Supply Chains: Taiwan
Taiwan is a top destination for supply chains and higher value-added manufacturing, including electronics and semiconductors. The Taiwanese government actively promotes foreign direct investment (FDI) with investment-friendly policies; as a result, the economy continues to be a draw for foreign investors. In 2020, it received US$8.8 billion of inbound FDI versus US$2.4 billion five years earlier, an increase of 267 percent. In 2020, Taiwan’s real GDP grew by 3.1 percent despite COVID-19 headwinds, making it one of the few economies in the Asia-Pacific region to register positive economic growth.
Taiwan’s economic sophistication attracts many investors, particularly technology firms looking to take advantage of Taiwan’s infrastructure, large industrial base, advanced research and development (R&D) and highly skilled labor force. Conversely, already high levels of investment somewhat limit further growth opportunities given limited land availability. Due to Taiwan’s leading global position in the manufacturing of advanced technologies and its strong R&D capacity, the economy currently ranks 2 out of 146 in economic complexity.
In recent years, Taiwan’s foreign investment policies have focused largely on maintaining its tech leadership. To facilitate this aim, in 2019, the Taiwanese government launched an initiative to re-shore some firms operating in China and has centralized services for inbound investment under the Invest Taiwan initiative. In recent years, top sources of inbound FDI have included the Netherlands, the United States, and Japan.
Recent Investment/Supply Chain Policies
On July 24, 2019, President Tsai Ing-wen promulgated the Management, Utilization, and Taxation of Repatriated Offshore Funds Act, which was put into effect by executive decree on August 15, 2019. The act aims to boost Taiwan’s “economic development under international standards” by incentivizing individuals and enterprises to “repatriate” offshore funds and investment income. More specifically, the act provides preferential tax rates of 8 percent to 10 percent for firms and individuals repatriating offshore funds within two years of the act’s date of enforcement.
On July 24, 2019, President Tsai Ing-wen promulgated the amended Statute for Industrial Innovation, which extends a wide range of tax incentives for ten additional years.
On January 1, 2019, the Executive Yuan implemented the Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan, which is a three-year (2019–2021) program that incentivizes companies to re-shore production back to Taiwan. The plan offers tax regulation consultation support services and establishes a designated task force.
On June 18, 2021, the Legislative Yuan approved draft amendments to the Act for the Recruitment and Employment of Foreign Professionals (2018). According to a government press release, the amendments will further “relax regulations on work, residence, and dependency, and [optimize] social protection without reducing the salary threshold.” The scope of foreign professionals eligible for benefits has been widened and the tax concession period has been extended from three to five years, among other measures.
On January 1, 2019, the Executive Yuan implemented the Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan, which includes incentives, such as the lowering of foreign worker caps for Taiwanese companies looking to establish new factories or expand existing ones in Taiwan. The plan also provides employers with subsidies to support their local recruitment efforts.
On February 8, 2018, the Act for the Recruitment and Employment of Foreign Professionals formally came into effect. The act aims to “make Taiwan a hub for international capital, talent and digital technology” by relaxing regulations for foreign professionals regarding visas, employment, and residency requirements and optimizing “welfare safeguards” such as insurance and retirement.
SPECIAL ECONOMIC ZONES
- On February 28, 2021, the Executive Yuan announced that it will spend NT$11 billion (US$394 million) over five years to develop a 5G Artificial Intelligence of Things Park in Kaohsiung. The Kaohsiung City Government will partner with five federal government ministries and agencies, including the Ministry of Economic Affairs, Ministry of Transportation and Communications, and National Development Council.
- On January 1, 2019, the Executive Yuan implemented the Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan, which includes incentives for companies looking to re-shore. These incentives include “rent-free benefits for the first two years after a company sets up operations in industrial zones.” The plan also looks to expand Taiwan’s industrial park through government subsidies.
- On April 23, 2021, the Ministry of Economic Affairs announced amendments to Regulations Governing Company Registration. Under the amended regulations, procedures for transforming foreign company Representative Offices into Branch Offices have been simplified.
Information and Communication Technology
- On June 26, 2019, President Tsai Ing-wen promulgated the Telecommunications Management Act, which seeks to “ensure the sound development of the telecommunications industry” and “facilitate fair market competition and telecommunications infrastructure” by significantly liberalizing the telecommunications regulatory regime.
- On July 29, 2020, the Ministry of Economic Affairs announced the Pioneers for Innovation Leadership on Technology Program to make Taiwan a “high-tech hub” by “nurturing emerging technology industries through R&D collaboration with foreign companies” –– ultimately aiming to attract US$1.34 billion worth of R&D investment by foreign tech companies. According to government officials, Taiwan will emphasize “research by foreign tech firms in Taiwan, co-innovation between Taiwanese and international companies, and development of value-added applications and services by Taiwanese firms.”
- On May 10, 2019, the Executive Yuan implemented an Action Plan for 5G Technology. According to a government press release, the government will spend NT$20.5 billion (US$657.9 million) over four years to “build Taiwan into a suitable environment conducive to innovative uses of 5G.” One pillar of the plan is to "adjust laws and regulations to create an environment beneficial to the development of 5G.”