Investment Climate Statements for 2016 - Taiwan

Executive Summary

Strategically located between Northeast and Southeast Asia, Taiwan is an important hub for regional and global trade and investment, especially in the high-technology industry. Indicative of its developed and open investment environment, Taiwan ranks in the upper 15th percentile of major global indices measuring ease of doing business, economic freedom, and competitiveness. To promote Taiwan’s regional economic integration and as part of seeking participation in multilateral free trade arrangements, regulatory agencies have initiated reforms across many sectors of the economy, including enhancements to protection of intellectual property rights and other investment-related regulations.

As a relatively open and liberal economy, Taiwan benefits from substantial foreign direct investment, with a total cumulative stock of USD 137 billion in approved investment as of December 2015. Taiwan’s GDP growth slowed to 0.65 percent in 2015, largely as a result of declining exports due to slow regional and global economic growth. Taiwan attracts a wide range of U.S. investors, including in high-tech, traditional manufacturing, and services. The United States is Taiwan’s largest single source of foreign investment, with the stock of committed U.S. foreign direct investment reaching USD 17.1 billion in 2014. U.S. private commercial services exports to Taiwan totaled over USD 12.8 billion in 2014.

Structural impediments in Taiwan’s investment environment include stalled progress on the privatization of Taiwan’s state-owned enterprises (SOEs), which exert influence in the utilities, aerospace, energy, postal, transportation, financial, and real estate sectors. Foreign ownership limits remain in place for wireless and fixed-line telecommunications, television broadcast, and transportation. Restrictions on investments from mainland China in some sectors have been relaxed as cross-Strait ties have improved. The Taiwan Central Bank retains a currency convertibility policy in which it reserves the right to require large transactions that could impact the foreign exchange market to be scheduled over several days. Foreign private equity firms have noted a lack of transparency and predictability in the investment approvals process.

Aiming to promote Taiwan as a regional financial hub, Taiwan’s Financial Supervisory Commission (FSC) adopted a series of liberalization measures in 2014, including liberalization of financial firms’ overseas investments and expansion of overseas business units. Amendments passed by the Legislative Yuan in June 2015 to investment-related statutes clarified review criteria for mergers and acquisitions. Other regulatory revisions and amendments to existing statutes proposed in 2015 aim to clarify review criteria for foreign investment in Taiwan, but these were not implemented or passed by the legislature.

Table 1



Index or Rank

Website Address

TI Corruption Perceptions index


30 of 167

World Bank’s Doing Business Report “Ease of Doing Business”


11 of 189

Global Innovation Index


Taiwan data are not provided

U.S. FDI in partner country ($M USD, stock positions)



Taiwan Ministry of Economic Affairs

World Bank GNI per capita




1. Openness To, and Restrictions Upon, Foreign Investment

Attitude toward Foreign Direct Investment

Promoting inward FDI has been an important policy goal for the Taiwan authorities because of Taiwan’s self-imposed public debt ceiling that limits public spending and Taiwan’s low levels of domestic private investment, which on average grew only 2.8 percent per year over the last five years. Taiwan has pursued various measures to attract FDI from both foreign companies and Taiwan firms operating overseas. A network of science and industrial parks, export processing zones, and free trade zones aims to expand trade and investment opportunities by granting tax incentives, tariff exemptions, low-interest loans, and other favorable terms.

Taiwan maintains a negative list of industries closed to foreign investment for reasons the authorities assert relate to national security and environmental protection, including public utilities, power distribution, natural gas, postal service, telecommunications, mass media, and air and sea transportation. These sectors constitute less than one percent of the production value of Taiwan’s manufacturing sector and less than five percent of the services sector. Railway transport, freight transport by small trucks, pesticide manufactures, real estate development, brokerage, leasing, and trading are open to foreign investment. The negative list of industries is available at

At the end of 2015, accumulated FDI stock in Taiwan totaled approximately USD 137 billion, according to Taiwan’s Ministry of Economic Affairs (MOEA) foreign investment approval data. However, discrepancies exist between Taiwan official data and the 2015 World Investment Report of the United Nations Conference of Trade and Development (UNCTAD), which calculated Taiwan’s net FDI stock at a much lower USD 68 billion as of 2014. The Taiwan authorities assert that the difference was due to UNCTAD’s deduction of outward remittances of profits by foreign investors, in addition to foreign investors’ ability to easily obtain low-cost financing directly from within Taiwan.

Other Investment Policy Reviews

Taiwan has been a member of the WTO since 2002. In September 2014, the WTO conducted the third review of the trade policies and practices of Taiwan. Related reports and documents are available at:

The OECD and UNCTAD have not conducted investment policy reviews of Taiwan.

Laws/Regulations on Foreign Direct Investment

Regulations governing FDI principally derive from the Statute for Investment by Foreign Nationals and the Statue for Investment by Overseas Chinese. These two laws permit foreign investors to transact either in foreign currency or the New Taiwan Dollar (NTD). The laws specify that foreign-invested enterprises must receive the same regulatory treatment accorded local firms. Foreign companies may invest in state-owned firms undergoing privatization and are eligible to participate in publicly financed research and development programs.

Amendments the Legislative Yuan passed in June 2015 to investment-related statutes clarified investment review criteria for mergers and acquisition transactions. Other amendments were proposed in 2015 but were not passed, including one that would replace a pre-investment approval requirement with a post-investment reporting system for investments under a USD 1 million threshold. Ex ante approval would still be required for investments in restricted industries and those exceeding the threshold. In 2015, Taiwan authorities ceased consideration of a private equity investment’s impact on capital markets and resulting thin capitalization as review criteria. Other criteria remain listed on the Ministry of Economic Affairs (MOEA) Investment Commission’s Frequently Asked Questions website (located in Chinese only at

In recent years, the Taiwan authorities revised rules to improve the business climate for startups. With the goal of developing Taiwan into a startup hub in Asia, Taiwan launched an entrepreneur visa program allowing young foreign entrepreneurs to remain in Taiwan if they raise minimum funding of NTD 2 million (USD 66,000). Taiwan has initiated rules to enable intellectual property (IP) rights holders to use IP as collateral in obtaining bank loans, and this and other rules would apply to foreign investors.

Please refer to the “Doing Business” section of the MOEA’s Invest in Taiwan Center website, which provides useful information for foreign investors:

The Investment Commission website lists the rules, regulations, and required forms for seeking foreign investment approval:

Business Registration

The MOEA operates a business registration website that describes the process:

Approval from the Investment Commission is required before proceeding with business registration. After receiving an approval letter from the Investment Commission, an investor can apply for capital verification and may then file an application for a corporate name and proceed with business registration. The new company must register with the Bureau of Labor Insurance and the Bureau of National Health Insurance before it can start recruiting and hiring employees.

The MOEA Department of Investment Services’ (DOIS) Invest in Taiwan Center serves as Taiwan’s investment promotion agency and provides streamlined procedures for foreign investors. DOIS services are available to all foreign investors.

For the manufacturing, construction, and mining industries, the MOEA defines small and medium-sized enterprises (SMEs) as companies with less than NTD 80 million (USD 2.5 million) of paid-in capital and fewer than 200 employees. For all other industries, SMEs are defined as having less than NTD 100 million (USD 3.1 million) of paid-in capital and fewer than 100 employees. Taiwan runs a Small and Medium Enterprise Credit Guarantee Fund to help SMEs obtain financing from local banks. Foreign firms may pay a fee to obtain a guarantee from the Fund. Taiwan’s National Development Fund has set aside NTD 10 billion (USD 330 million) to invest in SMEs.

Industrial Promotion

MOEA’s Invest in Taiwan Center website provides information about government programs to attract foreign investment. The Statute for Industrial Innovation provides the legal basis for offering tax credits for companies’ research and development (R&D) expenditures. MOEA also runs several research and development subsidy programs. MOEA’s current target industries for investment are offshore wind energy, logistics, electric passenger and cargo vehicles, information services, mobile broadband services, digital content, semiconductor equipment, biotechnology, and electronic materials.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign entities are entitled to establish and own business enterprises and engage in all forms of remunerative activity as local firms unless otherwise specified in relevant regulations. Taiwan sets foreign ownership limits in certain industries, such as a 60 percent limit on direct foreign ownership of wireless and fixed line telecommunications firms, and a 49 percent limit on direct foreign investment in that sector. State-owned Chunghwa Telecom Co., which controls 97 percent of the fixed line telecom market, maintains a 55 percent limit on indirect foreign investment and a 49 percent limit on direct foreign investment. There is a 20 percent limit on foreign direct investment in cable television broadcasting services, but foreign ownership of up to 60 percent is allowed through indirect investment via a Taiwan entity. In addition, there is a foreign ownership limit of 49.99 percent for satellite television broadcasting services and piped distribution of natural gas, and a 49 percent limit for high-speed rail services. The foreign ownership cap on airport ground services firms, air-catering companies, aviation transportation businesses (airlines), and general aviation businesses (commercial helicopters and business jet planes) is less than 50 percent, with a separate limit of 25 percent for any single foreign investor. For Taiwan-flagged merchant ships, foreign investment is limited to 50 percent for Taiwan shipping companies operating international routes.

Since 2009, Taiwan has gradually been relaxing restrictions on investments from the People’s Republic of China (PRC) in some sectors as cross-Strait relations have improved. Taiwan has opened more than two-thirds of its aggregate industrial categories to PRC investors, with 97 percent of manufacturing sub-sectors and 51 percent of construction and services sub-sectors open to PRC capital. PRC investors, however, continue to be prohibited from serving as a Taiwan company’s Chief Executive Officer, although a PRC board member may retain management control rights of a Taiwan company. In June 2013, Taiwan and the PRC signed the cross-Strait Agreement on Trade in Services under the Economic Cooperation Framework Agreement (ECFA), but legislative review of the services agreement has stalled due to public opposition in Taiwan. As of early 2016, regulators were assessing whether to relax rules regarding PRC investment in portions of Taiwan’s integrated circuits sector, and separately the Legislative Yuan was reviewing legislation that would create an oversight mechanism for cross-Strait agreements.

Privatization Program

There are currently no privatization program is in progress. Taiwan’s most recent privatization, of the Aerospace Industrial Development Corporation (AIDC) in 2014, included institution of a foreign ownership ceiling of 10 percent due to the sensitive nature of the defense sector.

Screening of FDI

The Investment Commission screens applications for FDI, mergers, and acquisitions. Taiwan authorities claim that 95 percent of investments not subject to the negative list and with capital less than NTD 500 million (USD 18 million) obtain approval at the Investment Commission staff-level between two and four days. Investments between NTD 500 million and NTD 1.5 billion (USD 50 million) in capital take three to five days to screen and the approval authority rests with the Investment Commission’s Executive Secretary. For investment in restricted industries, in cases where the investment amount or capital increase exceeds NTD 1.5 billion (USD 50 million), or for mergers, acquisitions, and spin-offs, screening takes 10 to 20 days and includes review by relevant supervisory ministries and final approval from the Investment Commission’s Executive Secretary. Screening for foreign investments involving cross-border mergers and acquisitions or other special situations takes 20-30 days, as these transactions require interagency review and deliberation at the Investment Commission’s monthly meeting.

The screening process has provided Taiwan’s regulatory agencies opportunities to attach conditions to investments in order to mitigate concerns about ownership, structure, or other factors. Screening also may include an assessment of the impact of proposed investments on a sector’s competitive landscape and protection of the rights of local shareholders and employees. Screening is also used to detect investments with unclear funding sources, including PRC-source capital. To ensure monitoring of PRC-source investment in line with Taiwan law and public sentiment, Taiwan’s National Security Bureau has participated in every investment review meeting since April 2014 regardless of the size of the investment.

Foreign investors must submit an application form containing the funding plan, business operation plan, entity registration, and documents certifying the inward remittance of investment funds. Applicants and their agents must provide a signed declaration certifying that any PRC investors in a proposed transaction do not hold more than a 30 percent ownership stake and do not retain managerial control of the company. When an investment fails review, an investor may re-apply when the reason for the denial no longer exists. Foreign investors may also petition the regulatory agency that denied approval, or may appeal to the Administrative Court.

U.S. investors have expressed concerns about a lack of transparency, consistency, and predictability in the investment review process, particularly with regard to transactions involving private equity investment. Current guidelines on foreign investment state that private equity investors seeking to acquire companies in “important industries” must provide, for example, a detailed description of the investor’s long term operational commitment and the investment’s impact on sector competition. Investors have experienced lengthy review periods for private equity transactions.

Competition Law

Taiwan’s Fair Trade Act was enacted in 1992. Taiwan’s Fair Trade Commission examines business practices that might impede fair competition.

2. Conversion and Transfer Policies

Foreign Exchange

There are few restrictions in place in Taiwan on converting or transferring direct investment funds. Foreign investors with approved investments can readily obtain foreign exchange from designated banks. The remittance of capital invested in Taiwan must be reported in advance to the Investment Commission, but the Commission’s approval is not required. Declared earnings, capital gains, dividends, royalties, management fees, and other returns on investment may be repatriated at any time.

For large transactions requiring the exchange of NTD into foreign currency that could potentially disrupt Taiwan’s foreign exchange market, the Taiwan Central Bank may require the transaction to be scheduled over several days. There is no written guideline on the size of such transactions, but according to law firms servicing foreign investors amounts in excess of USD 100 million may be affected. Capital movements arising from trade in merchandise and services, as well as from debt servicing, are not restricted. No prior approval is required for movement of foreign currency funds not involving conversion between NTD and foreign currency. The exchange rate is based on the market rate offered by each bank. The NTD fluctuates under a managed float system.

Remittance Policies

There are no restrictions on remittances deriving from approved direct investment and portfolio investment. No prior approval is required if the cumulative amount of inward or outward remittances does not exceed the annual limit of USD 5 million for an individual or USD 50 million for a corporate entity. There is no legal parallel currency market in Taiwan.

Taiwan is not a member of Financial Action Task Force (FATF) but is a member of the Asia-Pacific Group on Money Laundering, a FATF-style regional body. In January 2016, a new draft Terrorist Financing Prevention Act was forwarded to the Legislative Yuan for review.

3. Expropriation and Compensation

According to Taiwan law, the authorities may expropriate property whenever such a course is determined to be necessary for the public interest, such as for national defense, public works, and urban renewal projects. The U.S. government is not aware of any previous or recent cases of nationalization or expropriation of foreign-invested assets in Taiwan. There are no reports of indirect expropriation or any official actions tantamount to expropriation. Under Taiwan law, no venture with 45 percent or more foreign investment may be nationalized, as long as the 45 percent capital contribution ratio remains unchanged for a period of 20 years after the establishment of the foreign business. Taiwan law requires fair compensation be paid within a reasonable period when the authorities expropriate constitutionally-protected private property for public use.

4. Dispute Settlement

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

Taiwan has a codified system of law. In addition to the specialized courts, Taiwan has a three-tiered court system composed of the District Courts, the High Courts, and the Supreme Court. The Compulsory Enforcement Act provides a legal basis for enforcing the ownership of property. Taiwan does not have discrete commercial or contract laws. A variety of different laws regulate businesses and specific industries, such as the Company Law, Commercial Registration Law, Business Registration Law, and Commercial Accounting Law. Taiwan’s Civil Code provides the basis for enforcing contracts.

Taiwan’s court system is generally viewed as independent and free from overt interference by other branches of government. The U.S. Department of State’s 2015 Human Rights Report stated that although Taiwan authorities made efforts to eliminate corruption and diminish political influence in the judiciary, some residual problems remained. Judicial reform advocates pressed for greater public accountability, reforms of the personnel system, and other procedural reforms. Some political commentators and academics publicly questioned the impartiality of judges and prosecutors involved in high-profile and politically sensitive cases.

Taiwan established its Intellectual Property Court in July 2008, in response to the need for a more centralized and professional litigation system for disputes relating to intellectual property rights. There are also specialized divisions in the District Courts and High Courts to deal with labor disputes. Foreign courts’ judgments are final and binding, and enforced on a reciprocal basis.


Taiwan has a bankruptcy law that guarantees creditors the right to share the assets of a bankrupt debtor on a proportional basis. Secured interests in property are recognized and enforced through a registration system. Bankruptcy is not criminalized in Taiwan. Corporate bankruptcy was generally governed by the Company Act and the Bankruptcy Act. In 2014, there were 132 rulings on bankruptcy petitions.

Investment Disputes

Foreign investment disputes with the Taiwan authorities are rare. Taiwan resolves disputes according to its domestic laws and based on national treatment or investment guarantee agreements.

International Arbitration

Taiwan is not a signatory of any international investment treaties, but it has entered into bilateral investment treaties with countries including Singapore, Thailand, Malaysia, and India. Taiwan does not have an investment treaty with the United States. Taiwan’s bilateral investment treaties serve to promote and protect foreign investments.

A court order on recognition and enforcement must be obtained before a foreign arbitral award can be enforced in Taiwan. Any foreign arbitral award may be enforceable in Taiwan, provided that it meets the requirements of Taiwan’s Arbitration Act. In November 2015, the Legislative Yuan amended the Arbitration Act to stipulate that a foreign arbitral award, after an application for recognition has been granted by a court, shall be binding on the parties and have the same force as a final judgment of a court, and is enforceable. Taiwan referred to the UNCITRAL model law when the Arbitration Act was revised in 1998.

Parties to a dispute may pursue mediation by a court, a mediation committee of a town or city, and/or the Public Procurement Commission. Mediation is generally non-binding unless parties agree otherwise. Civil mediation approved by a court has the same power as a binding ruling under civil litigation.

Arbitration associations in Taiwan include the Chinese Arbitration Association, Taiwan Construction Arbitration Association, Labor Dispute Arbitration Association, and the Chinese Construction Industry Arbitration Association in Taiwan.

ICSID Convention and New York Convention

In part due to its unique political status, Taiwan is not a member of the International Centre for the Settlement of Investment Disputes (ICSID Conventions), and is not a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Duration of Dispute Resolution – Local Courts

There is no time limit for court rulings on disputes.

5. Performance Requirements and Investment Incentives


Taiwan has not notified the WTO of any measures that are inconsistent with the Trade Related Investment Measures (TRIMs) obligations. Taiwan does not require foreign firms to transfer technology, locate in specified areas, or hire a minimum number of local employees as a prerequisite to investment.

Investment Incentives

Taiwan has instituted investment incentives as stipulated in the Statute for Industrial Innovation and the Act for the Establishment and Management of Free Trade Zones. Domestic and foreign investors can receive tax incentives for investing in free trade zones, in public construction, and in biotechnology/pharmaceuticals. Investment support from the central authorities may be available for priority projects. Industrial zones, export processing zones, science parks, and local governments offer various types of subsidies, financing, and tax deductions. For a detailed list of investment incentives programs, please refer to the Invest-in-Taiwan website at:

Research and Development

Investors may receive low-interest loans or subsidies for participating in industrial R&D and industry revitalization programs. Research and development tax credits, equivalent to 15 percent of total R&D expenditures, are available only to companies who file corporate income taxes in Taiwan. Government procurement tenders are open to the public, including foreign firms. Under the Government Procurement Act, government procurement includes construction work, purchase or lease of property, and retention or employment of services.

Performance Requirements

Taiwan does not mandate any performance requirements.

Data Storage

Taiwan does not have forced localization policies related to data storage.

6. Protection of Property Rights

Real Property

Interests in property are enforced in Taiwan. Taiwan maintains a reliable recording system for mortgages and liens. Taiwan law protects the land use rights of indigenous peoples. Taiwan’s Land Act stipulated that forests, fisheries, hunting grounds, salt fields, mineral deposits, sources of water, and lands lying within fortified and military areas and those adjacent to the national frontiers may not be transferred or leased to foreigners. As in other investment categories, Taiwan has specific regulations governing property acquisition by PRC investors.

Intellectual Property Rights

Taiwan is not a member of the World Intellectual Property Organization (WIPO) but adheres to key international agreements such as the Berne Convention and the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). Reflecting progress in Taiwan's IPR legal regime and enforcement, the Office of the U.S. Trade Representative (USTR) removed Taiwan from the Special 301 Watch List in 2009. The United States continues to monitor a number of IPR issues in Taiwan, including online piracy of copyrighted materials, illegal textbook copying on university campuses, end-user piracy of software, satellite signal theft, corporate trade secret theft, and weak pharmaceutical patent protections. The importation and transshipment of counterfeit products, mainly from mainland China, is also a problem. The United States is actively working with the Taiwan authorities to address these issues.

Taiwan authorities have announced their intent to revise IP-related laws to meet criteria stipulated in the Trans-Pacific Partnership text, such as extending copyright protection from life plus 50 years to life plus 70 years, adopting a patent linkage system, extending market protection on biologics, and imposing criminal liability on persons importing counterfeit products. Amendments to the Pharmaceutical Affairs Act in 2015 increased penalties for the production, distribution, and sale of counterfeit medicines. The law authorizes pharmaceutical regulatory data protection for five years, the same period as in the United States, for chemical compound drugs. Amendments extending regulatory data protection to new indications were submitted to the Executive Yuan in December 2015 and are currently pending submission to the legislature.

Taiwan’s Intellectual Property Police reported that the value of trademark and copyright seizures in 2015 totaled NTD 14.4 billion (USD 432 million). Taiwan Customs reported that the number of cases involving seizures of imported counterfeit branded goods increased by 34 percent from 149 cases in 2014 to 199 cases in 2015. Customs officials attribute the rise in seizures to increased detection of small parcel air freight shipments of counterfeit goods purchased from mainland Chinese e-commerce sites.

A trademark or patent applicant must file an application with Taiwan's Intellectual Property Office (TIPO). TIPO normally renders a decision within six months after it receives all supporting documents. If the application is approved, the mark/patent will be published and registered after the applicant pays registration fees within two months upon receiving the approval notice. Taiwan’s patent application review period was expected to shorten from an average of 41 months in 2013 to less than 22 months in 2016, following the implementation of Patent Prosecution Highway (PPH) agreements with the United States, Japan, Spain, and the Republic of Korea in 2011, 2012, 2013, and 2015 respectively.

Taiwan has no patent linkage system, and there have been several cases of approvals and reimbursements for generic drugs despite of the existence of valid patents. As of April 2016, Taiwan was conducting final public hearings on Pharmaceutical Affairs Act amendments that would establish a patent linkage system, prior to their submission for Executive Yuan and legislative approval.

Patent holders may request the Taiwan Customs authorities suspend clearance and detain goods suspected of infringing their patent rights. An affected rights holder must submit a written statement detailing the infringement allegation and a security deposit equivalent to the import value. If final judgment confirms that the detained goods have infringed the patentee’s rights, the owner of the detained goods will be responsible for all relevant expenses incurred.

Resources for Rights Holders

Contact at AIT:
-Kris Kvols
-Economic Officer
-List of attorneys
-American Chamber of Commerce in Taipei (

7. Transparency of the Regulatory System

Taiwan has transparent policies and effective laws that foster competition and establish clear rules. Accounting, legal, and regulatory procedures are mostly transparent and consistent with international standards. All publicly listed companies were required to prepare financial reports using International Financial Reporting Standards (IFRS) as of 2013. Unlisted public companies, credit cooperatives, credit card companies, and insurance intermediaries were required to prepare financial reports using IFRS starting in 2015.

In November 2015, the Executive Yuan extended the public comment period for the amendment, promulgation, and abolishment of legislation from seven days to no less than 14 days, a step toward greater regulatory transparency. To help foreign investors obtain updated information regarding regulatory changes, the Executive Yuan Gazette in September 2015 launched an online platform and email subscription service to release draft bills and regulations for public comment. In February 2016, the Gazette dedicated a section to providing information concerning technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS), which require a public comment period of at least 60 days under WTO rules. Taiwan’s National Development Council (NDC) operates the Regulatory Reform Platform ( with the goal of enhancing policy communication with the general public. Through the platform, the public can submit comments on specific legislation, offer policy suggestions, and obtain information on newly promulgated or amended regulations.

8. Efficient Capital Markets and Portfolio Investment

Taiwan authorities welcome foreign portfolio investment in the Taiwan Stock Exchange (TWSE), with foreign investment now accounting for 37 percent of TWSE capitalization. In recent years, in addition to the offshore banking units that have been in operation since 1983, Taiwan launched offshore securities and offshore insurance units, aiming to attract a broader investor base. The Financial Supervisory Commission (FSC) has switched to a negative list approach toward local banks’ overseas business not involving the conversion of the NTD.

Taiwan’s capital market is mature and active. As of the end of 2015, there were 874 companies listed on the TWSE, with total market trading volume of USD 703 billion (including transactions of stocks, Taiwan Depository Receipts, exchange traded funds, and warrants). Foreign portfolio investors are not subject to a foreign ownership ceiling except in certain restricted companies, and are not subject to any ceiling on portfolio investment. Payments and transfers resulting from international trade activities are fully liberalized in Taiwan. A wide range of credit instruments, all allocated on market terms, are available to both domestic- and foreign-invested firms.

Money and Banking System, Hostile Takeovers

Taiwan’s banking sector is healthy and banks are tightly regulated. The sector’s non-performing loan (NPL) ratio has remained below one percent since 2010, with a sector average of 0.23 in December 2015. Capital-adequacy ratios (CAR) are generally high, and several of Taiwan’s leading commercial lenders are government-controlled, enjoying implicit state guarantees. The sector as a whole had a CAR of 12.67 percent as of September 2015, far above the Basel III regulatory minimum of 10.5 percent required by 2019. Taiwan banks’ liquidity coverage ratio, which was required by Basel III to reach 100 percent by 2019, already averages about 119 percent. Taiwan’s banking system is mostly deposit-funded and has little exposure to global financial wholesale markets. Regulators have encouraged local banks to expand to overseas markets, especially to Southeast Asia, and to minimize exposure to mainland China. Taiwan Central Bank statistics show that Taiwan banks’ exposure to mainland China on an ultimate risk basis declined for five consecutive quarters to USD 65 billion in 2015, after peaking at USD 94 billion in the third quarter of 2014. Taiwan’s largest banks in term of assets are the state-owned Bank of Taiwan, which has USD 157 billion in assets, followed by the state-controlled Mega Bank, with USD 100 billion in assets.

The Taiwan Central Bank operates as an independent agency under the Executive Yuan free from political interference. The Central Bank’s mandates are to maintain financial stability, develop Taiwan’s banking business, guard the stability of the New Taiwan Dollar’s external and internal value, and promote economic growth within the scope of the three aforementioned goals.

To promote the asset management business in Taiwan, starting May 2015 foreigners holding a valid visa entering Taiwan have been allowed to open an NTD account with local banks, replacing the previous dual-identification (passport and resident card) requirements.

Mergers and acquisitions are governed by a variety of laws and regulations (see Section 1). Hostile takeovers are rare in Taiwan.

9. Competition from State-Owned Enterprises

Taiwan launched privatization programs in 1989 transforming many state-owned enterprises (SOEs) into private industries. In March 2016, the Executive Yuan instructed the NDC to compile a consolidated list of all SOEs in Taiwan managed by different ministries, but the list had not been published as of April 2016. As of December 2015, the authorities owned 19 SOEs, including official agencies such as the Taiwan Central Bank. Some existing SOEs are large in scale and exert significant influence in their industries, especially monopolies such as Taiwan Power Co. (Taipower) and Taiwan Water Co. MOEA plans to amend the Electricity Industry Act to liberalize the power generation and distribution businesses. Other SOEs such as the CPC Corporation (petroleum) and Taiwan Tobacco and Liquor Co. remained industry giants after their sectors were opened to competition. CPC controls over 70 percent of Taiwan’s gasoline retail market. In August 2014, the Aerospace Industrial Development Corp. (AIDC) was successfully privatized through a public listing in the TWSE. MOEA holds a 45.7 percent stake in AIDC and intends to lower its stake to 34 percent by 2017.

The Taiwan authorities retain control over some SOEs that were privatized, including through managing appointments to boards of directors. These enterprises include Chunghwa Telecom, China Steel, Taiwan Fertilizer Co., Taiwan Salt, China Shipbuilding Co., Yang Ming Marine Transportation Co., as well as eight public banks. Taking the banking sector as an example, as of 2015, Taiwan’s four largest banks were either wholly owned or controlled by the authorities and accounted for 30 percent of Taiwan domestic banks’ total assets.

In 2014, the 19 SOEs contributed NTD 210 billion (USD 7 billion) to Taiwan’s treasury, with the Taiwan Central Bank contributing NTD 180 billion (USD 6 billion) of that total. The number of employees working in SOEs was 118,000 in 2014 after several years of gradual decline. R&D spending among SOEs in 2014 totaled NTD 5.7 billion (USD 190 million), concentrated in oil field exploration, drilling technology, and development of alternative energy.

Taiwan acceded to the WTO’s Agreement on Government Procurement (GPA) in 2009. Taiwan’s central and local government entities, as well as SOEs, are now all covered by the GPA. Except for the state monopolies, SOEs compete directly with private companies. SOEs’ purchases of goods or services are regulated by the Government Procurement Act and are open to private and foreign companies via public tender. Private companies in Taiwan have the same access to financing as SOEs. Taiwan banks are generally willing to extend loans to enterprises meeting credit requirements. SOEs are subject to the same tax obligations as private enterprises and are regulated by the Fair Trade Act as private enterprises. The Legislative Yuan reviews SOEs’ budget each year.

OECD Guidelines on Corporate Governance of SOEs

Taiwan has not adopted the OECD Guidelines on Corporate Governance for SOEs. In Taiwan, SOEs are defined as public enterprises in which the government owns more than 50 percent of the shares. Public enterprises with less than a 50 percent government stake are not subject to Legislative Yuan supervision but the authorities may retain managerial control through senior management appointments, which may change with each administration. Each SOE operates under the authority of the supervising ministry, and government-appointed directors should hold more than one-fifth of an SOE’s board seats. The Executive Yuan, the Ministry of Finance, and MOEA have criteria in place for selecting individuals for senior management positions. Each SOE has a board of directors, and some SOEs have independent directors sitting on the board.

Sovereign Wealth Funds

Taiwan does not have a sovereign wealth fund. Members of the incoming administration that will take office in May 2016 have publicly stated they may consider setting up a quasi-sovereign wealth fund to promote economic development.

10. Responsible Business Conduct

The Taiwan public has high expectations for and is sensitive to responsible business conduct (RBC), in part due to concerns about such issues as food safety and environmental pollution. The Taiwan authorities actively promote responsible business conduct. MOEA and the FSC have issued guidelines on ethical standards and internal control mechanisms to urge businesses to take responsibility for the impact of their activities on the environment, consumers, employees, and communities. MOEA maintains an online newsletter to publicize best practices and raise awareness of about latest RBC-related developments in Taiwan and abroad.

Companies with more than NTD 10 billion (USD 330 million) in capital and firms with direct impact on consumers such as food processing, restaurants, chemicals, and financial services were mandated to prepare annual social responsibility reports as of 2015. According to the TWSE, 77 percent of Taiwan’s top 100 companies have published social responsibility reports, and 30 percent (or 255) of all total listed companies have issued reports. In August 2014, the TWSE launched the Taiwan Top Salary 100 Index, a government effort to promote corporate social responsibility and expand the use of profit-sharing for the benefit of employees.

In response to a series of food safety and environmental protection scandals in recent years, the authorities have imposed stricter monetary penalties on violators and launched a registration platform for food industry suppliers to track food ingredients used in the industry’s production chain. Taiwan authorities encourage Taiwan firms to adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. Taiwan does not participate in the Extractive Industries Transparency Initiative.

11. Political Violence

Taiwan is a relatively young and vibrant multi-party democracy. The January 2016 presidential and legislative elections were peaceful and orderly, as was the transition of power between administrations. There are no recent examples of politically motivated damage to foreign investment.

12. Corruption

Taiwan has implemented laws, regulations, and penalties to combat corruption, including in public procurement. The Corruption Punishment Statute and Criminal Code contain specific penalties for corrupt activities, including maximum jail sentences of life in prison and a maximum fine of up to NTD 100 million (USD 3.3 million). Laws provide for increased penalties for public officials who fail to explain the origins of suspicious assets or property. The U.S. government is not aware of cases where bribes have been solicited for foreign investment approval.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Taiwan is not a party to the OECD Convention on Combatting Bribery.

Resources to Report Corruption

-Agency Against Corruption (AAC), Ministry of Justice
- Overall Planning Division
- No. 318, 2nd floor, Song-jiang Road, Taipei

Transparency International Chinese Taipei

13. Bilateral Investment Agreements

Bilateral Taxation Treaties

Taiwan does not have a bilateral taxation treaty with the United States. Taiwan has 29 bilateral tax agreements entered into force (available at and has concluded similar agreements with Japan and Canada that are pending approval by those governments.

Taiwan has concluded economic cooperation (free trade) agreements with El Salvador, Guatemala, Honduras, Nicaragua, Panama, Singapore, and New Zealand, and has concluded 29 bilateral investment or related agreements (available at

Under the Taiwan Relations Act, the terms of the 1948 Friendship, Commerce, and Navigation Treaty between the Republic of China and the United States remain in force. U.S. investors are guaranteed national treatment and are provided a number of protections, including protection against expropriation. Representatives of the United States and Taiwan signed a Trade and Investment Framework Agreement (TIFA) in 1994 to serve as the basis for consultation on trade and investment issues. TIFA discussions were suspended in 2007 in response to Taiwan policies affecting U.S. beef imports, but resumed in 2013.

14. OPIC and Other Investment Insurance Programs

Taiwan and the United States have an Overseas Private Investment Corporation (OPIC) agreement. The agreement, signed in 1952, is called the Agreement Dealing with Guaranty of American Investment of Private Capital in Taiwan. There are no active OPIC projects in Taiwan.

15. Labor

Taiwan's unemployment rate declined to 3.78 percent in 2015 from 3.96 percent in the previous year. The unemployment rate for people aged between 15 and 24 years was 15.4 percent in 2015. Taiwan’s labor force is decreasing as the society ages, with residents over 65 years of age expected to account for 20 percent of the total population by 2025. In the industrial sector, the number of blue-collar foreign workers increased from 331,585 in 2014 to 363,584 in 2015. Industry groups claim that a lack of blue-collar workers is one of the major issues facing manufacturers operating in Taiwan and have urged the authorities to increase the ceiling on foreign workers. Skilled white-collar labor, especially in the information technology sector, remains a strength of Taiwan's talent pool. However, Taiwan’s low wage growth compared with neighboring economies poses a challenge for talent recruitment and retention. The authorities sponsor training and certificate programs for college graduates to increase the talent pool for the manufacturing industry.

Private companies are not subject to rules requiring the hiring of nationals. Local workers have expressed concern about displacement by lower-cost foreign workers. Employers may institute unpaid leave with employees’ consent but must notify the labor authorities and continue to make health insurance, labor insurance, and pension contributions. Taiwan provides unemployment relief based on the Employment Insurance Law, vocational training allowances for jobless persons, and employment subsidies to encourage hiring.

Labor flexibility is the main reason Taiwan firms hire temporary workers. Financial and logistics industries hire temporary workers for entry-level administrative positions such as customer services representatives, administrative clerks, security guards, and janitors. SOEs also hire contract workers. Companies in specific hardship (labor-intensive) industries are entitled to a higher foreign labor quota. The authorities are considering relaxing rules for the hiring of foreign white-collar professionals in designated foreign trade zones.

Labor unions have become more active in Taiwan over the past decade, and the Collective Agreement Act outlines the negotiation mechanism for collective bargaining in order to protect labor's interests in the negotiations. If a proposal is refused, a union may submit an application for arbitration to the Committee for Dispute Resolution for Unfair Labor Practices under the Ministry of Labor Affairs (MOL). Taiwan has labor dispute resolution mechanisms in operation at all levels of labor, and the authorities accept about 20,000 cases per year. Starting in 2011, an arbitration mechanism was introduced to preempt disputes through a professional and neutral mediation system, which resolves about 60 percent of all cases.

Labor relations in Taiwan are generally harmonious. Although Taiwan is not a member of the International Labor Organization (ILO), it adheres to ILO conventions on the protection of workers’ rights. Taiwan law, including related regulations and statutory instruments, protects the right to join independent unions, conduct legal strikes, and bargain collectively. Taiwan’s labor authorities have sought to increase the frequency and coverage of labor inspections. MOL has proposed a law that would allow temporary workers to receive the same pay as full-time employees in equal positions.

Link to the U.S. Department of State Human Rights Report on Taiwan:

16. Foreign Trade Zones/Free Ports/Trade Facilitation

The first free trade/free port zone began operation in 2004 at Keelung, Taiwan’s northern port. Another four were established in 2005 at Taoyuan International Airport and the international harbors in Kaohsiung, Taichung, and Taipei. In May 2010 and August 2013, the Executive Yuan approved free trade zones at Suao and Anping ports, respectively, bringing total free trade zones in Taiwan to seven. Taiwan authorities have relaxed restrictions on the movement of merchandise, capital, and personnel into and out of these zones. As part of a broader restructuring and to increase the competitiveness of Taiwan’s ports, the Ministry of Transportation and Communication established the Taiwan International Ports Corp. (TIPC) in 2012 to manage commercial activities of Taiwan’s ports and free trade zones. TIPC facilitates cooperation with foreign shipping operations and related businesses.

Taiwan seeks to promote the unique advantages its ports offer as hubs for the Asian regional market. In June 2013, the London Metal Exchange (LME) board approved Kaohsiung Port as an LME delivery port of primary aluminum, aluminum alloy, copper, lead, nickel, tin, and zinc.

17. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy


Host Country Statistical source*

USG or international statistical source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data






Host Country Gross Domestic Product (GDP) ($M USD)





Foreign Direct Investment

Host Country Statistical source*

USG or international statistical source

USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)






Host country’s FDI in the United States ($M USD, stock positions)






Total inbound stock of FDI as % host GDP






* Local GDP data source: Directorate General of Budget, Accounting, and Statistics (DGBAS). * Local FDI data source: Ministry of Economic Affairs (MOEA). Taiwan FDI data reflect approved investments and do not take into account disinvestment.

18. Contact for More Information

-Michael Pignatello
-Deputy Chief, Economic Section, American Institute in Taiwan
-No. 7, Lane 134, Sec. 3, Xinyi Road, Taipei 110659 Taiwan