Taiwan Sending Out Mixed Messages To Foreign Businesses

by Mary Swire, Tax-News.com, Hong Kong

30 October 2001

What the Taiwanese government is giving to foreign businesses with one hand, it appears to be taking away with the other, according to recent reports.

The Taipei Times revealed at the weekend that in an effort to crack down on tax evasion, the government is considering imposing an additional 20% tax on the net income of branches of foreign companies established in the area, bringing the total tax rate on such entities up to 40%, in line with local companies and subsidiaries of foreign businesses.

According to the report, the country's Minister of Finance, Yen Ching-chang, is concerned that the current discrepancy encourages local organisations to establish shell companies abroad and branches in Taiwan, in order to take advantage of the lower tax. Experts fear that any move to increase taxation levels may harm the country's chances of attracting foreign business and investment.

However, it was also announced at the weekend that the government is considering offering a 5 year tax break to multinationals choosing to establish headquarters in the region. Local media reports have revealed that in order to be eligible, companies must have offices in Asia, Europe, and America, they must employ a minimum of 500 staff, and they will need to register annual revenues of at least US$145 million (NT$5 billion).

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