Spotlight on Taiwan
The Republic of China, also known as Taiwan, is an island country found in the North Western Pacific Ocean. It is separated from its much larger neighbor, the People’s Republic of China (PRC) by the Strait of Taiwan. Due to its location, it has a tropical climate.
It has a population of over 20 million people. Its large population on such a small island makes it one of the most densely populated countries in the world.
The Taiwanese economy is famously known as one of the Four Asian Tigers. It is a highly industrialized capitalist economy.
Taiwan employs modern manufacturing techniques that combine economics of scale and technology. This economic system has transformed it into a major electronics manufacturing country. Therefore, the base of the economy is its export capabilities which in turn is responsible for its significant trade surplus.
The ROC is a developed economy with one of the largest economies in the world, and it has one of the highest GDP-per-capita rates in the world. It also has a high Human Development Index score.
Ease of doing business in Taiwan
With one of the best corruption index scores and internet speeds on the Asian continent, Taiwan has constantly been in the top 20 list of countries with the best business-conducive environments.
Taiwan has more than 5 free trade zones (FTZs) and multiple seaports which make it attractive for companies and producers seeking safe grounds.
It has also maximized its membership in several international financial organizations, to facilitate its free market economy.
Like Mainland China, Taiwan operates a Civil Law system. Therefore, employment and other labor-related matters are regulated by the Labour Standards Act (LSA). The law prescribes minimum standards applicable and defines the terms of an employment contract. e.g. it prescribes the conditions for terminating an employee’s contract without notice.
Daily working hours are expected not to be more than 8 hours, while the weekly working limit is at 40 hours. When workers work beyond the daily working hours cap, for the first two hours, they would be paid an overtime compensation of 34% in addition to their basic salary. For the next two hours after that (totaling 4 extra hours), they would be entitled to 67% more than the basic hourly salary. The minimum wage payable to any worker is $870 per month and $5.5 per hour.
- In Taiwan, employees that are paid by an international employer who has been in operation in Taiwan for less than 90 days are not taxed. However, employers that have resided or conducted a business operation in Taiwan beyond 90 days are responsible for an 18% tax withholding on the employee’s salary.
- Also, Income Tax for employees in Taiwan is dependent on the territory. Income earned for services carried out in Taiwan by a local employer or income paid by a foreign employer for a service rendered in Taiwan are subject to Taiwan income tax. Income for services rendered outside Taiwan is taxed differently.
- Tax filing must be completed by the 31st of May.
- For every taxable income of a Taiwan worker, taxes are graduated between a minimum of 5% to a maximum of 40%. See the table below for more;
|Income (TWD)||Tax Rate|
|4,530,001 and over||40%|
- To comply with Taiwan’s Labor pension laws for international employees, a Taiwanese employer is required to contribute 6 percent of earnings into Taiwanese employees’ individual pension fund accounts and then about 2 – 15 percent of earnings into the pension fund accounts of non-Taiwanese employees. A foreign employer is not obliged to make contributions to an expert’s retirement fund if the employer is paying the employee’s remuneration without any reimbursement obligations.
- See the table below for more tax breakdown;
|Health Insurance||Employer, employee, and the Government||5.17% of employee’s gross salary|
|Health Insurance||Employer||60% of employee’s premium|
|Health Insurance||Employee||30% of employee’s premium|
|Health Insurance||Government||10% of employee’s premium|
|Labour Insurance||Employer, employee, and the Government||10.5% of employee’s gross salary|
|Labour Insurance||Employer||7% of the labor insurance allocation|
|Labour Insurance||Employee and Government||3.5% of the labor insurance allocation|
- The current rate for gross business receipts tax (GBRT) and value-added tax (VAT) is 5 percent. However, the rate may be reduced to 2 – 0 percent on special occasions.
- The land value tax rate ranges from 1% to 5.5% of the assessed land value. The building tax rate for commercial properties is 3% to 5% of the assessed value, and the rate for non-commercial properties is 1.2% to 3.6% of the assessed value.
- Employees who have worked for the company for at least six months are eligible for an 8-week paid maternity leave at a rate of 100% of their normal wage. Maternity benefits are reduced to 50% if the employee has not worked for the required amount of time.
- In Taiwan, there are two sorts of sick days. Employees are entitled to 30 days of sick leave per year, paid at a rate of 50% of their usual income, for illnesses that do not necessitate hospitalization. If there is a discrepancy between the amount owed and the usual salary rate of pay for an employee whose illness is covered by labor insurance, the employer is required to make up the difference.
- Employees are entitled to 5 days of paid paternity leave at the rate of 100% of the regular pay.
Why consider Taiwan as your next outpost?
Taiwan is a financially buoyant state and it operates a highly free market economy. Most interestingly, it isn’t a single-commodity-dependent country and therefore has a better chance of withstanding financial turmoil in other countries.
Its location in the North-western Pacific is strategic and significantly beneficial to trade as it is close to other manufacturing hubs like Japan and China. Therefore, presence on an important global trade route is a perk of expanding into the Taiwanese market.
Its strong currency and relative political stability are strong reasons to consider it. As for labor, Taiwan has a highly skilled labor market that firms can draw upon to fill their ranks.
These are why Taiwan has constantly attracted foreign investment and has grown to become a magnet for capital-seeking opportunities in Asia.
How can WeHireGlobally help you expand into Taiwan?
One of the biggest decisions you would make while expanding to the Taiwanese market is to partner with WeHireGlobally. We are a global PEO that provides you with the most reliable and efficient global employer of record solutions. With us, you can effectively build an international team in Taiwan without setting up a Taiwanese subsidiary and hence, save time, effort and money. Moreover, we provide an international payroll solution that allows us to add your Taiwanese employees to the local payroll and ensure the proper tax withholding and benefit disbursement, hence, achieving excellent employee retention. Furthermore, WeHireGlobally saves you from legal and tax penalties by mitigating all risks while ensuring 100% compliance with all obligations and regulations.