HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements...Taiwan

# 					2019 Investment Climate Statements: Taiwan			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Taiwan is an important market in regional and global trade and investment.  It is one of the world’s top 25 economies in terms of gross domestic product (GDP) and was the United States’ 11th largest trading partner in 2018.  An export-dependent economy of 23 million people with a highly skilled workforce, Taiwan is also a key link in global supply chains, a central hub for shipments and transshipments in East Asia, and a major center for advanced research and development (R&D).

Taiwan welcomes and actively courts foreign direct investment (FDI) and partnerships with U.S. and other foreign firms.  The administration of President Tsai Ing-wen has aimed to promote economic growth in part by increasing domestic investment and FDI.  The authorities offer investment incentives and seek to leverage Taiwan’s strengths in advanced technology, manufacturing, and R&D.  Plans for expanded investment by the central authorities in physical and digital infrastructure across Taiwan complement this investment promotion strategy.  The authorities convene an interagency monthly meeting to address common investment issues, such as land scarcity.  Some Taiwan and foreign investors regard Taiwan as a strategic relocation alternative to insulate themselves against potential supply chain disruptions resulting from regional trade frictions. 

The finance, wholesale and retail, and electronics sectors remain top targets of inward FDI, although Taiwan attracts a wide range of U.S. investors, including in advanced technology, digital, traditional manufacturing, and services sectors.  The United States is Taiwan’s second largest single source of FDI after the Netherlands, through which some U.S. firms choose to invest.  In 2017, according to U.S. Department of Commerce data, the total stock of U.S. FDI in Taiwan reached USD 17.0 billion.  U.S. services exports to Taiwan totaled USD 10 billion in 2018.

Structural impediments in Taiwan’s investment environment include: excessive or inconsistent regulation; market influence exerted by domestic and state-owned enterprises (SOEs) in the utilities, energy, postal, transportation, financial, and real estate sectors; foreign ownership limits in sectors deemed sensitive; and regulatory scrutiny over the possible participation of People’s Republic of China (PRC)-sourced capital.  Taiwan has among the lowest levels of private equity investment in Asia, although private equity firms are increasingly pursuing opportunities in the market.  Foreign private equity firms have expressed concern about a lack of transparency and predictability in the investment approvals and exit processes, as well as regulators’ reliance on administrative discretion in rejecting some transactions. These challenges are especially apparent in sectors deemed sensitive for national security reasons but that allow foreign ownership. Businesses have questioned the feasibility of Taiwan’s long-term energy policy in light of plans to phase out nuclear power by 2025 and increase use of fossil fuels and renewables. 

The Taiwan authorities have introduced new rules to help establish a modern regulatory framework for a thriving digital economy, but their reluctance to accommodate certain new business models, such as sharing economy platforms, presents a stark contrast to Taiwan’s efforts to position itself as a global innovation hub.  Taiwan in late 2016 implemented new rules mandating a 60-day public comment period for draft laws and regulations emanating from regulatory agencies, but the new rules have not been consistently applied.  Proposed amendments to foreign investment regulations, if passed, would help promote inward investment through streamlined reporting and approval procedures.

*Table 1: Key Metrics and Rankings*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards 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 its low levels of domestic private investment, which grew by 1.46 percent in 2018.  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 aim to expand trade and investment opportunities by granting tax incentives, tariff exemptions, low-interest loans, and other favorable terms.  Incentives tend to be more prevalent for investment in the traditional manufacturing sector. The Ministry of Economic Affairs (MOEA) Department of Investment Services (DOIS) Invest in Taiwan Center serves as Taiwan’s investment promotion agency and provides streamlined procedures for foreign investors, including single-window services and employee recruitment.  For investments of over NTD 500 million (USD 17 million), the authorities will assign a dedicated project manager to the investment process. DOIS services are available to all foreign investors. The Centre’s website contains an online investment aid system (at https://investtaiwan.nat.gov.tw/smartIndexPage?lang=eng) to help investors retrieve all the required applications forms based on various investment criteria and types.  Taiwan also passed the Foreign Talent Retention Act to attract foreign professionals with a relaxed visa and work permit issuance process as well as tax incentives. The proposed amendments to the *Statute for Investment by Foreign Nationals*, which was under priority consideration by the Legislative Yuan in the first half of 2019, would replace the existing pre-approval investment review process with an ex-post reporting mechanism.  

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 investment sectors, last updated in February 2018, is available at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=ZYi4SMROrBA= . 

To accelerate industrial transformation that would boost both domestic demand and external market expansion, the authorities have been actively promoting the “5+N Innovative Industries” development program targeting industries including smart machinery, biomedicine, Internet of Things (IoT), green energy, and national defense, as well advanced agriculture, circular economy, and semiconductors, among other key industries.  Taiwan authorities also offer subsidies for the research and development expenses for Taiwan-foreign partnership projects. The central authorities take a cautious approach to approving foreign investment in innovative industries that utilize new and potentially disruptive business models, such as in the sharing economy. Investors have reported that investments in the sharing economy have been approved without clear regulatory frameworks in place, generating regulatory and political difficulties and, in some cases, targeted legislation and regulations regarded as highly punitive or restrictive in ways that harm the viability of such business models in Taiwan.

The American Chamber of Commerce in Taipei meets regularly with Taiwan agencies such as the National Development Council (NDC) to promote resolution of concerns highlighted in the Chamber’s annual White Paper.  The authorities also regularly meet with other foreign business groups. Some 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, relisting choices, and the investment’s impact on competition within the sector.  U.S. investors have claimed to experience lengthy review periods for private equity transactions and redundant inquiries from the MOEA Investment Commission and its constituent agencies. Some report that public hearings convened by Taiwan regulatory agencies about specific private equity transactions have appeared designed to advance opposition to private equity rather than foster transparent dialogue.  Private equity transactions and other previously approved investments have, in the past, attracted Legislative Yuan scrutiny, including committee-level resolutions opposing specific transactions.

**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-controlled Chunghwa Telecom, which controls 97 percent of the fixed line telecom market, maintains a 49 percent limit on direct foreign investment and a 55 percent limit on indirect foreign investment. There is a 20 percent limit on foreign direct investment in cable television broadcasting services, and foreign ownership of up to 60 percent is allowed through indirect investment via a Taiwan entity, although in practice this kind of investment is subject to heightened regulatory and political scrutiny.  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. Foreign investment in Taiwan-flagged merchant shipping services is limited to 50 percent for Taiwan shipping companies operating international routes.

Taiwan has gradually eased restrictions on investments from the PRC since 2009.  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 nationals are prohibited from serving as chief executive officer in a Taiwan company, although a PRC board member may retain management control rights. The Taiwan authorities regard PRC investment in media or advanced technology sectors, such as semiconductors, as a national security concern.  The Cross-Strait Agreement on Trade in Services and the Cross-Strait Agreement on Avoidance of Double Taxation and Enhancement of Tax Cooperation were signed in 2013 and 2015, respectively, but have not taken effect. Negotiations on the Agreement on Trade in Goods halted in 2016. 

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 New Taiwan Dollars (NTD) 500 million (USD 17 million) obtain approval at the Investment Commission staff-level within two to four days.  Investments between NTD 500 million (USD 17 million) and NTD 1.5 billion (USD 51 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, 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 provides Taiwan’s regulatory agencies opportunities to attach conditions to investments in order to mitigate concerns about ownership, structure, or other factors.  Screening may also 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, especially PRC-sourced capital.  To ensure monitoring of PRC-sourced 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. Blocked deals in recent years have reflected the authorities’ increased focus on national security concerns beyond the negative-list industries.  The proposed revisions to the main investment statute would, if passed, allow the authorities to apply political, social, and cultural sensitivity considerations in their investment review process.

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.

**Other Investment Policy Reviews**

Taiwan has been a member of the World Trade Organization (WTO) since 2002.  In September 2018, the WTO conducted the fourth review of the trade policies and practices of Taiwan.  Related reports and documents are available at: https://www.wto.org/english/tratop_e/tpr_e/tp402_e.htm.  

The Organization for Economic Cooperation and Development (OECD) and United Nations Conference on Trade and Development (UNCTAD) have not conducted investment policy reviews of Taiwan.  

**Business Facilitation**

MOEA has taken steps to improve the business registration process and has been finalizing amendments to the Company Act to make business registration more efficient.  Since 2014, the company registration application review period has been shortened to two days, while applications for a taxpayer identification number, labor insurance (for companies with five or more employees), national health insurance, and pension plans can be processed at the same time and granted decisions within five to seven business days.  Since January 1, 2017, foreign investors’ company registration applications are processed by the MOEA’s Central Region Office.

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 foreign entrepreneurs to remain in Taiwan if they raise at least NTD 2 million (USD 66,000) in funding.  Taiwan has initiated rules to enable IP rights (IPR) holders to use intellectual property (IP) as collateral in obtaining bank loans, and this and other rules apply to foreign investors. 

Further details about business registration process can be found in Invest Taiwan Center’s website at http://onestop.nat.gov.tw/oss/web/Show/engWorkFlow.do  

The Investment Commission website lists the rules, regulations, and required forms for seeking foreign investment approval: http://www.moeaic.gov.tw/  .

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 may start recruiting and hiring employees. 

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.

**Outward Investment**

The PRC used to be the top destination for Taiwan companies’ overseas investment given the low cost of factors of production there, such as wages and land.  In recent years, however, the authorities have begun assisting Taiwan firms in relocating to lower-cost markets, including in Southeast Asia. Taiwan’s financial regulators have urged Taiwan banks to expand their presence in Southeast Asian economies either by setting up branches or by acquiring subsidiaries.  The administration of President Tsai Ing-wen launched the New Southbound Policy to enhance Taiwan’s economic connection with 18 countries in Southeast Asia, South Asia, and the Pacific. The Taiwan authorities seek investment agreements with these countries to incentivize Taiwan firms’ investment in those markets.  Invest Taiwan Center provides consultation and loan guarantee services to Taiwan firms operating overseas.

According to the *Act Governing Relations between the People of the Taiwan Area and the Mainland Area*, all Taiwan individuals, juridical persons, organizations, or other institutions must obtain approval from the Investment Commission in order to invest in or have any technology-oriented cooperation with the PRC.  The authorities maintain a negative list for Taiwan firms’ investment in the PRC. The central authorities, Taiwan companies, and foreign investors in Taiwan are increasingly vigilant about the threat of IP theft in key strategic industries, such as the semiconductor industry.

							2. Bilateral Investment Agreements and Taxation Treaties					

Taiwan has concluded economic cooperation (free trade) agreements with El Salvador, Guatemala, Honduras, Nicaragua, Panama, Singapore, and New Zealand, and has concluded 25 bilateral investment protection agreements, available at https://www.dois.moea.gov.tw/Home/relation1_1_3  ).  In December 2018, Taiwan and India signed an updated bilateral investment agreement (BIA) and a treaty to mutually recognize respective authorized economic operation (AEO) programs.

The complete list and full text of the bilateral investment treaties, both enforced and signed, which Taiwan has concluded, can be found at https://investmentpolicy.unctad.org/international-investment-agreements/countries/205/taiwan-province-of-china 

Taiwan does not have a bilateral taxation treaty with the United States.  Taiwan has 32 bilateral income tax agreements in force, available online at https://www.mof.gov.tw/Detail/Index?nodeid=191&pid=63930&rand=8151 .  Agreements with Canada and Poland took effect on January 1, 2017. Taiwan signed a taxation agreement with the PRC in August 2015, but has not yet taken effect.  Taiwan has reached a tax information exchange consensus with Japan, and will start exchange financial account information and country-by-country report with Japan in 2020. 

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 beginning in 2008 in response to Taiwan policies affecting U.S. beef imports, but resumed in 2013. The most-recent TIFA discussions meeting was held in 2016. 

With the increasing global demand for anti-tax avoidance and greater tax information transparency, Taiwan’s legislature has passed a series of anti-tax avoidance laws since 2016, aiming to establish the legal basis for the implementation of automatic exchange of financial information for tax purposes.  Starting in 2019, the Taiwan authorities implemented the OECD Common Reporting Standard (CRS), with the exchange of information with foreign countries to commence in 2020. Taiwan in 2017 also passed amendments to the *Income Tax Act* so that a foreign profit-seeking enterprise with a place of effective management in Taiwan will be deemed a domestic tax resident subject to corporate income tax reporting.  

							3. Legal Regime					

**Transparency of the Regulatory System**

Taiwan generally maintains transparent regulatory and accounting systems that conform to international standards.  Taiwan’s publicly listed companies adopted the International Financial Reporting Standards (IFRS) in 2013. Taiwan adopted IFRS 9 and IFRS 15 in January 2018. Ministries generally originate business-related draft legislation and submit it to the Executive Yuan for review.  Following approval by the Executive Yuan, draft legislation is forwarded to the Legislative Yuan for consideration. Legislators can also propose legislation. While the cabinet level agencies are the main contact windows for foreign investors prior to entry, foreign investors also need to abide by local government rules on transportation services and environmental protection, for example.

Draft laws, rules, and orders are published on The Executive Yuan Gazette Online for public comment, at http://gazette.nat.gov.tw/egFront/indexEng.do  .  The Taiwan authorities on December 25, 2015, first instituted a 14-day public comment period for new rules, but extended it to no less than 60 days beginning December 29, 2016.  All draft regulations and laws are required to be available for public comment and advanced notice, unless they meet certain criteria allowing a shorter window. While welcomed by the U.S. business community, the 60-day comment period is not uniformly applied.  Draft laws and regulations of interest to foreign investors are regularly shared with foreign chambers of commerce for their comments. For the ongoing amendment to the *Statute for Investment by Foreign Nationals*, the authorities held several regional public hearing and professional consultations meetings before finalizing its draft for the Executive Yuan review.  

These announcements are also available for public comment on the NDC’s public policy open discussion forum at https://join.gov.tw/index  .  Foreign chambers of commerce and Taiwan business groups’ comments on proposed laws and regulations, as well as Taiwan ministries’ replies, are publicly posted on the NDC website.  In October 2017, the NDC launched a separate policy discussion forum specifically for startups, which can be found online at http://law.ndc.gov.tw/  , serving as the main platform to harmonizing regulatory requirements governing innovative businesses and startups operation. 

The Executive Yuan Legal Affairs Committee oversees the enforcement of regulations.  Ministries are responsible for enforcement, impact analysis, draft amendments to existing laws, and petitions to laws pursuant to their individual authorities.  Impact assessments may be completed by in-house or private researchers.  To enhance Taiwan’s regulatory coherence in the wake of regional economic integration initiatives, the NDC in August 2017 released a Regulatory Impact Analysis Operational Manual as a practical guideline for central government agencies, available in Chinese here. 

Taiwan regularly discloses its public finance data to the public, including all debts incurred to all levels of government. Past information is also retrievable in a well-maintained fiscal database.  Taiwan’s national statistics agency also publishes the contingent debt information each year. 

**International Regulatory Considerations**

Taiwan is not a member of any regional economic grouping.  Although Taiwan is not a member of many international organizations, it voluntarily adheres to or adopts international norms, including in the area of finance, such as IFRS.  MOEA in July 2014 notified other Taiwan agencies of the requirement to notify the WTO of all draft regulations covered by the WTO’s Agreement on Technical Barriers to Trade and the Agreement on Sanitary and Phytosanitary Measures.  Taiwan is a signatory to the Trade Facilitation Agreement (TFA), and has met some of the customs facilitation requirement specified in the TFA, such as single window customs services and preview of the origin. In January 2018, citing tax parity for domestic retailers and the risk of fraud, Taiwan lowered the de minimis threshold from NTD 3,000 (USD 100) to NTD 2,000 (USD67), an approach regarded as contrary to facilitating customs clearance and trade, especially for small and medium-sized U.S. businesses. 

**Legal System and Judicial Independence**

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.  Taiwan established its Intellectual Property Court in July 2008 in response to the need for a more centralized and professional litigation system for IPR disputes.  There are also specialized divisions in the District Courts and High Courts to deal with labor disputes. Foreign court judgments are final and binding, and enforced on a reciprocal basis.  Companies can appeal regulatory decisions in the court system. 

**Laws and 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 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 R&D programs.  

Amendments the Legislative Yuan passed in June 2015 to the*Merger and Acquisition Act* clarified investment review criteria for mergers and acquisition transactions.  The Investment Commission is drafting amendments to the *Statute for Investment by Foreign Nationals*in an aim to simplify the investment review process, including an amendment that would replace a pre-investment approval requirement with a post-investment reporting system for investments under a USD 1 million threshold, which is considered too low by many stakeholders.  Ex ante approval would still be required for investments in restricted industries and those exceeding the threshold. The new proposal would also allow the authorities to impose various penalties for violations of the law. Guidance that previously required special consideration of the impact of a private equity fund’s investment has been folded into the set of general evaluation criteria for foreign investment in important industries.  The MOEA in November 2016 released a supplementary document to clarify required documentations for different types of investment applications. This document, in Chinese only, can be found at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=5dRl9fU97Fk=  .   

All foreign investment related regulations, application forms, and explanatory information can be found at Investment Commission’s website, at http://run.moeaic.gov.tw/MOEAIC-WEB-SRC/OfimDownloadE.aspx  

The Invest in Taiwan Portal also provides other relevant legal information of interest to foreign investors, such as labor, entry and exit regulations, at https://investtaiwan.nat.gov.tw/showPageeng1031003?lang=eng&search=1031003  

**Competition and Anti-Trust Laws**

Taiwan’s *Fair Trade Act* was enacted in 1992.  Taiwan’s Fair Trade Commission (TFTC) examines business practices that might impede fair competition.  In October 2017, TFTC imposed a USD 774 million antitrust fine on a U.S. technology company. The MOEA publicly expressed concern about the ruling’s potential impact on foreign investment.

**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 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. 

**Dispute Settlement**

*ICSID Convention and New York Convention*

In part due to its unique political status, Taiwan is neither a member of the International Centre for the Settlement of Investment Disputes (ICSID) nor a signatory to the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).  It also is not a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

*Investor-State Dispute Settlement*

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.  Taiwan has entered into bilateral investment agreements with countries including Singapore, Thailand, Malaysia, and India. Taiwan does not have an investment agreement with the United States.  Taiwan’s bilateral investment agreements serve to promote and protect foreign investments. DOIS is not aware of investment disputes involving U.S. investors, although there have been reports of disputes between U.S. investors and their local Taiwan partners.

*International Commercial Arbitration and Foreign Courts*

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.  The Judicial Yuan announced that alternative dispute resolution will be one of the issues addressed in an upcoming National Judicial Conference. Arbitration associations in Taiwan include the Chinese Arbitration Association, Taiwan Construction Arbitration Association, Labor Dispute Arbitration Association, and Chinese Construction Industry Arbitration Association in Taiwan.

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 United Nations Commission on International Trade Law (UNCITRAL) model law when the *Arbitration Act* was revised in 1998.

**Bankruptcy Regulations**

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 is generally governed by the *Company Act* and the *Bankruptcy Act*, while the *Consumer Debt Resolution Act* governed personal bankruptcy.   The quasi-public Joint Credit Information Center is the only credit-reporting agency in Taiwan.  In 2017, there were 227 rulings on bankruptcy petitions. 

							4. Industrial Policies					

**Investment Incentives**

The *Statute for Industrial Innovation* provides the legal basis for offering tax credits for companies’ R&D expenditures.  MOEA also operates several R&D subsidy programs. MOEA’s target industries for investment are IoT (including Asia Silicon Valley-related investments), smart machinery, biotechnology and biopharmaceuticals, green energy, national defense, the circular economy, and agriculture.  Investors can receive tax incentives for investing in free trade zones, public construction, and biotechnology or biopharmaceuticals. 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.  Investors may receive low-interest loans or subsidies for participating in industrial R&D and industry revitalization programs. R&D tax credits, equivalent to 15 percent of total R&D expenditures, are available only to companies who file corporate income taxes in Taiwan. The *Act for the Recruitment and Employment of Foreign Professionals* passed in October 2017 offers relaxed visa requirements and high-earner tax deductions to foreign professionals.  For a detailed list of investment incentives programs, please refer to the Invest in Taiwan website at https://investtaiwan.nat.gov.tw/showPage?lang=eng&search=1031001  .

**Foreign Trade Zones/Free Ports/Trade Facilitation**

There are seven free trade/free port zones:  Anping, Kaohsiung, Keelung, Suao, Taichung, Taipei, and Taoyuan International Airport.  The 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 Corporation (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. In addition to preferential tariff and fees, the foreign labor ceiling for manufacturers in the free ports zones is 40 percent. Kaohsiung Port also serves as a London Metal Exchange (LME) delivery port of primary aluminum, aluminum alloy, copper, lead, nickel, tin, and zinc. 

**Performance and Data Localization Requirements**

Taiwan does not mandate local employment, but the authorities have incentivized foreign companies to hire more local staff with preferential measures, such as in the mutual fund industry.  Except for restricted industries on the negative list, there is no restriction on foreigners taking roles in senior management or on boards of directors. Foreign investors have long expressed concerns over difficulties in recruiting skilled executives and professionals.  The *Act for the Recruitment and Employment of Foreign Professionals* that took effect February 2018 aims to attract foreign professionals through simplified policies regarding work, visa, and residence, and increased benefits on retirement, insurance, and tax obligations.  Taiwan does not mandate any forced localization or performance requirements, and does not ask software firms to disclose their source code. 

							5. Protection of Property Rights					

**Real Property**

Interests in property are enforced in Taiwan, and it 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 national frontiers may not be transferred or leased to foreigners.  Based on the Ministry of Interior’s (MOI) Operational Regulations for Foreigners to Acquire Land Rights in Taiwan, foreigners coming from countries that provide Taiwan residents the same land rights will be allowed to acquire or set the same rights in Taiwan.  In May 2015, the *Cadastral Clearance Act* was passed to promote better land registration management.  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 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 the PRC, is also a problem. The United States is actively working with Taiwan authorities to address these issues.

Taiwan’s legislature in 2017 passed an amendment to the *Pharmaceutical Affairs Act* introducing a patent linkage system aiming for better protection of innovative pharmaceuticals, but implementing regulations had not yet been introduced as of April 2019 amid some local opposition to the inclusion of biologics and biosimilars.  Foreign investors believe that a patent linkage system that does not includes biologics/biosimilars would present a challenge to the Taiwan authorities’ commitment to IP rights protection. Proposed amendments to the *Copyright Act*, which features 93 amendments and 17 new articles seeking to prevent intellectual property infringement in the digital age, are still under legislative review.  The Legislative Yuan has passed articles that would impose two-year criminal penalty or monetary fines up to NTD 500,000 (USD 16,700) for selling pirated TV boxes.  A proposed amendment to the *Trade Secrets Act,*which would allow foreign entities to file lawsuits against misappropriations and to allow prosecutors to issue a confidentiality preservation order over all information received and produced during investigations, is among one of the five priority bills being reviewed during 2019.   

Taiwan’s National Police Agency reported that the value of trademark, copyright, and trade secret violation in 2018 totaled NTD 10.9 billion (USD 360 million), up from the NTD 8.4 billion (USD 280 million) in 2016.  Taiwan Customs reported that the number of cases involving seizures of imported counterfeit branded goods continued to increase to 274 cases in 2018, with the majority of the violations in toys, medicine, and communications industries.  Taiwan prosecutes IP infringement, and imposes up to five years prison time for copyright violations, in addition to monetary fines. Affirmed IP infringement cases by the Prosecutors’ Offices of the District Courts totaled 7,082 cases in 2018, a 4.5 percent decline over the previous year, and nearly 60 percent of the cases were not indicted. 

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 or patent will be published and registered after the applicant pays registration fees within two months upon receiving the approval notice.  Taiwan has Patent Prosecution Highway (PPH) agreements with the United States, Japan, Spain, the Republic of Korea, and Poland in 2011, 2012, 2013, 2015, and 2017, respectively, with 1,675 requests to the United States filed by the end of 2017.

In July 2018, TIPO hosted its first hearing for patent invalidation proceedings under the new invalidation mechanism.  The hearings are considered a procedural alternative to administrative appeal and are expected to increase efficiency in resolving patent disputes. 

Patent holders may request that 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. 

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Taiwan authorities welcome foreign portfolio investment in the Taiwan Stock Exchange (TWSE) and Taipei Stock Exchange, with foreign investment accounting for approximately 40 percent of TWSE capitalization in the past few years.  Taiwan allows the establishment of offshore banking, securities, and insurance units to attract a broader investor base. The Financial Supervisory Commission (FSC) utilizes a negative list approach to regulating local banks’ overseas business not involving the conversion of the NTD.

Taiwan’s capital market is mature and active.  As of the end of 2018, there were 928 companies listed on the TWSE, with a total market trading volume of USD 987 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. The turnover ratio in the TWSE rose to 82.6 percent in 2018, likely due to a new lower transaction tax on day trades.  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**

Taiwan’s banking sector is healthy, tightly regulated, and competitive, with 39 banks servicing the market.  The sector’s non-performing loan ratio has remained below 1 percent since 2010, with a sector average of 0.24 in December 2018.  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 14 percent as of December 2018, 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, averaged 132 percent in December 2018.  Taiwan’s banking system is mostly deposit-funded and has limited exposure to global financial wholesale markets. Regulators have encouraged local banks to expand to overseas markets, especially Southeast Asia, and to minimize exposure in the PRC. Taiwan Central Bank statistics show that Taiwan banks’ PRC net exposure on an ultimate risk basis reached USD 66.6 billion in the fourth quarter of 2018, trailing the United States’ USD 73.7 billion.  Taiwan’s largest bank in terms of assets is the wholly state-owned Bank of Taiwan, which had USD 168 billion of assets as of December 2018. Taiwan’s eight state-controlled banks (excluding the Taiwan Export and Import Bank) jointly held nearly USD 790 billion, or 48 percent of the banking sector’s total assets.

**Foreign Exchange and Remittances**

***Foreign Exchange***

The Taiwan Central Bank operates as an independent agency and state-owned company 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 NTD’s external and internal value, and promote economic growth within the scope of the three aforementioned goals. 

Foreign banks are allowed to operate in Taiwan as branches and foreign-owned subsidiaries, but financial regulators require foreign bank branches to limit their customer base to large corporate clients.  To promote the asset management business in Taiwan, starting in May 2015, foreigners holding a valid visa entering Taiwan have been allowed to open an NTD account with local banks with passports and an ID number issued by the immigration office, replacing the previous dual-identification (passport and resident card) requirements.  Please refer to the Taiwan Bankers’ Association’s webpage: https://www.ba.org.tw/EnglishVer/BusinessEngDetail/2    for detailed information regarding various types of bank services (credit card, loans, etc.) for foreigners in Taiwan.   

**Foreign Exchange and Remittances**

***Foreign Exchange Policies***

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.  Funds can be freely converted into major world currencies for remittance, but in order to retain funds in Taiwan they must be held in currency denominations offered by banks.  In addition to commonly used U.S. dollar, euro, and Japanese yen-denominated deposit accounts, most Taiwan banks offer up to 15 foreign currency denominations. 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.  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.

**Sovereign Wealth Funds**

Taiwan does not have a sovereign wealth fund. Taiwania Capital Management Company, a partially government-funded investment company, was established in October 2017 to help promote investment in innovative and other target industries.  In December 2018, Taiwania raised USD 350 million for two funds investing in IOT and biotech industries.

							7. State-Owned Enterprises					

According to the NDC, there are 17 SOEs with stakes by the central authorities exceeding 50 percent, including official agencies such as the Taiwan Central Bank.  Please refer to the list of all central government, majority-owned SOEs available online at https://ws.ndc.gov.tw/001/administrator/10/relfile/0/1295/374a165c-c930-461e-bb5b-07893b3e5ea2.doc .  Some existing SOEs are large in scale and exert significant influence in their industries, especially monopolies such as Taiwan Power (Taipower) and Taiwan Water. MOEA has stated it does not intend to privatize Taipower, but plans to restructure it as a new holding company under *Electricity Industry Act* revisions passed in January 2017 that will gradually liberalize power generation and distribution.  CPC Corporation (formerly China Petroleum Corporation) controls over 70 percent of Taiwan’s gasoline retail market.  In August 2014, the Aerospace Industrial Development Corporation (AIDC) was successfully privatized through a public listing on the TWSE, and MOEA’s stake in AIDC declined to 35.2 percent by the end of 2017.  The Labor Insurance Bureau ceased to be an SOE in 2014 but remained under the Ministry of Labor (MOL). 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, Taiwan Salt, CSBC Corporation (shipbuilding), Yang Ming Marine Transportation, and eight public banks.

In 2017 (latest data available), the 17 SOEs together had net income of NTD 341 billion (USD 11.4 billion), down 5.7 percent from the NTD 362 billion (USD 12.1 billion) in 2016, mainly due to falling income at Taipower.  The SOEs’ average return on equities edged down from 11.1 percent in 2016 to 10.1 percent in 2017. These 17 SOEs employed a total of 116,499 workers.

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 shares.  Public enterprises with less than a 50 percent government stake are not subject to Legislative Yuan supervision, but authorities may retain managerial control through senior management appointments, which may change with each administration.  Public enterprises owned by local governments exist primarily in the public transportation sector, such as regional bus and subway services. 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 and union representatives sitting on the board.

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 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’ budgets each year.

**Privatization Program**

There are no privatization programs in progress.  Taiwan’s most recent privatization, of AIDC in 2014, included imposition of a foreign ownership ceiling of 10 percent due to the sensitive nature of the defense sector.  In August 2017, Taiwan authorities identified CPC Corporation, Taipower Company, and Taiwan Sugar as their next privatization targets. Following passage of the *Electricity Industry Act* amendments in January 2017, the authorities planned to submit a Taipower privatization plan within six to nine years after successfully separating Taipower’s power distribution/sales business from its power generation business. 

							8. 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.  Taiwan authorities actively promote RBC. 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 the latest RBC-related developments in Taiwan and abroad. 

Taiwan authorities place a high priority in addressing and promoting social responsibility investment. In 2015, the authorities mandated that publicly-listed companies with more than NTD 10 billion (USD 333 million) in capital and firms with direct impact on consumers such as food processing, restaurants, chemicals, and financial prepare annual social responsibility reports. Starting 2017, the capital threshold for mandatory reporting was lowered to NTD 5 billion (USD 167 million).  More than 500 of TWSE’s 907 listed companies have issued annual social responsibility reports. To promote more profit-sharing with employees, Taiwan’s *Securities and Futures Act*mandates that all publicly listed companies establish a compensation committee.  In November 2018, the Act was amended again to mandate all publicly listed companies disclose average employee compensation and wage adjustment information.  In addition to the Taiwan Top Salary 100 index and the Taiwan Corporate Governance 100 index that were respectively launched in 2014 and 2015, Taiwan Index Plus, an indexing subsidiary under the TWSE, together with FTSE Russel in December 2017 launched theFTSE4Good TIP Taiwan ESG Index, to help investors integrate environmental, social and governance (ESG) considerations into their portfolios.

In response to food safety and environmental protection problems in recent years, Taiwan 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 and many Taiwan listed companies have voluntarily enclosed conflict minerals free statement in their annual social responsibility reports.  In 2017, 18 Taiwan companies were included in the Dow Jones Sustainability Indexes (DJSI). Taiwan does not participate in the Extractive Industries Transparency Initiative. 

							9. Corruption					

Taiwan has implemented laws, regulations, and penalties to combat corruption, including in public procurement. The *Act on Property-Declaration by Public Servants* mandates annual properties declaration for senior public services officials and their immediate family members.  Such information is open to the public at the Control Yuan’s Sunshine Acts website: http://sunshine.cy.gov.tw/GipOpenWeb/wSite/mp?mp=6  .  In 2018, there were 29 violations found by the Control Yuan and a total of USD 300 thousand of fine was imposed.   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 *Government Procurement Act* and the *Act on Recusal of Public Servants Due to Conflict of Interest* both forbid an incumbent and former procurement personnel and their relatives from engaging in related procurement activities. 

Guidance titled *Ethical Corporate Management Best Practice Principles* for all publicly-listed companies was revised in November 2014.  It asks publicly-listed companies to establish an internal code of conduct and corruption-prevention measures for activities undertaken with government employees, politicians, and other private sector stakeholders.  The Ministry of Justice is drafting a Whistle Blowers Protection Act aiming to effectively combat illegal behaviors in both government agencies and the private sector. The new *Anti-money Laundering Ac*t implemented June 2017 requires the mandatory reporting of financial transactions by individuals listed in the Standards for Determining the Scope of Politically Exposed Persons Entrusted with Prominent Public Function, Their Family Members and Close Associates, and by the first-degree lineal relatives by blood or by marriage; siblings, spouse and his/her siblings, and the domestic partner equivalent to spouse of these politically exposed individuals.  The U.S. government is not aware of cases where bribes have been solicited for foreign investment approval.

***Resources to Report Corruption***

Contact at government agency or agencies are responsible for combating corruption:

Agency Against Corruption, Ministry of JusticeOverall Planning DivisionNo. 318, 2nd floor, Song-jiang Road, Taipeiaac2043@mail.moj.gov.tw

Transparency International Taiwanhttps://www.transparency.org/country/TWN  

							10. Political and Security Environment					

Taiwan is a young and vibrant multi-party democracy.  The transitions of power in both local and presidential elections have been peaceful and orderly.   There are no recent examples of politically motivated damage to foreign investment.

							11. Labor Policies and Practices					

Against a strong domestic economic rebound, Taiwan’s unemployment rate in 2018 edged down to 3.71 percent, hitting a new low since 2001, while the unemployment rate for people aged between 15 and 24 years also edged down from 11.9 percent in 2017 to 11.5 percent in 2018.  MOI data show that 46 percent of Taiwan’s population aged above 15 years is at least college-educated. An official labor force survey indicated that atypical employment has hit 814,000 in 2018, and among the 814,000 atypical workers, 282,000 had at least college education. 

The size of Taiwan’s labor force is decreasing as the society ages.  Taiwan has officially transitioned from an “aging society” to an “aged society” in 2018, with slightly over 14 percent of its population now 65 years old or above.  Taiwan’s total fertility rate in 2018 was 1.06, remaining one of the lowest in the world. As of December 2018, there were 706,850 foreign laborers in Taiwan, of which 448,753 were working in the industrial sector.  The *Labor Standard Act*and the *Act of Gender Equality in Employment* are universally applied to both domestic and foreign workers, with the exception that domestic foreign helper is not covered by the *Labor Standard Act*. 

MOL data indicated that, while labor shortage rates remained stable at around 3 percent in the manufacturing industry, the rates have been increasing over past few years in services industries such as food and accommodation, information and communication, art and entertainment, recreation, and real estate activities.  Industry groups have long claimed 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. Taiwan businesses are also urging the authorities to ease work visa requirements to recruit foreign professionals, especially the skilled white-collar labor in the information technology sector.  However, Taiwan’s low wage growth compared with neighboring economies poses a challenge for talent recruitment and retention. Taiwan 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.  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 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.  The number of effective collective bargaining agreements increased from 515 in 2017 to 713 in 2018, mainly due to a sharp increase of such agreements with vocational unions.  If a proposal is refused, a union may submit an application for arbitration to the MOL’s Committee for Dispute Resolution for Unfair Labor Practices. Taiwan has labor dispute resolution mechanisms in operation at all levels of labor, and the number of dispute cases filed slightly dropped from 27,174 in 2017 to 26,649 in 2018.  Taiwan also introduced an arbitration mechanism in 2011 to preempt disputes through a professional and neutral mediation system. 

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 announced the increasing frequency and coverage of labor inspections. A new *Labor Incident Act* passed in November 2018 mandates the establishment of special labor courts, which would help improve labor right through accelerated dispute resolution and reduced financial cost for labor filing employment lawsuits.  

Improving labor welfare is the one of the core themes pursued by the current Tsai administration.  Minimum monthly wage has been raised successively since 2017 to NTD 23,100 (USD 770) in 2019. MOL is also drafting a bill aiming to replace the current annual minimum wage review panel with a legislation-based system. In March 2018, Taiwan amended the *Labor Standard Act* to address foreign investor community’s concerns over rules governing rest days, overtime work, and overtime pay.

There have been strikes in recent years in the aviation industry.  Following strikes by flight attendants at both the state-controlled flag carrier China Airlines, of which Taiwan government owns a 35 percent stake, and Taiwan’s second largest airline EVA Air in 2016 and 2017, respectively, China Airlines’ pilots launched a 160-hour strike during the Lunar New Year peak travel week in 2019.  Under public pressure, the Ministry of Transportation and Communications proposed a draft amendment to the Ministry of Labor (MOL), suggesting MOL stipulate a seven-to-ten day notice requirement if any union, particularly in the transportation industry, plans to strike. 

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

							12. 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.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

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

* Source for Host Country Data:  Investment Commission, Ministry of Economic Affairs

*Table 3: Sources and Destination of FDI*

Data not available.

*Table 4: Sources of Portfolio Investment*

Data not available.

							14. Contact for More Information					

Michael PignatelloDeputy Chief, Economic Section, American Institute in TaiwanNo. 7, Lane 134, Sec. 3, Xinyi Road, Taipei 110659 Taiwan+886-2-2162-2000pignatellomx@state.gov

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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