Taiwan’s Executive Yuan has approved draft bills to amend the Statute for Investment by Foreign Nationals and the Statute for Investment by Overseas Chinese in an effort to simplify Taiwan’s foreign investment approval process. If passed into law by the Legislative Yuan, it is expected that 85% of foreign investment in Taiwan would be subject to post-investment reporting rather than pre-investment approval. The draft bills simplify review procedures, shorten the review process, and strengthen regulation of foreign investment.

Review Procedure Simplification

Under the draft bills, investments would require pre-approval or post-investment reporting depending on the nature of the investment. Investments that would require pre-approval include:

1. Investments above a certain amount or level of shareholding
2. Industries in which investment is restricted by law
3. The investor is a foreign government, government-related entity, or from a jurisdiction under sanctions.

It is expected that investments over US$1 million would require pre-approval. The level of shareholding that would require pre-approval is still under review.

Restricted industries include broadcasting, power transmission and distribution, and telecommunications. The complete list may be found in the Negative List for Investment by Overseas Chinese and Foreign Nationals last revised in February 2018.

Examples of sanctioned jurisdictions include Cuba, Iran, and North Korea.

All other types of investment would be subject to post-investment reporting.

Shortened Review Process

The draft bills would also tighten deadlines for regulatory approval. The Ministry of Economic Affairs would be required to notify investors within five days if application documents are incomplete. After accepting an application, the Ministry would have one month to rule on the application unless other agencies need to be consulted. If other agencies are involved, the deadline for a decision would be two months.

Strengthened Foreign Investment Regulation

The bills would also strengthen the regulator’s post-investment regulatory powers. If irregularities requiring review are discovered in an investment following reporting of the investment, the regulator could order the investor to apply for approval. The investor could also be ordered to withdraw the investment if it is discovered that the investment affects national security. Currently the regulator’s powers are limited to ordering withdrawal of the investment or cancellation of the right to settle foreign exchange.

Registered foreign investors in listed securities would be subject to new fines of NT$240,000 (c. US$7,660) to NT$4.8 million (c. US$153,000) for violations of the Taiwan Financial Supervisory Commission’s securities regulations. Failure to remedy such violations could lead to suspension of investments in securities by the foreign investor for up to one year or revocation of the investor’s registration.

Failure to apply for equity investment approval when required would be subject to fines of NT$120,000 (c. US$3,800) to NT$600,000 (c.US$19,000) while failure to report an investment would be subject to fines of NT$60,000 (c. US$1,900) to NT$300,000 (c. US$9,600). Orders to rectify, suspending shareholder rights, and to stop or withdraw the investment could also apply.

The draft bills also would expand the definition of an investor to include foreign funds and partnerships. Currently investors include only natural and legal persons. The definition of investment would also be expanded to include agreements giving control over domestic sole proprietorships, partnerships, and companies as well as acquisition of domestic sole proprietorships, partnerships, or companies.

The Legislature is expected to review these bills during its 2019 fall session at the latest.

For more information on investing in Taiwan, please contact Christine Chen at cchen@winklerpartners.com.