiwan’s financial sandbox.

The FSC plans to formalize and adopt the new STO regulations by the end of June of this year. Members of the business and legislative communities have already begun calling for increasing the SmallCap STO monetary threshold as well as loosening other restrictions. We will continue to watch this space and keep our clients informed of significant developments. A July 2019 update on the proposed regulations can be found here.

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

Taiwan’s legislature passes marriage equality bill

Taiwan’s Legislative Yuan passed “The Enforcement Act of Judicial Yuan Interpretation No. 748″ allowing same-sex couples to register their marriages on 17 May. The name of the Act refers to Interpretation No. 748 made by Taiwan’s constitutional court in May 2017. Interpretation No. 748 held that not permitting same-sex marriage was unconstitutional on grounds that it violated the rights to equality before the law and freedom of marriage. The Enforcement Act of Judicial Yuan Interpretation No. 748 (the “Act”) implements Interpretation 748.

Article 2 of the Act provides that “two people of the same gender may establish a permanent, exclusive, and intimate union for the purpose of pursuing a common life”.  Article 4 of the Act details the mechanics of how to create such a union and states that it may be registered as a marriage at the local Household Registration Office.

While Article 20 of the Act permits second-parent adoptions by married same sex couples, joint adoptions of non-biologically related children are not permitted. It is likely that the constitutionality of not permitting married same sex couples to adopt will be challenged on grounds of the right to equality before the law.

Article 24(2) of the Act provides that in general any provision of another law other than the Civil Code applies to a same-sex marriage if it refers to ‘husband and wife’, ‘spouse’, or ‘marriage’ . As a result, the provisions of Taiwan’s choice of law rules regarding marriage apply to same-sex marriages. Under those rules, a transnational marriage (same-sex or otherwise) is valid only if it is valid under the laws of Taiwan and the laws of the foreign spouse’s country.

As a result, transnational same-sex marriages will be valid in Taiwan only if the foreign spouse comes from a jurisdiction that permits same-sex marriage. Conversely, such a marriage will not be recognized in Taiwan if the foreign spouse comes from one of the many countries such as Japan that currently do not permit same-sex marriage.

Since Hong Kong and Macau are treated as foreign countries for most purposes, it follows that same-sex marriages where one spouse is from Hong Kong or Macau probably will not be recognized. Due to China’s special status in Taiwanese law, it is currently uncertain whether same-sex marriages where one spouse is from the People’s Republic of China will be recognized.

The Act comes into force on 24 May 2019. Taiwan’s Chinese language media has reported that local Household Registration Offices are ready to start registering same-sex marriages on the same date.

Taiwan’s regulatory fintech sandbox: one year on

The Financial Supervisory Committee (FSC) announced this week that their application target for the first year of the regulatory sandbox has been achieved. So far, 11 applications for the experimentation or testing of new forms of fintech have been filed since the sandbox was launched under the Financial Technology Development and Innovative Experimentation Act in April 2018. Of these applications, three are from the financial sector, and include banking, securities, and insurance innovations; three are from outside the financial sector, but are related to banking and securities; and the other six applications have yet to be revealed to the public. Only one application has been rejected.

In addition, the FSC is considering implementing a separate “trial operation” track specifically for financial sector businesses. Those applicants who qualify can test out their new ventures on this track, as long as these do not involve amending the current laws and regulations, and would thus not be required to enter the sandbox.

These developments are welcome news for companies, both domestic and international, 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, take a look at our overview article from last year here.

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

Providers of set-top boxes and apps that infringe on others’ copyright will now face criminal penalties

On 16 April 2019, Taiwan’s Legislative Yuan passed amendments to Articles 87 and 93 of the Copyright Act, which provide that companies that offer set-top boxes or apps that allow consumers to link to websites or download content that infringes on the copyright of others can now face up to two years in prison or a criminal fine of up to NT$500,000 (approx. US$16,200) in lieu of a prison sentence.

In recent years, a number of set-top boxes or apps that have been sold on the market provide users with a convenient channel to access websites that allow them to watch pirated content. By charging users monthly rental fees for or selling set-top boxes outright, providers of such products and services are able to reap big profits, a situation that has seriously affected the development of Taiwan’s film and television industry.

In order to implement broader protection of intellectual property rights in Taiwan, the recent amendments provide that the following three kinds of behavior will constitute copyright infringement:

  1. Launching apps that compile links to websites containing pirated content on Google Play, the Apple Store, or other platforms that allow people to download such apps.
  2. Providing advice on, assistance with, or a way to download and use computer programs that contain pirated content, rather than directly offering such computer programs. For example, a provider sells a set-top box that does not contain the above-mentioned programs, but gives guidance or pointers on how to install them.
  3. Manufacturing, importing or selling equipment that contains the above-mentioned programs.

These amendments specifically target providers of set-top boxes and apps. For infringing websites that such products and services link to, such websites constitute infringement of reproduction rights and public transmission rights, and the punishment for such behavior is already provided in Articles 91 and 92 of the Copyright Act.

In addition, while consumers who buy set-top boxes and apps that link to infringing content are not considered to have broken the law, the provider may be investigated for offering illegal content and the consumer could risk having their product or service disconnected or cut off.

It is hoped that the passing of these amendments will aid in ceasing infringement and promoting the development of the creative industries in Taiwan.

For more information on protecting and enforcing copyright in Taiwan, please contact Gary Kuo at gkuo@winklerpartners.com.

Disability and employment in Taiwan

Taiwan encourages the meaningful inclusion of people with disabilities in the workforce, having enacted the People with Disabilities Rights Protection Act in 1980. The act was last amended in 2015. Companies meeting requirements set out in this act have a responsibility to create employment opportunities for people with disabilities.

Companies employing over 67 people must employ at least one person with disabilities, with the total employed exceeding 1% of total headcount. Companies can choose not to meet this requirement and instead contribute to local employment funds for people with disabilities in amounts equal to the monthly minimum wage per number of vacant positions. In practice however, it is not common for businesses to simply contribute funds to avoid this requirement. According to Ministry of Labor statistics, only 12.1% of private companies failed to meet this quota in 2017.

Companies failing to meet the 1% quota without a valid reason are liable for fines ranging from NT$20,000 (approx. US$700) to NT$100,000 (approx. US$3,510). Violators will also be named and shamed.

To avoid violating anti-discrimination laws, when hiring, it is recommended that companies use inclusionary language such as “position suitable for people with disabilities” (工作內容適合身心障礙者) or “priority consideration for applicants with disabilities” (身心障礙者優先) in job advertisements.

Companies that employ people with disabilities shall abide by the principle of “same pay for same work” and treat them without any discrimination. Similarly, wages paid must not fall below the minimum wage set by the government (currently NT$23,100 a month or NT$150 an hour).

Places of business, like public areas, buildings and transportation, must allow the free entry of guide dogs, hearing dogs, mobility assistance dogs or those currently under training. Taiwan’s building code requires commercial buildings to meet requirements for disability friendly facilities such as wheelchair ramps, elevators and toilets for the disabled. Meeting these requirements is the responsibility of the building developers and owners, and not likely to affect businesses that rent offices in such buildings.

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

A quick look at Taiwan’s Cyber Security Management Act Enforcement Rules

The Cyber Security Management Act Enforcement Rules (the “Enforcement Rules”) define reporting requirements, duties regarding subcontracting, the content of information security policies, major security incidents, and responses to security incidents. The Enforcement Rules were issued by Taiwan’s Executive Yuan under authority delegated to the executive branch by the Legislature in the Cyber Security Management Act. Please see this article summarizing the Act itself. Here, we outline several points in the Enforcement Rules that companies should be aware of.

Improvement Reports

Article 3 of the Enforcement Rules lists the required content of an improvement report following a cyber security audit that discovers deficiencies.

Subcontracting Standard of Care

Article 4 defines the standard of care with respect to subcontracting in considerable detail. In total, there are nine factors that must be considered when using subcontractors to develop or maintain information systems. For example, the contractor must require independent third party certification or do its own security testing for a customized system if the subcontract is worth more than NT$10 million (approx. US$330,000). Enforcement Rules §4(1)(3).

Information Security Policies

Information Security Policies must cover a total of 13 topics including core services and be filed with the appropriate agency. Enforcement Rules §6. Core services are defined in Article 7 by reference to the companion Regulations for Classification of Cyber Security Regulations (the “Classification Regulations”). For example, a service is a core service if it involves nationwide services to members of the public. Enforcement Rules §7(1)(4); Classification Regulations §4(3).

Reporting Security Incidents and Significant Security Incidents

Article 8 of the Enforcement Regulations sets out requirements for reporting security incidents while Article 10 defines significant security incidents as Level 3 and Level 4 Security Incidents as defined in Article 2 of the Regulations for Reporting and Responding to Cyber Security Incidents (the “Cyber Security Incident Reporting Regulations”). For example, a security incident that results in an interruption to core operations in critical infrastructure that cannot be restored within a tolerable period is considered a significant security incident because it is a Level 4 Security Incident. Enforcement Regulations §8; Cyber Security Incident Reporting Regulations §2(4)(3).

The Enforcement Rules came into effect on 1 January 2019.

New rules on extensions of residence in Taiwan

The Taiwan Ministry of the Interior amended its rules on extensions of residence on 5 December 2018 with immediate effect.

Under the new rules, most holders of an Alien Resident Permit (“ARC”) for the purpose of professional work in Taiwan can extend their residence for up to one year after his or her ARC expires. Regulations Governing Visiting, Residency, and Permanent Residency of Aliens (the “Regulations” §22). Under the old rules, the Ministry permitted only one extension of up to six months.

The new rules also permit a foreign graduate of a Taiwanese university to extend his or her residence for up to one year following graduation. Regulations §22-1. Overseas Chinese graduates are also eligible for similar extensions of residence after graduation. Regulations Governing Residence and Permanent Residence of Nationals without Household Registration in Taiwan §18(3).[1]

Classes of Foreign Professionals Eligible For Extensions

Eligible classes of foreign professionals include:

  1. Professionals and technical workers (Class A),
  2. Directors and Officers of foreign-invested businesses (Class B),
  3. Language teachers at public and private schools and universities (Class C),
  4. Teachers at cram (buxiban) schools (Class D),
  5. Coaches and athletes (Class E),
  6. Artists (Class F) and missionaries, and
  7. Crew members of merchant vessels.

Others eligible for the extensions include consultants and researchers at government agencies, research institutes, certain types of visiting academics, foreign investors, and persons specially approved for residence by the Ministry of Foreign Affairs.

A professional ARC holder can also apply on behalf of immediate family members (spouse and minor children) for extensions of residence.

How to Apply

An eligible ARC holder must apply for an initial extension of six months before his or her original ARC expires. A second extension of up to six months can be applied for before the initial extension expires. Applications may be filed at a National Immigration Agency service center no earlier than 30 days before expiration. Regulations §8(1).

Special Rules for Adult Children of Foreign Residents

The new rules continue to permit the adult children of foreign residents who grew up in Taiwan to apply for two three-year extensions of residency if they meet certain minimum residency requirements as minors and apply during the 30 days before expiration of a current ARC. Regulations §8(2).

Since February 2018, adult children of permanent foreign professional are also eligible to apply for work permits as adults if they meet certain minimum residency requirements as minors. Act for the Recruitment and Employment of Foreign Professionals §17. These work permits can be applied for when the eligible child turns 20.

For questions about immigration matters in Taiwan please contact Michael Fahey at mfahey@winklerpartners.com and Christine Chen at cchen@winklerpartners.com.

[1] 臺灣地區無戶籍國民申請入國居留定居許可辦法