It depends on the type of service, but typical withholding rates are 10-20%.
A rep. office cannot sell or buy anything as a legal entity. The scope of a representative office is limited to tendering, signing contracts etc. If you wanted your Taiwan office to issue invoices and trade directly then you would need a branch office, not a rep. office.
As a representative you can visit Super Widget factories and sign a contract on your foreign company’s behalf to buy 10,000pcs from local company Super Widgets Inc. The rep. office is not involved in the actual transaction, only in the tendering and contracting. If the foreign company sells to Super Widgets Inc. then Super Widgets Inc. is importing the product or service from your foreign company and again the rep. office is not involved.
Can rep office employees actually do any tasks that actually is the delivery of work assuming all transactions occur at the head office?
I know you said you see know problem with it and technically neither do I, just wondering if anyone has got in trouble for it. I do website design and other projects, would a rep office in Taiwan allow me to officially do that web design without worry that it’s illegal supply of services rendered or something - not that anyone would necessarily know.
You said that employees can’t do any performance in bars or anything (unpaid or paid). My girlfriend is a singer and I was hoping to employ her, just so that she has an “official” source of income and insurance etc. I guess this means my Taiwanese Rep Office can’t hire her, but could my head office abroad hire her as an employee (she’s a Taiwanese citizen) to do that kind of thing assuming that foreign company pays any insurance or other things expected of employing a Taiwanese person?
Finally, up until now I’ve been planning on registering an HK company, but then looking at your recommendation for the UK company registration, it’s a tenth or less of the price… Are there any pros/cons to UK vs HK company registration?
Thanks,
Alex
Llary, thank you so much for this guide.
I had a question similar to the guy above me. I am looking to start a travel company that is only on the internet. I want to register the company offshore, and then create a Taiwanese Representative office.
Does the Taiwanese governement make it more or less difficult for companies depending on where they are registered? I am looking at the cayman islands, the british virgin islands, seychelles, belize, the UK, and an offshore LLC from the US. Is one easier to do than another, and what problems will I run into if I pick one of the “tax haven” countries?
Thanks
- TaipeiGuy122
[quote=“ALT83”]Can rep office employees actually do any tasks that actually is the delivery of work assuming all transactions occur at the head office?
I know you said you see know problem with it and technically neither do I, just wondering if anyone has got in trouble for it. I do website design and other projects, would a rep office in Taiwan allow me to officially do that web design without worry that it’s illegal supply of services rendered or something - not that anyone would necessarily know.
You said that employees can’t do any performance in bars or anything (unpaid or paid). My girlfriend is a singer and I was hoping to employ her, just so that she has an “official” source of income and insurance etc. I guess this means my Taiwanese Rep Office can’t hire her, but could my head office abroad hire her as an employee (she’s a Taiwanese citizen) to do that kind of thing assuming that foreign company pays any insurance or other things expected of employing a Taiwanese person?
Finally, up until now I’ve been planning on registering an HK company, but then looking at your recommendation for the UK company registration, it’s a tenth or less of the price… Are there any pros/cons to UK vs HK company registration?[/quote]
I think you’re maybe a bit confused about how rep. offices and businesses in general work. The representative office itself is a legal entity in Taiwan with a Unified Business Number. Once you have that your foreign business is legally and officially operating in Taiwan.
MOFA will then (generally speaking) allow one foreign national to reside in Taiwan on an ARC as long as they can prove their presence here is necessary for running the rep. office. The point about working in bars, schools, whatever applies to YOU ONLY because you are a FOREIGN NATIONAL with LIMITED PERMISSION to work in Taiwan - i.e. limited to the scope of your representative office activities.
The rep. office itself can employ as many staff as it likes but you will not get work permits for foreign staff, so this effectively limits you to Taiwanese. I employ admin staff in our rep. office and it works exactly the same as if we were a local company. Whatever our staff do in bars, paid or otherwise, has bugger all to do with our office. Unless, of course, you were planning to employ your missus as a singer for your rep. office, which would make absolutely no sense.
To sum up, a representative office is just that - an office that legally represents your foreign company. So the sort of stuff that office should be doing is e.g. visiting factories in Taiwan; signing contracts with suppliers; advertising for customers in Taiwan; liasing between head office and Taiwanese customers; opening company bank accounts etc. etc. Stuff that the office should NOT be doing is e.g. selling product to Taiwanese people or businesses; making local sales under the rep. office name with the rep. office UBN.
Also you cannot ‘hire’ someone from abroad in the way that you think. If, as a company in country X you give someone money in country Y without any kind of registration in country Y then your employee is really just a self-employed contractor. If you want to hire someone as staff with regular benefits then you absolutely need registration in that country.
I cannot suggest where you should register your company, but an HK registration should not be ten times a UK registration. Last time I checked the costs were pretty similar. Wherever you register do bear in mind that you will have a legal obligation to file a company return and tax return each year. It is a criminal offense not to file your company return on time in the UK, so this is serious business. Make sure you can handle that before you register.
One point that has come up recently - if you have or want to start a service-based, import or export company that has some connection with Taiwan then a rep. office is a great way to get started with limited time and expense.
A rep. office is not - I repeat, NOT a way for someone to get legal residency in Taiwan just as a convenience and then do other stuff. Teaching, working for other companies etc. as a foreign representative is ILLEGAL.
In other words, if you are not genuinely in business and have no genuine reason to need residency in Taiwan to do that business, then forget about using this as a way to get a visa because it will not work.
Another point towards recent comments is that it seems some are looking at a representative office as an ‘easy’ way to set up a business and having the main office registered in a tax haven will somehow be better.
First of all, registering a branch company or registering an entirely local company is not that much harder. The capitalization requirements for a limited company (which would apply to branch or local) has already been lowered to NT$250k and they are talking about lowering it further. For most starting a business you will need that much anyways, so that is really only a barrier to someone who wants to set up a small noodle shop or part time home based business. The second hurdle is that you will need to show a minimum level of revenue each year to keep the company president ARC, but that has also loosened up a lot. I don’t remember the exact numbers but it was low enough that almost any real full time business could easily make the requirement. The third hurdle is that you need to remit the minimum capital from abroad OR show tax receipts showing that the money was legally earned by you in Taiwan (e.g. your tax returns). Again, that should not be a problem for most.
So yes, a representative office is easier, but branch/local is NOT that much harder. If your planned activities are not really what the representative office company was designed for (soliciting and signing contracts for customers and suppliers on behalf of a foreign company), then try for a branch/local company. It will give you a lot more flexibility in what you can do.
Next question is branch or local. If you are setting up a foreign head office only to save on taxes, think twice. Tax rates in Taiwan are not that high. There is the revenue tax (also often called sales tax or vat though it isn’t really quite the same) which is only 5%, and you can deduct all expenses which you have a legal invoice for (fapiao), so if you have a lot of expenses you can keep this to a minimum. Salary tax rates are low, so if you are paying the bulk of what would be profit as salary (to yourself and/or spouse, etc.) then you probably won’t end up with a whole lot of business income tax. On the other hand if you remit your dividends to the main office you will likely have to pay 20% tax, so your tax savings can evaporate right there. It may not be true for all companies. If your expenses are low or the profit very high then it may be more advantageous as a branch.
If your business and work activities are going to be all or mostly in Taiwan then it is very possible that a local company would be more tax efficient.
Of course you should talk to a qualified accountant experienced with foreign owned businesses to discuss your particular case, as not every solution will fit every situation. My point is simply that a branch/local company is not that terribly difficult to set up, and that having a head office in a tax haven is not necessarily the most tax efficient way to do things, so one should investigate what would best work in your own case.
Very sound advice j.
I have been thinking about setting up in HK, and then get around taxation issues by transfer pricing my way out of them. The issue is that my turnover is getting where I can’t do shushen tax accounting any more but will have to do it based on actual figures.
In your case that makes sense. For those not familiar with Mr. He’s business, he sells products to foreign customers that are manufactured by a third party company, so there is little reason why the sales must be booked in Taiwan. In that case it can be advantageous to have the sales occur where they would be taxed the least. Llary’s business is similarly international in nature, so a representative office makes sense.
My advice is directed more towards those who want to do business in Taiwan but where the business is not primarily international in nature. In that situation there’s not a compelling reason to have a foreign head office in most cases.
Jlick and Mr He - Thank you so much for your contributions. Llary, again I have to thank you for this thread.
As I said before, I plan on starting a travel company that is focused on bringing Americans to Taiwan. I am looking to incorporate in either BVI, Panama, Cayman Islands, or Hong Kong. Are certain offshore countries more likely to get through the foreign representative process than others? Is Hong Kong the best bet?
Also, Llary, you mentioned that in order to get a foreign ARC, its not a sure thing, but if you’re lucky, you can get one ARC. I am creating this venture with a business partner, and wanted to know if there is any chance that a foreign representative office could get 2 ARC’s. We both intend on living in Taiwan and working as representatives, but is it written in stone that only one ARC will be allowed?
Thanks in advance for your reply!
- Taipei Guy
If you have a spousal Visa, can you set up a rep office and stay on spousal Visa? Or is it easier to set up a company in TW then?
I would do the latter, IE set up a company here in that case.
Being on a spousal ARC doesn’t affect how you would start a local company. The decision whether to make it a local or representative company would depend on the type of business you intend to engage in.
I believe that you can only get one ARC for the one representative. Not sure about the stone.
You can get more than one ARC for employees of a representative office but your company would have to be big enough to prove why you need so many foreign staff. In practice most companies this big would probably prefer to set up a branch office instead.
Would it have no advantages? With an ARC, you would need a local partner, is it same with JFRV? As for rep company, this would bypass needing to get a Visa through that, which would make it easier.
You don’t need a local partner. Period. End of sentence.
This bit of misinformation seems to come up again and again and it is completely wrong in EVERY case. Any foreigner can start a local company, branch office or rep office without any local or foreign partner regardless of current or future visa status. Nor does having a local partner make anything easier unless you put everything in the name of the local ‘partner’ in which case you aren’t a partner, but are instead giving up any legal right to any say in the business. That tends not to work out too well.
If you already have an ARC of any kind then you might not need to change to an ARC through the business. Getting an ARC through a representative office may in some cases be easier but not in all cases, and rep office isn’t necessarily the best type of business type. It is possible to get at least one ARC for any type of business though the revenue requirements may vary for keeping it active, regardless of whether or not you have a local partner.
Since you have a JFRV you probably don’t need an ARC through the business anyways, so you should probably think more about what company type is most appropriate for your planned business rather than what makes it easier to get the ARC you don’t need. Take a step back and decide the nature of the business first, then you can ask for advice on the best way forward.
Just out of interest, what benefit/drawbacks are there between having a branch office here and starting a local business?
I’m getting involved with some people who are about to start a new business and at least two of us will be here in Taiwan and would as such need an ARC through the company.
It’s an online business (I really can’t say more at this point in time) and there should be more than sufficient funds for any kind of company structure.
Since the investment needed and cost of starting a branch office and having a limited company without public shares cost the same, I can’t really figure out the difference between the two.
The only thing I can find is something related to tax (at least in terms of what we’re concerned about), but I don’t know enough about this matter to understand the difference.
We would of course hire an accountant to take care of all this when it comes to it, but at least a few pointers would be helpful if anyone has experience of doing one or the other.
LostSwede,
See my earlier comments for the general answer:
viewtopic.php?p=951195#p951195
The main question you need to ask is if there is a sufficient international aspect to your business that organizing in a low tax country would be more favorable, or are you anticipating making so much profit that you would end up in a high tax bracket here? If no on both counts then a local company is probably better. If yes on the second part, please let me know if you need more investors. 
You don’t need a local partner. Period. End of sentence.
This bit of misinformation seems to come up again and again and it is completely wrong in EVERY case. Any foreigner can start a local company, branch office or rep office without any local or foreign partner regardless of current or future visa status. Nor does having a local partner make anything easier unless you put everything in the name of the local ‘partner’ in which case you aren’t a partner, but are instead giving up any legal right to any say in the business. That tends not to work out too well.
If you already have an ARC of any kind then you might not need to change to an ARC through the business. Getting an ARC through a representative office may in some cases be easier but not in all cases, and rep office isn’t necessarily the best type of business type. It is possible to get at least one ARC for any type of business though the revenue requirements may vary for keeping it active, regardless of whether or not you have a local partner.
Since you have a JFRV you probably don’t need an ARC through the business anyways, so you should probably think more about what company type is most appropriate for your planned business rather than what makes it easier to get the ARC you don’t need. Take a step back and decide the nature of the business first, then you can ask for advice on the best way forward.[/quote]
Thanks for good, straightforward advice. Are there no other local business formats here? It seems like the limitied company and sole proprietorships are all that come up in threads. I find it hard to believe that every shop I see falls into one of these categories. South Africa has a “closed corporation” format, which is a limited liabilty company, but without some of the perks of big companies. It is a great booster for SMME’s. I think USA has a similar type, but I forget what its called.