Taiwan Market Entry

Taiwan Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Taiwan is a relatively small but highly competitive market – a small geographic area with a relatively high population density compared to other Asia-Pacific markets helps create a highly competitive market. A good relationship with a local partner and a reliable business network – “networking” is an important part of business. It is recommended to find a local partner or manager in a senior position at the very beginning of the business, who will maintain or develop business relationships/networks.

Foreign companies, especially small and medium-sized enterprises, generally rely on agents to mediate the sale of goods to distributors. The most common form of distribution of goods from the supplier to the end customer in Taiwan is as follows: supplier -› distributor -› retailer -› seller – › consumer. Some suppliers distribute goods through resellers, but so-called multi-level marketing is a very common practice in Taiwan. Check smber for agriculture and fishing facts of Taiwan.

Before entering the Taiwanese market, most foreign companies use the services of a local representative or agent. Even Taiwanese companies in most cases prefer dealing/partnering with a local agent. However, if the situation requires it, it is also possible to consider setting up a branch or subsidiary in Taiwan. Taiwan welcomes foreign investment and despite some bureaucratic procedures, setting up an office in Taiwan is relatively easy.

Companies should also consider online sales, i.e. sales via e-commerce platforms. Online and television (B2C) shopping is very popular in Taiwan. The most frequent customers are people aged 20-39. The most used platforms by small businesses are PChome, Yahoo! Kimo, Momo, and Raku. Customers, on the other hand, use the Shopee platform the most. In recent years, the field of Taiwanese e-commerce has been growing rapidly. Among the best-selling categories are consumer electronics or clothing and footwear, but also, for example, household goods or cosmetics, etc. With ever-increasing demand, it is expected that online platforms will soon surpass sales in physical retail stores. The growing demand for purchases via e-commerce is also related to the legislation, which is continuously updated and modified. The Law on Electronic Signatures, which is based on UN standards, recognizes electronic signatures of certification bodies. The Consumer Protection Act allows consumers to return goods within 7 days of purchase. In 2015, a law was approved detailing online payment procedures. As for the financial sector in the field of e-commerce, it is still much more conservative in Taiwan (compared to other markets).

Forms and conditions of operation on the market

It is possible to establish any of the following business units in Taiwan:

  • joint stock company
  • limited liability company
  • branch of the company
  • representative office

The majority of foreign entrepreneurs or companies entering the Taiwanese market prefer to establish a company in the form of an s.r.o. Joint-stock company is established if you plan to have a larger volume of financial resources or sell off the company’s shares. A branch company is another option for starting a business in Taiwan. Entities registered as companies (according to foreign legislation) should first apply for recognition of the status of a foreign company and only then establish a branch at the Central Region Office – Ministry of Economy. A representative office is established mostly when foreign companies are not willing to establish new companies or branches in Taiwan, but are nevertheless interested in appointing someone to represent them. You can find more information about the procedure for establishing the types of companies described above on the websiteStartup/SMEs and the necessary forms can be downloaded from the Commerce Industrial Services portal.

The decision on what type of company to establish should be made taking into account the scope of planned activities and the anticipated type of business, as well as after evaluating the legal and tax implications of the investment. Legal and accounting firms operating in Taiwan can be helpful in determining the best choice for an investment project. In this context, it is appropriate to emphasize that joint ventures are not legal entities formed in Taiwan as a jointly owned firm for the purpose of carrying on the business of the joint venture. Last but not least, the 20% tax liability for legal entities in Taiwan enters from the amount of profit above NTD 120,001. You can register your company via the online portal, including, for example, checking the availability of your company’s name.

Marketing and communication

Without massive marketing and advertising, it is impossible to succeed in the conditions of fierce competition in the Taiwanese market. The consumer is literally bombarded with advertising at every step, and therefore a company that wants to make its product known to customers must not spare the resources for these purposes. Considering that consumers do not have the necessary identification and differentiation ability towards Czech products and are at the same time overwhelmed by all kinds of advertising, it is necessary to support market entry with a significant marketing campaign. When preparing a marketing campaign, it is most necessary to establish cooperation with a specialized local agency that is familiar with the mentality of the Taiwanese population and the local media market. Even though a local partner/agent can give you good advice on where and how to advertise,

Below is a list of Taiwan’s top business-focused newspapers/magazines:

  • Commercial Times news.chinatimes.com
  • Economic Daily News www.udngroup.com
  • Business Weekly www.businessweekly.com.tw
  • Commonwealth english.cw.com.tw
  • Management Magazine www.managementmagazine.com.tw
  • Director of Taiwan www.taiwannews.com.tw

Issues of intellectual property protection

Rapid industrial development in recent years has brought an unprecedented increase in patent and trademark applications, which are approved and certified by the Taiwan Intellectual Property Office (TIPO) under the Ministry of Economy. Protecting intellectual property rights is the number one issue for Taiwan’s industry, which is based on knowledge and intellectual wealth. Industry there has become the most important driving force of the island’s economy since traditional manufacturing industries moved to other countries when they were no longer competitive. The problem of protecting intellectual property rights has thus moved from the manufacturing sphere to the intellectual sphere, including issues of patenting, copyright and semiconductor design. Unlike in the past, more and more Taiwanese products are becoming the target of piracy. The Taiwanese administration attaches great importance to IPR due to the country’s long-term economic and cultural development, and therefore also spends considerable resources on a media campaign that informs the public about the importance of IPR protection. To help professionals in the field of intellectual property protection, among other things, a specialized training institution, the so-called Taiwan Intellectual Property Training Academy (TIPA), was established in Taiwan. From the point of view of its specific position, Taiwan is not a member of the World Intellectual Property Organization (WIPO), but it has joined the WTO, TRIPS (WTO Agreement on Trade Related Aspects of Intellectual Property Rights), IPEG and at the same time signed a number of bilateral contractual agreements (e.g. with the Czech Republic – Memorandum of understanding on cooperation between TIPO and ÚPV CR).

Public procurement market

In 2009, Taiwan acceded to the World Trade Organization (WTO) Agreement on Government Procurement (GPA). The Public Construction Commission (PCC) is responsible for the implementation of the GPA, i.e. overseeing the awarding of public contracts, handling disputes, assessing the qualifications of bidders and awarding contracts. Although the provisions of Taiwan’s GPA are periodically modified, there is a general perception in the international business community that, despite the country’s WTO commitments, they do not always conform to internationally recognized standards. The most common problem is the language mutation of the assigned order, which is often only in Chinese.

The number of foreign participants in public contracts has been on the rise in recent years. The largest contracts in the last three years were intended for power plants, railways, ports or pharmacies. Current public contracts can be searched on the Government Procurement System website. General information on public procurement in Taiwan can also be found on these pages. The Public Construction Commission (PCC) is in charge of supervising public contracts.

According to the Taiwan GPA, the documentation for the Request For Quotation (RFQ) or Invitation to Bid (ITB) must be publicly available. The ITB containing the tender notice, technical requirements, drawings, bill of quantities and contract proposal can also be downloaded from the PCC website in Chinese. This public review mechanism allows comments from any interested entity regarding project modification, specification of conditions and technical parameters, omitted circumstances and other aspects of the ITB content. The goal of this procedure is to allow comments and modifications to the project that the customer deems appropriate to avoid unnecessary disputes at a later stage of the project. After that, the selection procedure is officially announced. According to the GPA Act, the procedure must last at least 14 days. The investor can define which of his needs can be satisfied by domestic or foreign supplies of goods or services. In the case of more complex projects, the customer can choose a selective selection method, in which a shortlist of at least three potential applicants is drawn up in the first round. Only those companies that pass the first round can continue. If less than 3 companies participate in the first round, the investor organization is obliged to cancel this tender and call for a new one. In the case of renewed proceedings, the deadline for accepting proposals is at least 10 days. In this case, the number of applicants is not limited in any way and may even be lower than 3. If it happens that not a single applicant for the project is found, the client can use a shortened selection procedure. In such a case, he is not obliged to publicly announce a tender and can negotiate directly with one or two suppliers for the implementation of the contract. The most common practice is to award contracts to the proposals with the lowest price. When it comes to contracts for engineering services or turnkey supplies, they are often awarded to the companies that present the “cheapest” option. In the case of this scenario, an evaluation committee is appointed to determine the selection criteria. Successful applicants must submit a proposal that specifies in detail how to secure the project and are usually invited to make a presentation. According to the established criteria, the evaluation committee assigns a score to the individual proposals, on the basis of which it decides to whom the contract will be awarded.

Payment terms, payment ethics and resolution of commercial disputes

Taiwan has no specific risks within its market. The problems are comparable to developed world economies. As in most developed countries of the world, commercial disputes are resolved through courts or arbitration. Before concluding business contracts, it is a good idea to define the jurisdiction of the courts in case of disputes, if this does not contradict the nature of the contractual relationship, from which the jurisdiction of the legal system would result otherwise.

Payment morale in the country is generally good, and in the current stable economic conditions, serious problems of unwillingness to pay are not generally known. However, it cannot be ruled out that the exporter will come into confrontation with Asian cultural specifics during collection. When making deliveries of machinery and equipment, it is customary to require an advance payment. When importing to the Czech Republic, it is recommended to provide advance payments only after consultation with the bank.

At the beginning of establishing business cooperation, documentary payments are used, especially an irrevocable and confirmed documentary letter of credit (L/C – Letter of Credit). Later, less secure payment instruments, such as documentary collection (D/P – Documents against Payment), can be accepted with verified and provably solvent partners. It is not recommended to approach the payment with a promissory note that has a later maturity date.

There are no overdue receivables from Czech companies. Taiwan belongs to countries with a low credit risk and a high rating. Nevertheless, it is still prudent to choose good securing of receivables and payments with suitable payment instruments, e.g. in the form of irrevocable documentary letters of credit, bank guarantees of renowned banking houses, etc.

Visas, fees, specific conditions for traveling to the territory

There is an agreement between the European Union and Taiwan on a visa-free stay not exceeding 90 days. For a tourist (non-earning) stay in Taiwan not exceeding 90 days, a citizen of the Czech Republic presents a passport of the Czech Republic upon entry, which is valid for at least 6 months after entering the territory. As a result of the global covid-19 pandemic, there are strict restrictions on entry to Taiwan, please inquire about current entry conditions at the Taipei Economic and Cultural Office in Prague. Here you can also apply for a visa for a purpose of stay other than tourism (student, work, business, etc.).

More detailed information on entry can be found on the website of the Department of Foreign Affairs of Taiwan – Consular Department. For the importation of animals and plants to Taiwan, please consult the website of the Taipei International Airport or the Bureau of Animal and Plant Health Inspection and Quarantine. In case of import/export of other products, information can be found on the website of the Taiwan Customs Office. There are no places with an increased security risk for foreigners on the territory of Taiwan. The main risk, often underestimated by tourists, is the typhoons that come in the summer and autumn seasons. We therefore recommend following weather forecasts and respecting the instructions of local authorities in the event of an approaching typhoon. You can follow the current information about typhoons on the website of the Central Weather Bureau. On the CWB website, you can also find instructions on what to do in case of an earthquake, which is also quite common in Taiwan.

Employment of citizens from the Czech Republic

Employment of foreigners in Taiwan is quite common, with regulatory measures falling within the competence of individual administrative bodies. Before deciding on a job in Taiwan, we recommend checking the current requirements on the websites of these institutions:

Workforce Development Agency www.wda.gov.tw/en/Default.aspx

Bureau of Consular Affairs www.boca.gov.tw/mp-1.html

National Immigration Agency www.immigration.gov.tw/5475

Department of Labor (Taipei) english.bola.gov.taipei/

The fact that an entrepreneur is the sole owner of a business does not in itself establish a foreigner’s right to work and stay in Taiwan. This is the result of a procedure that evaluates the extent of the investment and the immigration status of the alien.

A working holiday program for young people between the Czech Republic and Taiwan was also launched in 2016. To apply for the relevant visa, contact the Taipei Economic and Cultural Office in Prague. The annual quota under this program is 100 applicants.

The basic minimum wage rate is set at NTD 168/hour or NTD 25,250/month.

Fairs and events

Due to the covid-19 pandemic, most fairs have been cancelled, postponed or will take place online. The current overview of international exhibitions and fairs can be found on the specialized website of the Taiwanese export promotion agency TAITRA.

 

Practical telephone numbers (emergency services, police, firemen, information lines, etc.)

In case of emergency, the following phone numbers can be used:

  • 110 – police
  • police – 24/7 service in English: tel. 2556 6007, fax 2555 4275
  • 119 – firefighters and medical emergency services
  • 106 – help for communication in English
  • line for tourists – 2717 3737 or 08000 11765
  • 1990 hotline line for foreigners

Important web links and contacts

All information about taxes and the tax system in Taiwan can be found on the website of the tax office or on the Invest in Taiwan website.

For information about the business partner, you can visit the simplified database in English on the website of the Office for Foreign Trade.

A detailed company database similar to the Czech commercial register can be found only in Chinese, on the website of the Ministry of Economy in the Business and Industry Inquiry Services chapter.

Assistance in searching (screening) a suitable business partner can be requested on the TaiwanTrade website.

On the business.com.tw.tw portal, you can search for the relevant business partner (manufacturer) according to industry specialization.

Current product catalogs can also be downloaded from the Taiwan Trade website.

An up-to-date list of the most important international trade fairs in Taiwan is available here.

Additional important information regarding doing business in Taiwan can be found on the websites of the following institutions: Bureau of Foreign Trade (BOFT) – Office for Foreign Trade. Business policy incl. drafting and implementing legal regulations with the aim of creating a favorable environment for the development of foreign trade, participating in international trade organizations and strengthening bilateral trade relations; negotiation, consultation or resolution of commercial disputes; negotiating free trade agreements; administration of the import/export regime; promotion of foreign trade and development of foreign markets; supervision and coordination of MOEA offices abroad; business advisory services.

Taiwan External Trade Development Council (TAITRA) – The Taiwan External Trade Development Council coordinates with other government agencies and other chambers of industry to provide assistance to exporting firms and support foreign trade. TAITRA provides information, analysis, consultation, promotion and mediation services to Taiwanese and foreign companies

Small and Medium Enterprise Administration (SMEA) – Administration of small and medium enterprises. Formulation of relevant legal regulations for the support and development of small and medium-sized enterprises; providing advice in areas related to the development of small and medium-sized enterprises and carrying out inspections of small and medium-sized enterprises; providing assistance to small and medium-sized enterprises with the aim of improving their technological production, incl. training etc.

Bureau of Animal and Plant Health Inspectionand Quarantine (BAPHIQ) – Inspection of animal and plant products.

Invest in Taiwan – Provides services to existing and potential investors: investment plan evaluation and advisory services; provision of the so-called “one-stop” service incl. assistance in recruiting workers; identification of a suitable location for foreign investment, cooperation and coordination with central and regional government agencies in solving problems; providing information to investors and other services related to investing in Taiwan.

Customs Administration – Customs Administration.

Taiwan Market Entry