Working remotely for a self-owned foreign company without an office in Taiwan - legal?

Business Money
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Hi,

I am planning to relocate to Taiwan on a Gold Card soon (given that my Gold Card application will be accepted).

My goal is to continue working remotely for my former employer in Europe. However, they are a small company without a dedicated HR department, so in order for them to accept my proposal to work remotely, I need to offer them a way they can “hire” me without causing them too much effort in terms of taxes, compliance and stuff. So them actually hiring me as an employee is most likely off the table.

At the moment, I see three possible options:

  1. First, I could just work for them as a freelancer / being self-employed. Apparently, this seems to be possible on a Gold card and I could also apply to join the NHI after some waiting period. However, this would not allow me to reapply for a Gold Card after it expires as income from self-employment does not seem to fall into the “income” category required for attaining a Gold Card. So freelancing does not seem to be ideal in my case.

  2. Second, I could set up a company in Taiwan. However, I am not sure if my old employer would be happy to receive invoices from Taiwan without European VAT and without a European bank account to actually pay the invoice. And they might be afraid that their local tax authorities might not accept invoices from Taiwan without even more bureaucracy involved…

  3. Third, I could set up a limited liability company in Europe (possibly Estonia because they allow creating one without needing to be a resident there). This type of company could send invoices with a European VAT id, so it would probably the “easiest” option for my old employer to hire me. The company could either pay out dividends (which would be taxed in Estonia) and / or could pay an employee salary and/or shareholder salary. The employee salary would be tax-free in Estonia if I can produce proof that I pay taxes for this money in my country of residence (which would be Taiwan).

So at the moment, I am really in favour of choosing option 3.

However, doing some research, I came across an article Company Requirement for Hiring Employees in Taiwan which clearly states:

Companies that do not have a legal entity in Taiwan cannot hire employees. If a foreign company wants to hire an employee in Taiwan before they set up a legal entity, they must hire the employee through an Employment Solutions / PEO (Professional Employment Organization) provider.

Is that true?
That kind of “provider thing” doesn’t sound easy and/or cheap unfortunately…

Additionally: If I would create my own company in Europe and hire myself as an employee: Would this be considered as regular employment income in Taiwan? Or does it also fall into the category of self-employment income (which would bring me back to the issue of not being apply to reapply for the Gold card again…)?

So far, I am quite certain that it is definitely not “foreign sourced” income as I would be doing the actual work in Taiwan. In fact, I am actually looking to pay taxes 100% in Taiwan if possible, so that I have proof the money is not untaxed which might cause tax liability back in Estonia or even my home country with much higher tax rates. So trying to “avoid” tax payments in Taiwan would definitely be really counterintuitive in this situation, it seems.

Any ideas? Or someone in a similar situation?
Can I actually be “employed” (according to Taiwanese regulations) without having an employer in Taiwan? Or does this situation always lead to “self-employment”?

Looking forward to any response!

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Reading more about it, the concept of these PEOs actually sounds kinda interesting as it would enable having a “real” employer in Taiwan.

I just send out a message to a couple of companies offering this service asking how much they charge for this - there seems to be a handful of them (located in all parts of the world: China, US, …):

I am planning to relocate to Taipei, Taiwan (Republic of China) and would like to offer consulting services through a European-based company in Estonia. Currently, I am looking into options in how to set this up with low overhead while staying compliant with all local laws.

Would it be possible to basically “hire myself” as an employee in Taiwan of my Estonian company through your PEO services?

How much would it cost me to pay out a salary of NT$ 160,000 per month (a ballpark figure should be fine at first so I can decide whether to further look into this option or not)?
The cost should include all of your fees and all other fees and mandatory contributions to the government.

How much would it additionally cost if I would require your services for attaining a work permit, too?

I would my my only employee and I would only require a minimum amount of support regarding the employer-employee relationship because I would control the company employing me. So I am looking for a very simple and cost-effective solution.

I’ll update here when I hear back. If the cost is less than around 100-150 USD / month, I might actually consider using one of them maybe.

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I’d be interested in hearing the results of this. (I agree that it doesn’t sound cheap) :slight_smile:

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Maybe related articles in Chinese

Being a contractor is illegal?

https://m.facebook.com/groups/1190343134374259/?ref=group_header&view=group

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Not sure if some aspects got lost in Google Translate, but I think the second link contains an important piece of information:

But also because of this, usually these services will charge a certain service fee. As far as business practices are concerned, these service fees are generally borne by your employer. The common service fee ratio in the world is about 15-25% of the salary (there is a minimum amount).

So definitely not cheap, I would say…

Though the question remains: Can you still be employed by a foreign company as an employee (not as a contractor)? Or can you only be an employee in Taiwan if your employer is a Taiwanese company?

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hi @qwert_zuiop, nice thread, has made me think a bit about my own situation. I’m a Gold Card holder (for another few weeks, at least) and run a foreign company branch office in Taiwan, where I’m an employee. I’m also an e-Resident of Estonia for reasons related to your third option :slight_smile:

Here’s your nirvana:

  1. Use Option #1
  2. The New Economic Immigration Bill passes and as a result Gold Card holders can gain permanent residence after 3 years instead of the usual 5
  3. Get permanent residence.

all it relies on is the Taiwanese legislature :wink:

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Thanks for the response and congrats!

and run a foreign company branch office in Taiwan, where I’m an employee. I’m also an e-Resident of Estonia for reasons related to your third option

What’s your experience on this?
And your main motivation for setting up the branch in the first place?
Is a branch office very difficult / expensive to setup and maintain? Would you choose this path again?

For me, I fear that the administrative overhead might be a bit too much, especially because I am not sure yet how long I would be staying in Taiwan. And probably not a good idea to set up a local company and needing to close it down again after two or three years in case of moving away…

Here’s your nirvana:

Mhh, interesting! Although that would require moving to Taiwan as soon as the validity of the Gold card begins (which seems to be impossible when not in Taiwan at the time of application especially in these times…). Also, need to hope that no one asks for salary verification within the three years of validity.

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First response came in (from a US based company):

[…] At this time we can only support local Taiwanese; we are working on a solution to support expats in Taiwan but do not have this 100% sorted out yet.

Rates dependent on salary; rates below are for local Tawianese:

  • Below NTD 80,000: Flat fee at 15% of the total monthly payment, and minimum charge of NT$ 4,500 flat fee per month per employee, whichever is higher.
  • NTD 80,000 - NTD 120,000: Flat fee at 13.5% of the total monthly payment, and minimum charge of NT$ 4,500 flat fee per month per employee, whichever is higher
  • NTD 120,000 above: Flat fee at 12% of the total monthly payment, and minimum charge of NT$ 4,500 flat fee per month per employee, whichever is higher.

I guess these rates don’t include any employer contributions to NHI and stuff.

So yeah, probably not a very cost effective way unless someone is really desperate for having a Taiwanese employer.
Or maybe having a Taiwanese employer with a low salary for NHI registration and then earning the rest of the salary through other ways?

Still hoping @fifieldt might be able to share some more information about his branch office approach maybe :slightly_smiling_face:

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FYI

Your office doesn’t need to support your ARC, so it might not be so hard to open and keep a branch or representative office of your foreign company

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Thanks for the link!

I am more worried about the „aftermath“: I read that opening a branch office might lead to the parent company becoming a tax resident of Taiwan (according to some CFC rules which might or might not apply…). That would require bookkeeping according to Taiwanese laws of both entities and lots of bureaucracy.

And that sounds like lots of work and money that needs to be spent on accountants, lawyers, …

So I am hoping to hear from someone who has dealt with all these aspects before and can comment on how much effort (and money) is actually involved on a practical basis.

And of course the question remains: Do I really need the branch office? Or could I just be employed by the foreign company somehow?

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I am going to do something similar to you.

For the first year I am not even setting up the Estonian Company, I will just use Xolo Go to issue invoices and then at the end of the year present my invoices to an accountant and declare this as foreign income.

If things progress well, I might set-up a proper Estonian Company, until then I see no reason.
With Xolo GO you can already send invoices (even though they will come from Xolo) without having to setup anything.

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The nice thing about setting up a “real” company would be the possibility to equate payment flows, i.e. paying out a regular salary rather than a larger amount every couple of months.

But yeah, if I decide to move forward with this, I would definitely need to visit an accountant before receiving the first “payment” of any sort, in order not to cause myself any further issues in the future.

Maybe a combination would work: One of these PEOs with a low salary for NHI registration and getting a work permit just in case and then paying the rest of the salary directly - maybe even as “foreign income” then.

I’ll see - still many other things to take care about first.

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What’s the difference with ‘manpower’? ‘Independent’ contract labor?

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Not sure if I get your question, but these PEOs offer „employer as a service“ basically. Like a personnel leasing service.

But as I said: Not really sure if you really need them or not. But apparently from what I have read so far, it doesn’t seem to be possible to live in Taiwan and being employed by a foreign company without an office in Taiwan. And that’s basically their offer: Allowing regular employment without having an office yourself.

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Since the hold card allows you to live in Taiwan independent of employer… For the short term, anyway, could you not just keep your current regular employment and take long remote working trips to Taiwan? That is, effectively live in Taiwan but still get paid as if you were living in you current country? You’d be liable.to pay Taiwan taxes if you stay here more than 90 days I believe, but I am not sure if you’d be subject to double taxation. And also not sure about National Health Insurance.

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For the short term, anyway, could you not just keep your current regular employment and take long remote working trips to Taiwan?

In theory, that would work. But practically speaking, I would be liable to pay taxes back in my home country then. And they have one of the highest tax rates in the world (> 50% when including social insurances).

And I couldn’t even register a company because that one (no matter where in the world) would also become a tax resident of my home country requiring all kinds of bureaucracy and fees.

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Another aspect to consider would be the “tax residence” of the foreign company.

Luckily, Taiwan does not seem to have CFC-rules in place which would make the foreign company a tax resident on Taiwan. However (see Corporate - Significant developments (PWC Taiwan) ):

The Income Tax Act was amended in July 2016 to include anti-tax avoidance rules in Article 43-3 (Controlled Foreign Company [CFC]) and Article 43-4 (Place of Effective Management [PEM]) of the Income Tax Act.
[…]
For PEM rules, under this new tax regime, if a foreign company meets all three criteria triggering the PEM definition, including (i) decision making location, (ii) record keeping and maintenance location, and (iii) actual operating location are all in Taiwan, the foreign enterprise will be deemed as having its head office in Taiwan and will be subject to tax assessment in accordance with the Taiwan Income Tax Act and other tax regulations. The Regulations Governing Places of Effective Management were announced by the Ministry of Finance in May 2017.

So in order to actually control a foreign company from Taiwan, at least “record keeping and maintenance location” have to be outside Taiwan in order for it not to become liable to pay taxes in Taiwan.

However, there is also this aspect ( Corporate - Taxes on corporate income ):

A non-resident company is taxed on income derived from Taiwan sources. A non-resident company with a fixed place of business (FPOB) or business agent in Taiwan is taxed similarly to a resident company (i.e. subject to filing of an annual CIT return based on the same CIT rate provided above). A non-resident company having no FPOB or business agent in Taiwan is subject to WHT at source on its Taiwan-sourced income

I think this means that having the owner of a foreign company permanently residing in Taiwan means that the foreign company has to file company income tax in Taiwan!

For me this means that I should either work self-employed or actually start a Taiwanese LLC.

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PEOs in the US generally charge a fixed fee (e.g., $1000/yr/employee, https://justworks.com/pricing).

I wonder if there are companies offering technology solutions to create Taiwanese LLCs/Rep offices like clerky.com or gust.com in the US?

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Hi there, just wondering, did you ever figure this out? I’m in a similar situation except I already have the LLC and such set up in the US, but I’m trying to figure out what the best setup is for 2022.

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Currently looking into this again based on a post in another thread:

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So starting from this year’s tax return in the next year, there will be taxation of CFCs in Taiwan. However, there’s an exemption for companies earning less than NTD 7 million.

I am not fully sure how exactly they will tax the CFC earnings, but from my understanding of that “poster” by the MoF it looks like this will be done as part of the basic income tax (formerly AMT).

Overall it sounds like that as long as one pays out enough salary and/or dividends from their overseas company to keep the profit under NT$ 7 million per year, there shouldn’t be anything to worry about under this new regulation. And even profits slightly over NT$ 7 million shouldn’t incur any additional tax if one is also paying tax on the salary in Taiwan (as the basic income tax is a minimum tax considering the total of all income and factoring in the taxes already paid).

And if someone really greatly exceeds NT$ 7 million in profit per year - well, I guess there should be some money left for paying the necessary taxes :wink:

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