Taiwan BIZ info
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 Posted: Sat Apr 30, 2005 2:05 pm Post subject: DOING BUSINESS IN TAIWAN GUIDE |
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DOING BUSINESS IN TAIWAN GUIDE
Business etiquette
Establishing contacts and networks:
* It is unusual for Taiwan companies to buy anything from someone that they do not know.
* Business introductions are vital and ‘cold calling’ is not the appropriate way to start a business relationship in Taiwan.
* The ‘classmate network’ is a recurring theme of business in Taiwan as the contacts developed at school or university carry over into later careers.
* The quality of your agent or representative’s contacts will often be a more important selling point than the intrinsic marketability of your product.
* It is vital to spend time in Taiwan with your representative to clearly explain the product, effectively negotiate terms of business and develop networks in the market.
Business entertainment:
* Eating and drinking play a major role in doing business in Taiwan.
* Dinners with local representatives and customers help to develop networks and give the local agent ‘face’.
* Toasting at banquets, and after-dinner activities such as karaoke singing, are common business practices.
* When rice wine (shaoshing jiu) is served at a meal, the custom is for individuals to drink only after a toast is made. The glass should be held in the right hand, preferably supported by the left. Returning a toast is standard practice. Common toasts are ‘ganbay’ (empty your glass) and ‘sweiyi’ (as you please).
* Seating should be arranged so that the Australian host’s party is alternated with the Chinese guests. Ensure that guests are invited to eat when each course is served.
* The guest of honour will be expected to make a move to leave the dining table first at the conclusion of the meal.
Negotiations:
* While understanding Taiwan culture is important, do not lose sight of the Australian characteristics of doing business which differentiate you from other foreign competitors and your Chinese customers.
* Focus on transaction details as well as cultural factors.
* Chinese have a reputation for being tough negotiators so it is essential to be well-prepared.
* Research the company’s business, markets, financial status and reputation.
* Understand current economic conditions and government policies in Taiwan.
General:
* Business cards – exchanging business cards is very important in Taiwan, so you should have a large supply at all times as several hundred may be required for a short trip.
* Correspondence – answer enquiries, proposals, correspondence and invitations as soon as possible, and at the very least, send an acknowledgment stating that an answer will follow shortly.
* Punctuality – while traffic conditions in Taipei can cause delays, Chinese place importance on punctuality and you should avoid arriving late at appointments.
* Gifts – the exchange of gifts is widely practiced in business in Taiwan and gift-giving usually occurs at the end of a meeting or during a meal in honour of your guests. Usually only small gifts are necessary but sometimes gifts offered by the Chinese are quite lavish – beware that a special favour may be expected in return.
Forms of address
Many Taiwanese have an English first name used with a Chinese family name, eg. Henry Wang – when this is the case, the family name is used last, as in Australia. Normally when a Chinese name is written, the family name comes first with the given name following, eg. Mr Tang Jie-Fu would be addressed as Mr Tang.
Tariffs/regulations
Import restrictions
Imports may be effected either under the Automatic Approval system or the Covering Licence system. Some applications for Automatic Approval items must be made to authorised banks; other items may be permitted entry without a licence. Applications for Covering Licence items must be made to the Board of Foreign Trade. Licences are valid for six months.
Permitted imports are classified into two categories:
1.Controlled - includes government monopoly controlled items, ie. petroleum; strategic and military supplies; and imported items, which compete with the produce of emerging domestic industries
2. Permissible - all other items
All importers, except those authorised to import on a deferred payment basis, must make a deposit with a foreign exchange bank within 14 days after approval of their import licence. The current rate of deposit is 10 per cent of the CIF value (Incoterms 1990).
Tariff
Two-column tariff based on the Harmonised System. Most duties are ad valorem (per cent), based on the GATT Valuation Code - approximately CIF value (Incoterms 1990). Preference is granted to countries having trade agreements or diplomatic relations with Taiwan.
The Ministry of Finance administers customs regulations and procedures in Taiwan. Goods imported into Taiwan are liable to ad valorem (per cent) duty determined and calculated on the transaction value. Tariff rates vary depending on the product. Specific customs regulations also apply to travellers coming into and out of Taiwan.
Customs authority contact details:
Director General
Directorate General of Customs
13 Ta Cheng Street
Taipei
Tel: (886 2) 2550 5500
Fax: (886 2) 2550 8111
Packing, marking and labelling
*Goods should be securely packed, having due regard to the nature of the goods, means of transport and likely climatic conditions during transit and delivery.
*Outer containers should bear consignee's mark and port mark and should also be numbered (to accord with packing list) unless their contents can be otherwise readily identified.
*Labelling regulations are applied to all kinds of packaged foods and pharmaceuticals. If a foreign language is used in the label prepared by the manufacturer in the country of origin, major ingredients, valid date, manufactured date, product name, weight/size, name and address of the importer is required.
*Cigarettes must indicate the date of manufacture and display a generic health warning.
*Most textile goods are now subject to mandatory labelling requirements; importers should be contacted for specifics.
*Square recycle logos are required to be on recyclable containers, including those which are made from glass, plastic, iron, aluminium, paper, and aluminium foil, imported to Taiwan. For plastic containers, triangle recycle logos should also be shown.
Methods of quoting and payment
*Quotes in US dollars preferred but accepted in any free world currency. Should be by pro-forma invoice, and, if for machinery or engineering products, must enclose a catalogue.
*Payments usually by letter of credit.
*Imports on a collection basis are permitted on documents against payment (D/P) or documents against acceptance (D/A) terms.
Public health requirements
*Food additives, medical instruments, drugs and pharmaceutical products require prior registration with, and approval from, the Department of Health, Executive Yuan.
*Certificate of origin is required to register cosmetics, pharmaceuticals, food additives, agricultural chemicals and some medical instruments.
*Live animals, animal products, plants and plant products require health certificates issued by an approved authority in the country of origin. In Australia this is usually the Australian Quarantine and Inspection Service (AQIS), Commonwealth Department of Agriculture, Fisheries and Forestry-Australia.
*Use of DDT on agricultural crops or as a household pesticide has been banned.
Documentation
Pro-forma invoice
Two copies are required to obtain import licence. See 'Methods of quoting and payment' regarding quotations. The invoice must include:
* a full description of the goods
* including brand name (if any)
* method of packing
* quantity
* unit price
* total cost
* freight
* insurance and other charges
* method of shipment
* date and port of shipment
* port of destination
* terms of payment
* methods of inspection and/or survey
* validity of offer
* name and address of letter of credit beneficiary and any other details as requested by the importer
Must be certified to the effect that the prices stated therein are either net without rebate or inclusive of commission, as the case may be.
Commercial invoice
No prescribed form and a minimum of four copies required. The invoice must include:
* import licence number
* names of seller and buyer
* marks and number on each package
* number of packages
* full description of contents (including gross and net weights)
* quantity
* dimensions
* unit price
* total price (whether FOB, C&F, or CIF (Incoterms 1990))
* commissions
Goods in different licensing categories must be shown separately. Method of shipment, packing, date and port of shipment should also be included.
Certificate of origin
Two copies, when requested. It is a requirement to register pharmaceuticals, cosmetics, medical instruments, food additives and agricultural chemicals (see 'Public health requirements').
Bill of lading
All marks and case numbers appearing on outer containers must be shown on the bill of lading.
Packing list
Two copies required for customs clearance.
Special certificates
* Live animals, animal products, plants and plant products require health certificates issued by an approved authority in the country of origin (see 'Public health requirements') - two copies required.
* Old newspapers require a sanitary certificate - two copies.
* Old jute, feather waste, cotton rags, etc. require a fumigation certificate - two copies.
Labour laws
The Labour Standards Law (LSL)) sets down minimum standards in regard to the terms and conditions for employment. The LSL is applicable to all expatriate employees, including those at the managerial level. The core labour laws administered by the Bureau of Labour Insurance and Labour Insurance Act cover:
Investment
Taiwan places great importance on foreign and overseas Chinese investment and the government provides assistance to foreign nationals investing in Taiwan. Large-scale inward investment is a relatively recent phenomenon and more than 80 per cent of all inward investment has occurred in the last 10 years. The Ministry of Economic Affairs (MOEA) administers Taiwan's macro-economic policy and monitors overall growth targets. Within the Ministry are a number of specialised agencies charged with specific responsibilities for the various aspects of economic planning and implementation.
Investment incentives:
1.Preferential taxes – Taiwan authorities enacted the statute for upgrading industries in 1991 to develop a favourable environment for foreign investors in Taiwan to encourage investment by foreign companies for the purpose of upgrading Taiwan’s industrial base.
2. Non-tax incentives – In order to encourage new product development by private manufacturers with R&D potential, the government may provide a subsidy of up to half of the cost of development and matching funds for the other half.
3.Low-interest loans – To accelerate industrial development and economic growth, a special fund has been set aside by the Development Fund of the Executive Yuan for cooperation with banks in providing various kinds of special low-interest loans.
4.Government participation in investment – To promote investment in high-technology industries, the Development Fund of the Executive Yuan directly invests in high-tech start-ups and in the procurement of new technologies by existing companies.
Investment restrictions
There are now few areas in which foreign investment is prohibited outright or otherwise limited. The Taiwan Government maintains two lists - a ‘negative’ list and a ‘restricted’ list, which detail broad areas where limitations apply. Overt limitations on overseas capital have been reduced substantially in recent times along with measures to internationalise the local economy and Taiwan’s entry to WTO. The Industrial Development and Investment Center (IDIC) website carries extensive information on investment incentives, programs and opportunities.
Setting up an office
The decision to set up a local office in Taiwan will depend on your market entry and maintenance strategy. Setting up a local office in Taiwan requires approval and presentation of documentation to support applications. Generally, there are four main steps in the approval process. You must apply to:
1.the government body controlling the related business sector
2.the Civil Services of DOC, MOEA for reservation of Chinese business name – Tel: (+886 02) 2396 7333 or (+886 2) 2321 2200 #368. Dept. of Commerce, MOEA
3.local government authority for a business operating license
4.the Bureau of Foreign Trade for registration as licensed exporter – Tel: (02) 2351 0271. Board of Foreign Trade. E-mail: boft@trade.gov.tw
The following documents must be provided:
*document certifying the identity and residence of the representative
*Power of Attorney, if the application will be filed by a lawyer or a CPA
*duplicate or photocopies of the documents certifying the establishment of the foreign company in its own country
*Power of Attorney appointing the representative in Taiwan
*Three copies of the registration card
The following procedures must be followed:
*all applications to appoint a representative to do legal acts in Taiwan must be filed according to Article 386 of the Company Law
*all applications should be filed by a board member of the shareholder of the head office actually in charge of management or by its representative in Taiwan or by a proxy of any of the above.
*Chinese translations must be certified in Taiwan.
*the foreign company’s certificate should be authenticated by its own responsible government agencies
The foregoing documents should be authenticated by the appropriate representative of Taiwan in the country where the company is located.
Infrastructure
Infrastructure such as road, rail, harbours and airports are highly developed in Taiwan. Taiwan's rapid economic development over the past two decades has led to a surge in growth in all sectors of infrastructure. Taiwan's well-developed infrastructure and its world-class technology sector, combined with an export-driven economy, make it an ideal location for the development of e-business. The National Infrastructure Initiative outlined by the government sets out its e-business policy, which is to shape Taiwan into an e-commerce hub for the region.
The latest strategy announced by Taiwan detailed in the ICT profile Challenge 2008 National Development Plan further details plans making Taiwan a full e-economy. The Challenge 2008 National Development Plan also has the goal of doubling the number of tourists visiting Taiwan over the next five years.
Government expenditure on infrastructure continues to remain a priority with over A$45 billion in major infrastructure projects under consideration:
*post-quake reconstruction
*development of industrial parks
*public infrastructure programs
*transportation
*environmental preservation
Taiwan’s WTO entry and gradual liberalisation of the infrastructure sector will see more opportunity for Australian companies to enter this market. With some $10 billion in rail projects, including the Taiwan High Speed Rail, the Tainan Light Rail Project and Koashiung MRT Project (both under consideration) there are opportunities for Australian companies in this sector.
In telecommunications (see ICT Profile) changes to foreign investment laws in fixed line, mobile and satellite communications have provided additional opportunities for Australian exporters and the continued development of broad band internet services and the granting of five licences for 3G services have provided opportunities for companies in the provision of data services.
Taxation
Corporate income tax (or ‘profit-seeking enterprise income tax’) is levied by Taiwan on all registered profit-seeking enterprises including companies, sole proprietors, partnerships and other forms of business organisation organised for profit.
Both foreign and locally owned firms operating within Taiwan and which are classed as profit-seeking enterprises are subject to the following tax rates:
1.For taxable incomes up to NT$50 000 no income tax liability is incurred
2.For incomes between NT$50 000–NT$100,000 the tax payable is 15 per cent of total taxable income to a maximum not exceeding 50 per cent of the portion of taxable income in excess of NT$50 000
3.For taxable incomes above NT$100,000 the portion in excess of NT$100,000 is taxed at 25 per cent
Income tax law is complex and there are implications for resident and non-resident tax-payers. You should contact a tax consultant or authority to determine your own particular circumstances.
Finance
Taiwan is in the process of transforming from a manufacturing to a services-based economy. It is national policy to develop Taiwan as an economic hub for the Greater China region. Within this national objective, Taiwan accords a high priority to the establishment of Taiwan as a regional financial center within East Asia.
The three principal agencies regulating the capital and securities markets in Taiwan are:
1.Ministry of Finance (MOF)
2.Securities and Futures Commission
3.Taiwan Stock Exchange
The MOF is the primary regulator of the bond market with the Central Bank of China acting as the issuing agent for all government securities. The Securities and Futures Commission regulates and controls all publicly offered securities and oversees the exchanges.
The long awaited passing of the financial holdings laws in November 2001 have meant that for the first time, cross group mergers in the finance sector are legal. We have seen the merger of a number of major financial groups including Fubon Bank and Taipei Bank to create one of the largest financial institutions in Taiwan. This has spurred considerable interest in financial services, software and systems as efficient financial institutions are seeking new ways to increase their competitiveness and Australian companies are supplying a range of consultancy services, systems and software to Taiwanese institutions.
Marketing
When marketing products and services into Taiwan there are several elements that are common characteristics among companies who are successful exporters. These companies:
*actively support importer and distributor initiatives
*tailor products to customer preferences
*prepare company brochure and product information in Chinese with the traditional long-form characters
*participate in selected major trade exhibitions to get best exposure for their products
*establish strong relationships with local representatives
*utilise media and public relations effectively in promoting and marketing their products and services
*organise seminars and product briefings
*visit the market on a regular basis
*are patient and do not expect results overnight
Samples
*samples of no commercial value admitted duty free
*valuable samples may be temporarily imported under deposit, equal to duty plus taxes, for up to six months, with possible extensions for a further six months if merited
*the main system can be unreliable and so couriers are preferred
Advertising matter
Advertising matter for free distribution, and not useful for any purpose other than advertising, is admitted duty free. Normal duty payable in all other cases.
e-Business
*Taiwan's well-developed infrastructure and its world-class technology sector, combined with an export-driven economy, make it an ideal location for the development of e-business. Total revenues from e-business are expected to jump from US$1.4 billion in 1999 to US$46.6 billion in 2004.
*Taiwan has a highly developed B2B System for its ICT sector and major Taiwanese conglomerates such as China Steel have now well developed e-purchasing platforms.
*TAITRA (Taiwan External Trade Department Council) late last year established a Biz-exchange platform to link more than 20 000 Taiwanese exporters globally.
*Taiwan has an estimated 7.8 million Internet users, with an online penetration rate of 34 per cent.
*Some 44.3 per cent of all businesses in Taiwan are now connected to the internet.
*There are more than 100 officially registered Internet Service Providers (ISPs) in Taiwan..
*The ISPs Seednet, Chunghwa Telecom’s Hinet and Hitron have a combined market share of 75 per cent.
*ADSL Services are now available to 98.9 per cent of all households with more than one million subscribers by end of 2001
*E- Government program will see all Taiwan government services on line by end 2003 with more than 1500 Internet based services in four years.
The establishment of a Government Root Certification Authority (GRCA) in October 2002 has seen more than 400,000 digital subscribers to digital certificate services.
Logistics
As a small island economy, transport and distribution logistics are generally not a concern to Australian exporters and are usually handled by the local importer or distributor. The distribution networks are efficient and competitive. For Australian exporters, the typical distribution steps from their company to a Taiwanese importer would be:
* Australian exporter
* Australian freight forwarder
* Taiwan freight forwarder
* customs broker
* local courier
* Taiwan importer
Road:
* road transport from north to south on the island takes approximately five hours
* from Taipei to Taichung by road is two and a half hours, and Taichung to Kaohsiung two and a half hours
* transportation of containers by road is very convenient and efficient and service providers are easy to find
* cost for container transport start from A$300-A$1300 depending on the destination
* normally shipping companies or the custom brokers have their contracted local transport company in Taiwan
* generally local couriers do not speak English and contact is best handled through the freight forwarder
The three major ports in Taiwan are Keelung Port which is located in Northern Taiwan. Taichung Port, which is located in Central Taiwan and Kaohsiung Port, in the south. You should choose the port that is closest to the final destination or the goods to be delivered.
Business partners
In principle, Chinese do not do business with people or companies they do not know well, so finding a business partner with a good track record and solid networks in your industry sector is essential. The quality of your business agent or representative’s contacts will often be a more important selling point than the marketability of your product. The development of a close working relationship with the local representative is crucial to access local business networks, which are generally closed to foreigners. It is vital to spend time with your representative to clearly explain the product, effectively negotiate the terms of business and develop networks in the market.
It is not difficult for Australians to identify partners. You can source credible business partners from the Taiwan External Trade Development Council (TAITRA), a non-profit seeking government organisation specialised in sourcing potential partners for contact. A list of partners can be easily obtained and is free. Please contact Austrade to assist in further market research to ensure the partners you selected are qualified.
Security
Taiwan is generally a safe place to visit and do business, but there are a few safety precautions to be aware of:
1.avoid quiet streets
2.when visiting busy and crowded places such as night markets, you should pay extra attention to securing handbags and personal belonging to avoid pick pockets
3.use ATMs located inside banks or on a busy street
You should treat your business security interests with the same care and diligence that you do in Australia. Take steps to ensure the protection of your intellectual property rights, such as patent, design and trademark by registering with the Chinese Taipei Intellectual Property Office. Also ensure any business contracts are reviewed and authenticated by a legal consultant to avoid trade disputes.
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