14 April, 2009
Minimum Capital Requirement for Companies Abolished
Chinese-language media sources reported today that the Legislative Yuan has abolished minimum capital requirements for companies established under Taiwan's Company Act. Previously, limited companies and companies limited by shares established under the Act were required to be funded with NT$250,000 and NT$500,000 respectively at start up.
It is important to note that companies wishing to obtain work authorization for foreign nationals must in general have start up capital of at least NT$5 million (c. US$150K). If the company has been in existence for more than one year, it is required to have average annual revenue of NT$10 million (c. US$300K) to employ foreign professionals. Average annual exports of US$1 million or commisions of US$400,000 can also qualify.
In practice, a company may employ one foreign technical or professional specialist for each NT$5 million in capitalization or NT$10 million in sales in the previous year. This is not black letter law, and there is some administrative flexibility on the threshold amounts.
Foreign-invested companies that have received approval from the Investment Commission or have been recognized by the Ministry in the case of branch companies are treated somewhat differently. These companies can currently obtain work permits for the registered manger(s) of the company without any minimum capitalization requirement in the first year of the company's operation. In addition, work permits are sometimes issued for as many as three years to such managers.
Upon renewal however, these foreign-invested companies will be subject to a minimum average annual revenue requirement of NT$5 million or five times the company's capital to obtain subsequent work permits. Work permit renewals can also be obtained if the foreign-invested company has exports and imports of at least US$500,000 or commission income of at least US$200,000. Winkler Partners expects these regulations to be updated soon in view of the removal of minimum capitalization requirements.
The distinction between minimum capitalization requirements for company establishment and the rules for work authorization often causes some confusion among prospective foreign investors. It may help to note that the establishment of companies is regulated by the Ministry of Economic Affairs under the Company Act whereas work authorization requirements are administered by the Council of Labor Affairs under the Employment Services Act. While the Ministry of Economic Affairs is generally concerned with the promotion of business and trade in Taiwan, the Council of Labor Affairs works to protect labor rights and job security.
A feature article in today's Taipei Times also provided some interesting personal perspectives and advice on starting a business in Taiwan from foreign entrepreneurs.
For more information on starting a new business in Taiwan, please contact Shan Lee. Shan is a contributor to the World Bank's Doing Business 2008, which provides a great deal of useful information on the practicalities of doing business in Taiwan.
