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Supply Chains: Taiwan

Investment Climate

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 2021, Taiwan received US$5.4 billion of inbound FDI versus US$9.6 billion five years earlier, a decrease of 43 percent, and real GDP grew by 6.2 percent.

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. Recently, top sources of inbound FDI have included the Netherlands, the United States, and Japan.


Key Data Points

 
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Recent Investment/Supply Chain Policies

National
Subnational

Economy-Wide Policies

TAX INCENTIVES

National
  • On December 23, 2020, the Ministry of Economic Affairs extended the “Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan.” The Action Plan was initiated on January 1, 2019, by the Executive Yuan as 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. The new extension is also for three years, and will expire at the end of 2024.

  • 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.

SUBSIDIES

National
  • On July 8, 2021, President of the Executive Yuan Su Zhenchang announced the decision to increase loans for the “Staying in Taiwan” and “Small and Medium-sized Enterprises Accelerated Investment Action Plan” to a total of 150 billion yuan (US$5.4 billion), and to subsidize bank handling fees of those enterprises that have “deep roots in Taiwan” and large enterprises and suppliers who have “strong interest in investing in areas that are key to Taiwan’s industrial development strategy.”

LABOR REFORM

National
  • 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.

SPECIAL ECONOMIC ZONES

National
  • On December 6, 2021, the Asia Bay Innovative Park and the 5G AIoT Innovative Park Project Office were officially launched in Southern Taiwan, which, according to InvestTaiwan, will connect global talents, capital, technology and markets and mark the beginning of Kaohsiung’s digital transformation process.

  • On July 6, 2021, during the Yawan Asia New Bay-Area Guidance Meeting, the Minister of Economic Affairs Wang Meihua listed the ministry’s plans to promote the development of the Yawan Innovation Park. The ministry will introduce “international accelerators” to facilitate investment in its artificial intelligence of things (AIoT) industry by overseas startups. The aim is to “create a startup-friendly ecosystem that attracts foreign enterprises and investment” through regional collective efforts.

  • On July 2, 2021, the Export Processing Zone Management Office of the Ministry of Economic Affairs announced the Kaohsiung Software Park’s Second Park Development Plan, which aims to create a 5G artificial intelligence of things (AIoT) industrial cluster in southern Taiwan. Domestic and foreign investors can “apply individually or jointly with other qualified investors.”

  • 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.

ADMINISTRATIVE BARRIERS

National
  • On April 15, 2022, the Legislative Yuan approved draft amendments to the Copyright Act, the Trademark Act, and the Patent Act. These reforms bring Taiwan in compliance with the provisions contained within the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). The reforms raise the penalties for copyright and trademark infringement while clarifying the process for patent disputes in the pharmaceutical sector. 

  • In January 2022, the Taiwan Fair Trade Commission (TFTC) announced amendments to the merger and acquisition process for both domestic and foreign companies. The new guidelines streamline the merger process by shortening the review process for mergers that do not have “significant domestic effects.” This should create a more predictable merger processes with fewer necessary reviews. 

  • On July 7, 2021, the Executive Yuan approved the National Development Council’s draft amendments to the Act for the Recruitment and Employment of Foreign Professionals, to “enhance the recruitment and employment of foreign professionals.” The new law, which took effect on October 25, 2021, provides the following benefits for qualified foreign professionals: (1) shortening of residency requirements for foreign professionals to be eligible for permanent residency from five to three years, (2) extension of tax breaks for foreign professionals from three to five years, and (3) waiving of the six-month waiting period for foreign professionals and their dependents to qualify for National Health Insurance.
     
  • 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

ADMINISTRATIVE BARRIERS

National
  • 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. 

OTHER

National
  • 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.” 

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