TAIWAN Law and Practice Contributed by: Susan Lo, Chi Lee and Evelyn Shih, Lee and Li Attorneys-at-Law
LLP structure is not available under Taiwan’s regula - tory regime. The partnership structure is only avail - able to individual partners – ie, not to entity/corporate partners. The LP structure is typically used for venture capital and is not a preferred option among institu - tional investors in the context of JV activities. The traditional JVC has long been the most popu - lar option for JVs in Taiwan. Nevertheless, establish - ing a closed-end JVC is also widely considered as it provides flexibility, allowing corporate governance arrangements in shareholders’ voting rights, in-kind contributions and simplified shareholder meeting pro - cedures. 2.2 Strategic Drivers for JV Structuring In Taiwan, JV parties typically consider corporate gov - ernance issues as the key factor, among other factors such as controllership, voting rights, restrictions on share transfers and repatriation, when determining the JV structure. For tax-related considerations and incentives, the Statute for Industrial Innovation (SII) provides incen - tives, applicable from 1 January 2025 to 31 Decem - ber 2029, including the following tax benefits among others. • Investment tax credits: Up to 5% of expenditure in areas like smart machinery, 5G, cybersecurity, AI, energy conservation and carbon reduction can be credited against current-year corporate income tax (CIT). Alternatively, 3% of expenditure can be credited over a three-year period. The total credit is capped at 30% of the current year’s CIT plus profit retention tax. • R&D tax credits: Up to 15% of qualified R&D expenses, capped at 30% of tax payable. Small and medium-sized enterprises (SMEs) can choose between – (i) 15% credit for the current year only, and (ii) 10% credit carried forward for two years pursuant to the Act for Development of Small and Medium Enterprises. Additionally, Taiwan has extended tax incentives for start-ups from two to five years and lowered capital thresholds for venture capital participation, and it now allows angel investor benefits for investments starting
from TWD500,000. Companies operating in science parks, export processing zones and free-trade zones may qualify for additional tax benefits. The Ministry of Culture (MOC) has also implement - ed tax benefits and incentive policies specifically to promote cultural and creative industries. These are designed to attract foreign investment and JV activi - ties in Taiwan’s cultural sector. 3. JV Regulation 3.1 Legal Framework and Regulatory Bodies The Ministry of Economic Affairs (MOEA) is the primary regulator, and the Company Act is the main statutory law, for JV companies in Taiwan. If there are foreign investments involved in JV activities, a foreign inves - tor should obtain inbound foreign investment approval (FIA) from the Department of Investment Review of the MOEA (DIR) before making the investment. 3.2 Anti-Money Laundering Compliance The primary AML-related law is the Money Laundering Control Act, and the main regulator is the Department of Justice. If the JV activities occur in the financial sec - tor or other sectors specified in the Money Launder - ing Control Act, the Regulations Governing the Anti- Money Laundering of Financial Institutions will also apply, and such enterprises will be supervised by the Financial Supervisory Commission. For cross-border investments where foreign exchange conversions are involved, the Central Bank will also be involved in AML control. 3.3 Sanctions, National Security and Foreign Investment Controls National Security Considerations and Sanction List Under the Counter-Terrorism Financing Act in Taiwan, the Ministry of Justice has the discretion to put any person or entity considered to be engaging in activi - ties relating to terrorism or intending to cause harm or threat to the public on the terrorist financial sanction list. Entities on the sanction list are prohibited from transferring their properties at will, so will not be able to engage in JV activities as a partner/investor.
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