Branch/subsidiary in Hong Kong or Taiwan?

Question posted by Marine Shah, on behalf of BOP Consulting in EC1M

A research and consulting company, we have started doing business in Taiwan and want to employ a local consultant in Taipei, therefore opening an office. We are aware of the authorisation process in Taiwan. But many people in Taiwan have advised that trading from Hong Kong would be a better option. We have further development opportunities in Hong Kong and Mainland China, therefore there could be a rationale to be based in Hong Kong. But given the local regulations for doing business in Taiwan, I am wondering if we will need to have branch/subsidiary in Taiwan anyway so to support our operations and being able to employ people. I would welcome advice / past experiences, of setting up operations in Taiwan, or operating from Hong Kong / Taiwan in the wider Asia. Thank you

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Peter Curnow-Ford, on behalf of Viatec Associates Ltd in WC1N.

Marine,

Based on my long experience, it may be best to have Hong Kong as a hub, you can easily reach both Taiwan and the mainland using frequent flights and regional airlines to suit your schedule.

Culturally this has been the best way, avoiding any issues of tension between Taiwan and the mainland.

Separately, yes you may well be advised to have a 'rep office' in Taiwan for any local hires but with all invoicing etc coming from HK. Most countries have a 6 month rule, ie if the individual can be seen to be working for a day over 6 months on a consistent basis then they should be treated as a local and also be liable for income tax etc.

For the latter best to get some independent advice from both a local accountant and also the UKTI Taipei office.

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Julia Chang, on behalf of British Trade & Cultural Office in UKTI Taipei.

My name is Julia Chang, Commercial Officer at British Trade & Cultural Office in Taipei, Taiwan, who works for UKTI here. We will be very happy to assist if you considr of establishing an office here.

Here are general websites providing background info about Taiwan business -
- Invest in Taiwan, http://investtaiwan.org/library/main_eng_general.jsp
- British Chamber of Commerce in Taipei, www.bcctaipei.com
- Price Waterhouse, www.pwc.com

Actually, Taiwan has signed the bi-lateral economic agreement with China which allows Taiwanese business to be entitled of tax-free on certains items/sectors, such as texitile, machinery and agricultural foods; this is to say, the economic co-operative framework agreement, ECFA. The Taiwan government is striving hard to be positioned as a spring board of the cross-link trade.

Please contact me at julia.chang@fco.gov.uk, if there is anything else we can help.

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Patrick Li, on behalf of UK Trade & Investment Hong Kong in Hong Kong.

Hi Marine,

Thank you for your interest in the Hong Kong market. Hong Kong offers many benefits to overseas countires wishing to explore the S E Asia and China markets. Further details can be found at http://www.ukti.gov.uk/export/countries/asiapacific/fareast/hongkongsar/doingbusiness.html

In addition, Hong Kong's Closer Economic Partnership Arrangement (CEPA) with China opens up huge opportunities for Hong Kong's goods and services. This covers trade in goods and services. The latter should be applicable for research and consulting services which BOP Consulting specialises in. Full details of CEP can be found at
http://www.tid.gov.hk/english/cepa/

With regards to using Hong Kong as a hub to support your operations in Taiwan, I suspect you will still need to set up a branch there. If you do not wish to do so, one option is to partner with a company there whereby this partner takes care of the employment and other operations. This partnership model works similiar to a distributor / agent agreement in which the partner carries out the necessary research and consulting services on behalf of BOC Consulting and gets a share of the profits.

I hope you will find the above useful.

Best regards,

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Ian McAleese, on behalf of Orbis HR in BD4.

Hi Marine,

I'd be more than happy to talk to you about hiring people overseas. I've had experience of hiring people in a number of countries and Orbis HR assist companies looking to set up employees in countries outside of the UK or already have people in a number of countries.

You need to consider the longer term plans you have for the region to go into the mix of where is the best place and how you might go about it.

Best regards,

Ian

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Marine,

To conduct business in Taiwan, it would be more tax advantageous for a foreign company to set up a branch than a subsidiary in Taiwan for reason that:

- No withholding tax for remittance of profits by a Taiwan Branch to its foreign head office, whereas

- 30% withholding tax shall apply on dividend payment from a Taiwan subsidiary to its foreign parent company (20% if the Taiwan subsidiary qualifies to be a Foreign Investment Approved company).

If BOP Consulting aims to develop business in China, a Hong Kong subsidiary can be used as the bridge between UK and China. This HK subsidiary can take advantage of (a) double tax arrangement between China and HK; (b) low tax rate in Hong Kong if certain activities are not required to be performed in China and can be performed in HK; (c) CEPA, i.e, reduction in entrance barrier into China from HK; (d) it can hold the Taiwan branch at the same time; and (e) it creates a more visible presence to Chinese clients as it will have an office in HK.

Regards,

Erica Xiong
Russell Bedford Hong Kong Limited
ericaxiong@russellbedford.com.hk
Tel : (852) 2851-0260 Ext. 303

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Peter Murray, on behalf of Computersoft in PE14.

We can provided you with Taiwan local supply staff whom are well versed with dealing with overseas business, and speak perfect English they can do service and sales in Taiwan on a pepper corn basis and you paid on results. All legal issues would be handled by a TW company so you would have no issues or worrys.

We run a support desk system at Paladin International Corp. Which is complemented by a UK sales and support, Computersoft Ltd 01945 861815 peter@computersoft.org.uk
The TW address. Is in the Trade Centre, where massive expos and trade shows are held.
RM,3G-15, No.5, Sec.5 Hsinyi Rd.
110 Taipei Taiwan, which is next to the 101 building.

Business can come and go very fast in TW to reduce costs short term max the income so profit over investment is the trick. No need for mass outlay until the volume of business warrants it. Employing staff costs is time consuming hard, expensive and they may not do as required and not achieve the results wanted. I have bitter experience of this.

Try small, outlay little,work smart, with local business whom have a profit incentive for success, be ready to change being flexible, market the products and services your selves remotely ie from UK via emails, fax, telephone calls and using Skype these are free or very cheap. Your companies senior management be prepared to visit and support your local commission only representative even for a short period with a mass of pre booked apts to see the decision makers of prospective clients, as TW people at a high level want to meet you and build trust face to face this is most important. Be ready to jump at business that comes very fast as every thing is fast in TW.

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agree with Pardeep - set up in HK 100% and go from there with a branch in Taiwan. It is quite straightforward and there are formation speciaists in HK advertising locally who know how to do this. I can probably give you name of one we use to manage our companies there. They might assist you in Taiwan.
regards
Jeremy
www.broadbrand.biz
jeremywaller@broadbrand.biz

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