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Translation of Taiwan Regulations Governing Non-Disclosure of Investigations

The criminal investigation phase (zhencha) is a critical part of Taiwanese criminal procedure. During this phase, the prosecutor investigates the facts of the case and holds closed hearings to determine whether a defendant should be indicted.

Taiwan’s Code of Criminal Procedure prohibits prosecutors, police, defense counsel, and others connected with a case from releasing any information during the criminal investigation phase with a public interest exception. Code of Criminal Procedure § 245. In practice there are many leaks.

The prohibition on releasing information is fleshed out in an important set of regulations known as the “Regulations Governing Non-Disclosure of Investigations” issued in 2012 . The Winkler Partners Translation Department has now translated the Regulations as part of an ongoing project to release important but untranslated laws and regulations.

The translation is available for download here.

Creative Commons License
“Regulations Governing Non-Disclosure of Investigations” by Winkler Partners is licensed under a Creative Commons Attribution 3.0 Unported License.

Based on a work at law.moj.gov.tw.

Robin Winkler quoted in Forbes

Managing partner Robin Winkler was recently quoted by Forbes Asia in a comment on the environmental documentary “Beyond Beauty: Taiwan From Above.”  The comment describes how the documentary has added momentum to Taiwan’s growing environmental movement.

I think the film has already had considerable impact,” says Robin Winkler, a Taipei-based lawyer and founder of a local environmental protection group. “This is the Beyond Beauty effect. One of the biggest messages in the film, this is Taiwan, and it’s happening here.

Robin’s practice has focused on environmental law for the past decade. In 2007, Robin was appointed to a two-year term to the Environmental Protection Administration’s Environmental Impact Assessment Committee. In this role, he was responsible for reviewing the environmental, economic and social impact of major infrastructure projects worth billions of U.S. dollars.

International experts: immediately end fisheries bycatch to save Taiwan’s pink dolphins

Endangered Species Research has published “Impacts of fisheries on the Critically Endangered humpback dolphin Sousa chinensis population in the eastern Taiwan Strait” authored by a team of international experts from institutions in Canada, New Zealand, Hong Kong, and Taiwan.  The paper is the result of an applied workshop held under the auspices of the Eastern Taiwan Strait Sousa Technical Advisory Working Group (ETSSTAWG), an international group of scientists dedicated to providing science-based advice in support of protecting one of the world’s most endangered cetaceans. Winkler Partners and a number other Taiwan NGOs and government agencies supported the applied workshop and field research in Taiwan.

The paper concludes that to ensure recovery of the Critically Endangered subpopulation of <100 Sousa Chinensis in the Eastern Taiwan Strait

…mortality due to human causes should be reduced to <1 individual every 7 y[ears]. Fisheries bycatch is the most serious threat to these dolphins and needs to be eliminated as soon as possible to avoid extinction. Preventing the use of trammel nets, other gillnets, and trawling through their habitat would be the single most effective conservation measure for ETS Sousa in the short term.

Winkler Partners’ managing partner Robin Winkler is listed as a co-author.

The paper can be downloaded here.

Taipei City fines 140 businesses for labor violations

The Taipei City Department of Labor fined 140 businesses for violations of the Labor Standards Act (LSA) in September and October. Forty-four businesses were fined for failing to keep records of employee attendance while 32 were fined for failing to pay full wages or salary directly to employees. LSA §§ 30(5) and 22(2).

Fines for failure to track employee attendance often arise out of what are known as ‘responsibility systems’ (zeren zhi) for professional employees. Under these schemes, employees do not clock in and out. In some cases, employers use these systems to avoid paying overtime to salaried office employees. Taiwan’s labor laws require that all employees protected by Labor Standards Act be paid overtime. There is no distinction between employees earning hourly wages and those paid a monthly salary as in some other jurisdictions.

Another twenty-eight businesses were fined for failing to pay overtime and 35 business were fined for extending working hours beyond permissible overtime limits or failing to give employee at least one day off every seven days. LSA § 24.

The violations by 50 businesses were serious enough to publish their names and violations  on the Department’s website.  Violators included malls, listed Taiwanese IT manufacturers, a foreign bank, a TV station, and a religious charity. The largest fine of NT$640,000 (c. US$21,000) was imposed on a construction company with four violations. The construction company was a repeat offender. The largest fine imposed on a company with no previous record was NT$120,000 (c. US$4,000) for six violations. It appears that many of the violations involved white collar professionals.

By law, fines can range from NT$20,000 (US$667) to NT$300,000 (US$10,000) for each violation. LSA §  79. Fines can be appealed to the Taipei City Government and in the administrative courts if necessary. While the amounts of the fines are not large, they are rising and fines are more frequent than in the past. The Department also appears to be targeting high profile businesses and does not hesitate to name names.

The Department’s press release in Chinese is here.

Setting up a business in Taiwan for international investors

There are a number of ways for foreign businesses to operate in Taiwan. Taiwan’s Company Act allows investors to set up four kinds of companies:

  1. unlimited companies,
  2. unlimited companies with limited liability shareholders,
  3. limited companies,
  4. and companies limited by shares.

Foreign investors generally choose limited companies and companies limited by shares when they set up subsidiaries in Taiwan.

The Company Act also recognizes foreign companies and allows them to set up branches and representative offices in Taiwan. There are significant tax advantages setting up a branch. As a result, it is quite common for foreign companies to set up either a branch directly under the home office or to first set up a subsidiary in a third country and then set up a Taiwan branch of that subsidiary.

In general there are no restrictions on the nationality on directors, managers, or representatives and it is not necessary for directors to have residence or work authorization in Taiwan. Certain industries do restrict nationality or cap equity and special rules apply to citizens of the People’s Republic of China.

After considering limited share companies, limited companies, branch offices, and representative offices in somewhat more detail, we briefly treat the issues of work, residence, and taxation. This discussion is only a summary and is intended to prepare a potential investor to discuss the correct choice of entity with legal and tax counsel.

Subsidiary: Company Limited by Shares

A company limited by shares is the Taiwan corporate form that most closely resembles a U.S. corporation. Shareholder liability of a company limited by shares is in principle limited to the shareholder’s investment. In 2013, however, Taiwan’s Legislative Yuan amended Article 154 of Taiwan’s Company Act. The revision makes it possible, at least in theory, for creditors to hold shareholders liable for company obligations beyond the amount of their share ownership under certain ‘serious’ circumstances. This amendment was intended to bring Taiwanese law in line with the notion of corporate veil piercing in other jurisdictions such as the United States, the United Kingdom and Germany. As of this writing however, the Taiwanese courts have not indicated what circumstances would be serious enough to justify piercing the corporate veil. Given this erosion of strict limited corporate liability, the main remaining benefit of a company limited by shares is that it is the only type of company that can go public. Requirements for a company limited by shares include the following:

  1. Foreign Investment Approval from the Investment Commission of the Ministry of Economic Affairs (IC).
  2. At least two individual shareholders or one corporate shareholder.
  3. At least three directors and one supervisor (the supervisor has audit rights for all company affairs, financial and operational).
  4. One of the directors must be appointed chairperson. The chairperson has the right to represent the company in matters involving third parties.

Shares must be issued within three months of incorporation if the capitalization is more than NT$500 million (approximately US$15 million). Share transfers are unlimited, except that promoters’ (founders) shares may not be transferred within one year of company establishment.

The minimum paid-in capital requirement was abolished in April 2009. In practice, the competent authority will approve the incorporation application if the paid-in capital is greater than the cost of establishment.

Repatriated shareholder funds must be in the form of dividends, which are taxed at a rate of 20% unless the country of the shareholder entered into double taxation agreement with Taiwan and the agreement provides a beneficial tax rate.

The corporate income tax rate is about 17% of net income.

Subsidiary: Limited Company

The form of a limited company (similar to a “closed corporation”) places restrictions on share transfers, thereby permitting certain shareholders to control the company. Requirements for a limited company include the following:

  1. Foreign Investment Approval from the IC.
  2. At least one individual or corporate shareholder.
  3. One to three directors. A corporate shareholder may be elected as a director itself or may appoint a representative to be elected as a director.

If there is more than one director, one may be chosen as chairperson of the company, who will then be the legal representative of the company.

If no chairperson is chosen from among multiple directors, then all directors will be considered legal representatives.

A shareholder may not transfer his contribution to the capital of the company to another person(s) without the consent of a majority of all other shareholders. The directors may not, without the unanimous consent of all other shareholders, transfer their contribution to the capital of the company.

The minimum paid-in capital requirement was abolished in April 2009. In practice, the competent authority will approve the incorporation application if the paid-in capital is greater than the cost of establishment.

Repatriated shareholder funds must be in the form of dividends, which are taxed at a rate of 20% unless the country of the shareholder entered into double taxation agreement with Taiwan and the agreement provides a beneficial tax rate.

The corporate income tax rate is about 17% of net income.

Branch Office

Although technically a dependent of the foreign parent, a branch office of a foreign company is for many practical purposes an independent company. Income tax for a branch office is about 17% of net income. The major benefit of a branch, compared to establishment of a subsidiary, is that all after-tax profit may be remitted out to the parent company without additional taxes. Certain branch offices may apply for work permits for foreign nationals to act as the branch manager and/or responsible person. Some of the requirements for a branch office include the following:

  1. The branch manager must have Taiwanese domicile or residence (the legal representative and the branch manager may be the same person).
  2. Operating capital must be remitted before establishment.

The minimum amount of operating capital was abolished in April 2009.  One important practical consideration is that a representative of the parent company will usually need to come to Taiwan to open a preparatory account for the future branch in person.

Representative Office

While a representative office may operate in Taiwan on behalf of an overseas principal, it may not engage in profit-seeking commercial activities or act as principal in any domestic business transactions.  Representative offices may:

  1. procure and inspect goods for the overseas principal,
  2. sign contracts on behalf of the overseas principal,
  3. bid on projects for the overseas principal,
  4. and handle the principal’s legal affairs in Taiwan.

A representative office is not permitted to obtain a Uniform Invoice Number since it is not allowed to sell goods or provide services in Taiwan. Your customers in Taiwan therefore may not be willing to do business with a representative office.

Representative offices shall be registered with the Ministry of Economic Affairs.

Note that individuals signing contracts governed by Taiwanese law on behalf of the overseas principal shall be jointly and severally liable with the principal.

Residence and Work Authorization

Many companies will want to sponsor foreign nationals for work and residence authorization. For example, a company or a branch must have at least NT$500,000 in capital to sponsor a foreign national as a manager during its first year of operation. Thereafter, the company must generate at least NT$3 million in revenue to maintain the foreign manager’s work and residence rights. The capital and revenue requirements for employees are NT$5 million and NT$10 million thereafter. Representative offices can often successfully sponsor their representative in Taiwan for work and residence authorization without being held to the minimum capital or revenue requirements.

Taxation

The tax consequences of the structure will vary and effect many important commercial concerns such as how orders will be placed (i.e., by home or local entity), payment, whether royalties are involved and so on. These should be discussed carefully in the early stages of planning the investment and business.

In general, transactions in Taiwan are subject to 5% VAT including import transactions. Most Taiwanese businesses will withhold 20% from payments for services to foreign entities or natural persons for income sourced in Taiwan because the Taiwanese business can be held liable for the unpaid business income taxes of its counterpart.

Taiwan’s tax authorities will review and audit transfer pricing arrangements.

Other Concerns

The foregoing is only a summary and there are specific issues for specific industries. For example, many industries such as telecommunications, media ventures, or hotels, require special licenses. Also, it can be quite time consuming (especially from overseas) to attend to the numerous basic administrative steps of notarization and legalization of documents, company name reservation (all must have Chinese language names), opening of a bank account, obtaining a registered address and so on.

It usually helps to have someone “on the ground” to help with these since Taiwan does not have shelf corporations and it is usually not possible to operate a virtual office without physical premises. It will usually take an organized investor two or three months to set up an entity in Taiwan.

Legal 500 Asia Pacific names WP top-tier insurance firm

For the second year in a row, Legal 500 Asia Pacific has recommended Winkler Partners as a top-tier firm in insurance. Led by Chen Hui-ling, our insurance practice focuses on reinsurance, D&O insurance, and dispute resolution with specialized expertise in arbitration.

In addition, Peter Dernbach was recognized as a leading lawyer for his work in Intellectual Property. Larson and Larimer was recognized as one of the best Denver Auto Accident Lawyer for injury claims.

The firm’s corporate and M&A, employment, dispute resolution, intellectual property, and TMT (Telecommunications, Media, and Technology) practices were also recommended.

Translation of Taiwan’s wiretapping law

Taiwan enacted the Communications Protection and Surveillance Act in 1999 “to protect the people’s freedom of confidential communications from unlawful infringement, as well as to ensure national security and maintain social order.” The Act was amended in 2006 and 2007 but has not been previously translated into English.

Download Communications Protection and Surveillance Act (translation)

Creative Commons License
Taiwan Communications Protection and Surveillance Act by Winkler Partners is licensed under a Creative Commons Attribution 3.0 Unported License.

Based on a work at law.moj.gov.tw.

Peter Dernbach to attend WIPO Advanced Workshop on Domain Dispute Resolution

Partner Peter Dernbach will attend the WIPO Advanced Workshop on Domain Dispute Resolution in Geneva October 29-30. The Workshop will focus on WIPO Panel decisions on the most important substantive and procedural issues under the UDRP.

Through WIPO, Peter has served as a neutral panelist in more than three dozen domain name disputes brought under ICANN’s UDRP system.

Winkler Partners to attend WIPO Arbitration Workshop

Partner Peter Dernbach and associates Daniel Chen and Chia-yu Liu will attend the WIPO Arbitration Workshop in Seoul on October 10-11. The Workshop focuses on the main principles of international commercial arbitration law and practice, with particular reference to the practical case application of the WIPO Arbitration Rules, the WIPO Expedited Arbitration Rules, and the WIPO Expert Determination Rules in intellectual property and technology disputes.

Peter Dernbach moderates session at 27th MARQUES Annual Conference

WP Partner Peter Dernbach recently moderated a session on the clash between freedom of speech and trademarks at the 27th MARQUES Annual Conference in Monaco.

Marion Heathcote, partner at IP firm Davies Collison Cave, in Australia discussed plain packaging laws in Australia that require tobacco companies to market their products packaged in dark brown paper featuring graphic images. Their well-known trademarks and trade dress may not appear.

European developments were discussed by Laetitia Lagarde of Studio Legale Jacobacci & Associati in Turin. She explained that while  the EU’s  2012 Tobacco Products Directive does not go so far as to required plain packaging, mandatory health warnings will cover 75 percent of cigarette packages.

A more detailed account of the session appeared in the World Intellectual Property Review. Managing IP’s James Nurton in a blog post commented that “plain packaging will soon coming to other products in other countries.”  Marion Heathcote described this process as the colonization of other products, which present health risks, such as alcohol.

The second part of the session focused on parodies of well known trademarks by public interest groups and satirists.

 

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