Employment in Taiwan is governed under the Labor Standards Act (LSA), which establishes the minimum terms and conditions of employment in Taiwan. Conditions such as issues on labor contracts, wages, work hours, leaves of absence, compensation, retirement, and benefits all are covered in the LSA. Hiring foreign nationals is governed by the Employment Services Act (ESA). Provisions for labor contracts are not very strict and are flexible. Currently, there is a push for greater flexibility for the LSA to provide fixed-term labor contracts, and to incorporate dispatched workers in employment regulations.
Taiwan does not impose a complicated or onerous tax system on foreign companies operating in the country. The primary concerns for a foreign company that needs to comply with tax laws in Taiwan are: Individual income tax for employees in Taiwan, social security costs, VAT, withholding tax, business tax and permanent establishment concerns.
In order to work in Taiwan, a foreign worker must first sign an employment contract with the company, where the company must then apply for a work permit from the Ministry of Labor before the worker may work in Taiwan. A work visa and an Alien Residence Certificate is required to legally reside in Taiwan during the duration of employment in Taiwan.
There are regulations that outline the permitted industries and occupation types. Among the permitted industries for foreign workers are oceanic fishing, housemaid, manufacturing, construction, nursing, bilingual translation and cooks. Taiwan does allow the employment of specialized foreign workers who are able to provide specialized knowledge and skills for competitive technologies.
Most foreign businesses entering Taiwan will choose to use a local agent or distributor to gain an initial foothold in the business community. The options for incorporating a branch office, representative office or a locally-incorporated company is more applicable to markets of considerable size or for foreign companies who wish to establish a persistent market presence.
Taiwanese investment policy allows foreigners to invest in most business sectors except the ones on the Negative List. Foreign businesses in particular may only incorporate once they have obtained approval from the Ministry of Economic Affairs’ Investment Commission (MOEAIC). The Taiwan Company Act allows four kinds of company to be established:
Companies entering Taiwan must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Taiwanese Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Taiwanese entity established that can run payroll.
A DIY approach will typically be delayed until there is a properly incorporated company ready to run payroll and may be a costly option. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.
|Management Fee for Employer of Record Services / Monthly Payroll Costs||
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Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.
|Tax Returns Supplied||
|Employers Social Security and statutory contributions||
No social security taxes are levied in Taiwan, but nominal labor insurance premiums and national health insurance premiums are imposed by all business entities.
Labor Insurance Scheme: 6.35%
National Health Insurance Scheme: 5.008%
|Employees Social Security and statutory contributions||
No social security taxes are levied in Taiwan, but nominal labor insurance premiums and national health insurance premiums are imposed by all business entities to the employee.
Labor Insurance Scheme: 1.8%
National Health Insurance Scheme: 1.4731%
|Corporate Income Tax Rate||
Company tax rate: 17% at a NT$120,000 threshold level
The sales tax in Taiwan is known as the business tax (BT) and is imposed through the VAT and non-VAT system.
The basic rate of the BT is 5%.
Exports, export-related services, items sold by duty-free shops, goods sold to export-oriented entities in tax-free export zones and goods sold to a bonded factory are exempt from this sales tax.
Dividends: 20% imposed on dividends paid to a nonresident, unless it is reduced by a tax treaty.
Interest: 15% imposed on interest to a nonresident, unless it is reduced by a tax treaty.
Royalties: 20% imposed on royalties paid to a nonresident, unless it is reduced by a tax treaty.
Customs duty: Customs duty is payable based on the dutiable value of the volume of goods imported. It is calculated on the basis of the true transaction price.
Excise duty: Includes commodity taxes, tobacco and liquor tax.
Stamp duty: Stamp duty is levied as follows:
Property tax: Includes the land value tax, imposed at 1% – 5.5% of the public land value, house tax and deed tax on property.
Estate tax: flat tax of 10%.
Gift tax: flat tax of 10%.