5.25.event2 1On Sunday May 25th, Enspyre hosted the first How to Start a Business in Taiwan workshop since moving to its current new office. Organized by Anthony Van Dyck, founder of Taiwanese.com, and Elias Ek, the CEO of Enspyre, the workshop lasted for 4 hours, and despite the broken AC and the perspiring weather, 40 people attended the event and enjoyed an afternoon of experience sharing, networking, and learning everything an entrepreneurs need to know about starting a business in Taiwan.
Elias started out by introducing his 14 years of entrepreneurial experience in Taiwan, both the successes and the not so successful. He then continued to talk about the highlights of laws, rules and habits that entrepreneurs needs to consider, such as:
How to pick a business entity
Visa, ARC and Work Permits
Finding employee, salaries and wages
Renting office
How to finance your business
Banking in Taiwan
Employment laws
Corporate and Individual Taxes
And much more
Here a link for the Elias’s presentation (http://startabusinessintaiwan.tw/media/Taiwanease-How-to-start-a-business-in-Taiwan-20140524.pdf)
The participants asked a lot of questions and offered many great opinions. Here are a few issues that were discussed especially much or where we can fill in some more information.
Fuzeren, Directors, and Supervisors
Much attention was given to the roles of fuzeren, directors, and supervisors. Many were eager to know the legal liabilities of these three positions. While every Taiwanese corporation requires these roles, it is hard to find out exactly what their liabilities and responsibilities are. The Company Law does not specify their liabilities, and many seasoned CPAs find it difficult to explain their exact liabilities. We have found a pdf file written by PwC Taiwan that states the fuzeren’s duties in details, and on the last 3 pages you’ll find a table that puts the rights, obligations, and responsibilities of a board director and a supervisor into bullet points. You can find the file via this link: (http://webline.sfi.org.tw/)
Currently the information is in Chinese only but we will try to make it available in English with easy-to-understand language and tables. Stay tuned on Facebook or via our newsletter via www.startabusinessintaiwan.tw
Visa and Work Permit
There was a question during the workshop regarding the work permits and visa for a minority shareholder.
To answer this, we suppose what you need is a type B work permit to legally work in Taiwan as a manager (as opposed to a type A work permit for a professional employee). Under Article 38 of QCSF (Qualifications and Criteria Standards for Foreigners), if a company wants to hire a foreigner as the manager, foreigner ownership should account for at least one third of the shares in the company. So in this case, it does not matter whether you are a minority shareholder or not. As long as foreign ownership-the combined ownership of foreign shareholders-is one third or more, you can apply for a type B work permit.
The corporation you start, would need to have at least 500,000 in paid in capital and after the first year you need to show 3,000,000 or more in turnover or the company might not be able to continue to offer that work permit.
Liability Insurance
During the discussion of the roles of directors, supervisors, and fuzeren, some participants brought up liability insurance and wondered if it is common in Taiwan. You can purchase Directors and Officers (D&O) liability insurance in Taiwan but it is not common. The threshold ?? for such insurance is high and claim rates are rather low.
Fapiao
The concept of fapiao also sparked reverent discussion.
The Chinese word Fapiao is usually translated as invoice or receipt.
It is supposed to be the receipt you send to a customer when they have paid. The fapiao itself you get from the government and it is based on the amounts on the fapiao you issue that you pay taxes.
Fapiao acts like a receipt, not an invoice, yet it is expected to be issued and sent to the customer before payment. This of course poses a paradox: what if my customers don’t pay but they’ve already gotten the receipt to prove that they did? Based on his experience, Elias said this is simply how it works in Taiwan. Every company accepts and carries out this custom.
Another problem that comes along is fapiao’s two-month period payment schedule. Every two month you pay the government 5% taxes based on the fapiao. Let’s say you just secured an order at the end of the two-month period, close to the time you have to pay the taxes. If the order is a big one, for example NT$1 million, you have to pay the government NT$ 50,000 maybe just few days after the issuing of the fapiao. Yet, the payment might not come in until few months later. If you don’t have the money at hand, you’ll need to BORROW money just to pay the taxes before you receive the payment.
Representative Office
Elias advised that a representative office probably isn’t what most people are looking for, since it cannot do business in Taiwan.
The purpose of a rep office is to do purchasing or communicate with Taiwanese vendors or service providers but it cannot issue fapiao so it cannot sell products in Taiwan. The hurdles to get a work permit is however lower.
A representative office is the perfect choice for exporting, buying products, and contacting local suppliers. But to actually do business you have to rely on other business structures.
Owning a Company V.S. Working for the Company
One major concern among entrepreneurs is that owning a business in Taiwan does not mean you are legally allowed to work for the company, that is, you are the boss but your company cannot automatically employ yourself. In other words, ownership does not guarantee work permits or visas at all. Not only do you have to have more than NT$500,000 as paid in capital, you also have to reach a revenue of NT$3 million in the first year to renew the type B work permit for a foreign manager. Some participants found this regulation extremely straining, and it certainly gives entrepreneurs a lot of pressure to scale up faster; they worry that they will be kicked out of the country just after one year of setting up and fighting for their business.
As an owner you can participate in board meetings. You can have meetings with the CEO of the business to make sure he or she is managing your investment properly.
What you can’t do is make sales calls or serve customers in your restaurants, if your company paints walls, of course you can’t go out and paint without that work permit. It does not matter that you are the owner. Those two roles, owner and employee, are separate.
If the immigration authorities would come knocking on the office doors, you have to be able to show them that you are not working as an employee and explain why you are there. One participant in the restaurant industry shared his experience, saying that if you are not employed by the business yet you are taking a shift in your own shop, there might be paperwork like accounting reports that show a gap on labor costs etc. So, take note of this and be aware of the complications and consequences to stay within the law!
Recruiting
Human resources, apparently, is another issue that gives business owners a headache. Several bosses shook their heads when they talk about hiring young Taiwanese people because they don’t seem to be able to commit or know what they want. A participant shared his experience, saying that if you need ‘casual employees’, look for people living outside of Taipei. He finds them more grateful for working opportunities, more hard-working, and having better attitudes. He said that paying for the transportation costs is much worthier than just hiring people in Taipei.
Another participant mentioned that she heard the government is imposing a law on how large percentage of freelancers vs. employees a company can hire. So far we haven’t found any information regarding this possible regulation.
Banking
Lastly, credit cards and bank accounts also ignited some heated discussion and experience sharing. According to the law, foreigners can have Taiwanese credit cards WITHOUT a Taiwanese guarantor. However, the law leaves it up to the issuing banks to decide how to evaluate customers.
In Section 15, Paragraph 1 of the Central Bank of China regulation called “Directions Governing Banking Enterprises for Operating Foreign Exchange Business” it says:
“If a foreign natural person is issued a card, the card-issuing bank shall strengthen the credit investigation and the solvency evaluation of the cardholder, and pay attention to risk control.”
Nowhere does it say the government will not allow the banks to give foreigners a credit card.
http://www.law.cbc.gov.tw/webCbcEng/wfrmLaw_ShowAll.aspx?LawID=LA04C008004
One participant suggested Standard Charter for good services and options, and quite a few other participants recommended Mega Bank. Anthony, the organizer of the event said Mega Bank is willing to give foreigners check accounts, which is very rare among Taiwanese banks. He pointed out that checks are still used often in Taiwan, and that Taiwanese companies and banks take checks very seriously; the chances of checks bouncing are minimum, almost non-existent.
Fundraising
From the 200 dollar door fee we gathered NT$6,800 that all went to The Sanctuary, a non-profit animal-relief organization (http://thesanctuarytaiwan.org/) well worth the support. Elias’ homemade chocolate cakes were well-received with no crumbs left, and with the help of ice cubes and refreshing drinks, the attendees managed to survive under the sweltering heat, and many of them gave good feedbacks to the highly informative workshop.
