Fuelling China-Taiwan investment

This article is from the Outbound - Taiwan chapter of the 2015 Annual Review and is available for download here.


Daniel Lee of Jingtian & Gongcheng highlights the biggest cross-strait deals and provides an overview of investing in Taiwan, from dispute resolution and IP protection to tax incentives and the competition environment

1. What are the main regulatory developments in Taiwan over the past 12 months that affect cross-strait investment?

On December 27 2013, the Executive Yuan of Taiwan submitted the draft of the Special Regulations for Free Economic Pilot Zones (Regulations) to the Legislative Yuan, which has yet to pass its review/deliberation.

The second paragraph of Article 8 of the Measures Governing Investment Permit to the People of Mainland Area was originally for the purpose of complementing the first phase promotion plan for free economic pilot zones, intending, subject to national security, to study relaxing restrictions on investment by mainland investors, with the restrictions on investment in manufacturing by mainland investors in the pilot zones to be comparable to those on investment by foreigners, while those on investment in the service industry are comparable to WTO treatment. However, as the Legislative Yuan has yet to pass the Cross-Strait Service Trade Agreement, and the legislative work on the Regulations has yet to be completed, the Legislative Yuan resolved to delete it on March 13 2015.

2. What are the most significant recent China-Taiwan deals that reflect investment trends?

The major investment cases involving mainland investors approved by the Investment Commission in 2014 include the Bank of China's capital increase of US$59.93 million of its Taiwan branch, an investment of US$44.36 million by Nice Zhejiang Investment in Magic Amah Household (Taiwan) and an investment of US$43.99 million by the BVI Colourful Group in Yicheng International Development. Additionally, in March 2015, it approved an investment of NT$100 million by Xiamen Jinyuan Investment Group to establish Jinyuan Industrial.

The major investments in mainland China by Taiwan in 2014 include the investment of US$711 million by United Microelectronics Corporation in Lianxin Integrated Circuit Manufacturing (Xiamen), capital increases of US$300 million each in Futaihua Precision Electronics (Jiyuan) and Hongfujin Precision Electronics (Chengdu) by Hon Hai Precision Industry and the investment of US$264 million by USI Corporation and six other companies in Gulei Lianhe Petrochemical.

3. Are final judgments from mainland courts and awards from Chinese arbitration centres readily enforced in Taiwan? What challenges remain in enforcement?

Article 74 of the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, which specifies that, “To the extent that a final civil ruling or judgment, or arbitral award rendered in mainland China is not contrary to the public order or good morals of Taiwan, an application may be filed with a court for a ruling to recognise it”, recognises the application of the relatively simple non-trial procedure.

It is the Supreme Court's view that the foregoing provision is “based on the special relationship between the two sides of the Taiwan Strait. For the purposes of resolving actual issues, a non-trial procedure is specially used to render rulings recognising final civil rulings/judgments and civil arbitration awards rendered in mainland China and solely determining whether their content is enforceable, without bestowing substantive determining force. The legislators made the foregoing provision on the basis of the differences between the civil procedure systems and arbitration regimes of the two sides of the Taiwan Strait for the purpose of safeguarding Taiwan's legal system while also giving due consideration to the rights and interests of parties (see the legislative reasons for the Article), without requiring further citing of the provisions and legal principles on the validity of final foreign civil rulings/judgments and foreign arbitration awards of the Code of Civil Procedure and the Arbitration Act. Once a civil ruling/judgment or arbitration award rendered in mainland China is recognised by a court ruling of the Republic of China, it achieves res judicata”. (Supreme Court Year 104 Tai Shang Zi No. 33)

In short, once a final judgment or arbitration award from China is recognised by a court of Taiwan, it is enforceable but does not have res judicata.

4. How has Taiwan's IP protection regime changed over the past year? What are some landmark cases foreign investors should be aware of?

The bill to amend the Copyright Act passed the third reading on January 7 2014. The key points of the amendments are as follows:

(i) central and local government agencies, non-profit organisations and associations and lawfully established schools at every level are required to produce accessible versions for use on a non-profit basis by the visually and hearing impaired and, for the purpose of producing such accessible versions, they may circumvent or crack the technical protection measures taken by the copyright holders; in addition to being circulated or distributed among the above mentioned agencies, associations, schools and the visually and hearing impaired, they may be imported from abroad exclusively for use by the visually and hearing impaired;

(ii) fair use standards: “(1) objective and nature of the use, including whether the same is for commercial purposes or non-profit educational purposes; (2) nature of the work; (3) the substantiality of the use and the percentage of the entire work for which it accounts; (4) the impact of the use on the potential market for the work and its current value”;

(iii) the revision of the word “copy” in a provision to read “copy of a work legally reproduced abroad” clarifies that the intent of the Article in question is to regulate the ban on the parallel import of “genuine items”.

The bill to amend the Patent Act passed the third reading on January 3 2014. The key points of the amendments are as follows:

(i) detention procedure: the applicant is required to give Customs a written explanation of the facts of the infringement and provide security;

(ii) repeal of detention: if, after an application for detention, the applicant fails to institute a legal action for infringement, the accusation of infringement is dismissed at trial, the applicant cancels the detention at its own initiative or the owner of the detained articles provides counter security, Customs will repeal the detention; and

(iii) damages: if the court rules that there was no infringement, the party who instituted the legal action will be liable for compensation to the owner of the detained articles for the damage incurred by it as result of the detention.

The Trade Secrets Act was amended on January 30 2013 (see question 5).

The bill to amend the Fair Trade Act passed the third reading of the Legislative Yuan on January 22 2015 (see question 10).

One major trademark litigation in Taiwan was the Ferrero Rocher case. Ferrero SpA, arguing that the trademark “ROSHEN” of Roshen Confectionery Corporation approved in October 2011 was similar to its series of trademarks “ROCHER”, “FERRERO ROCHER”, etc., filed an opposition with the Intellectual Property Office, which ruled the opposition untenable. The opponent instituted an administrative action.

The Intellectual Property Court held that there was a difference in the layout of the foreign letters, the pronunciation and the devices, each giving consumers a different impression, their similarity being weak and not causing confusion among, or misidentification by, consumers. Accordingly, it rendered a judgment finding for the Intellectual Property Office.

5. Trade secret misappropriation is a big problem in the region. How can Chinese investors better protect their trade secrets in Taiwan?

In terms of civil liability, if a party illegally infringes another's trade secrets deliberately or negligently, he is liable for damages. If more than one person jointly illegally commit infringement, they are jointly and severally liable for damages.

The provisions on criminal liability for infringement of trade secrets are as follows:

(a) if a party seeks to obtain illegal benefits for himself or a third party, or prejudices the interests of the trade secret owner, he will be sentenced to up to five years in prison or penal servitude, and may be fined not less than NT$1 million and not more than NT$10 million;

(b) if he seeks to use the trade secrets in a foreign country, mainland China, Hong Kong or Macau, he will be subjected to a heavier penalty, and trial without complaint will apply;

(c) if the representative of a legal person, the agent of a legal person or natural person, an employee or another member of staff violates the Trade Secrets Act in carrying out business, the author of the act will be criminally liable and the legal person or natural person will also be subject to a fine. However, an exception will be made if the representative of the legal person or the natural person used his best efforts to prevent the commission of the criminal offence.

6. What industries are on Taiwan's negative list? What are some foreign ownership restrictions to note?

On the negative list, 10 industries fall into the prohibited category (including but not limited to chemical materials manufacturing, chemical products manufacturing, basic metals manufacturing, machinery and equipment manufacturing, and the road transport industry), and 16 fall into the restricted category (including but not limited to agriculture, animal husbandry, tobacco manufacturing, chemical materials manufacturing, and the electricity and gas supply industry).

In the case that a company in a third country is invested in by a person, legal person, association or other organisation from mainland China and the mainland investor directly or indirectly holds more than 30% of the shares of, or total capital contribution to, the third country company; or exercises control over the company, the company in the third country is nonetheless deemed mainland invested.

7. Does Taiwan have any tax incentives in place to attract Chinese or foreign investment?

A foreign for-profit enterprise or a branch thereof established in Taiwan that itself establishes or engages a free trade port enterprise to engage in the storage or simple processing of goods in the free trade port, which then sells the goods of the foreign for-profit enterprise to domestic and foreign customers will be exempt from profit-seeking enterprise income tax on its income. However, if the goods it sells to domestic customers in the year in question exceeds 10% of the total turnover on its sales to domestic and foreign customers, it will not be exempt on the portion above the 10%.

The tax incentives offered by the draft of the Regulations are as set forth below:

(a) where storage and/or simple processing activities are engaged in in a zone and goods are sold to domestic and foreign customers, profit-seeking enterprise income tax is exempted; the exemption applies to a maximum of 10% of the sales turnover;

(b) the wage/salary income for the first three years of foreign and mainland persons who come to Taiwan to work for the first time will be calculated in their gross income at half the amount, and they will be exempt from reporting their foreign income;

(c) tax on the income and overseas profit of a Taiwanese investor repatriated to, and actually invested in, a pilot zone will be exempted.

8. What are the benefits of investing in Taiwan's free trade zones?

Goods, machinery and equipment for self use imported into a zone for operational purposes are exempt from import taxes, goods tax, tobacco and liquor duties, tobacco health and welfare tax, trade promotion service fees and harbour service fees.

9. What labour laws are in place to guarantee stable employment practices for Chinese or foreign businesses?

(1) Where a foreigner is employed to work in Taiwan, his employer is required to apply for an employment permit.

(2) Although the term of the work permit of a foreign professional may not exceed three years each time, an application for renewal may be made before the expiration of the employment term, and there is no limit on the number of renewals.

(3) If a person from mainland China has secured another nationality and has lived in a country other than mainland China for at least four years, he may apply for a work permit with reference to the provisions for foreigners.

(4) To date, it is not possible for a person from mainland China to come to Taiwan to work.

10. Which regulators are responsible for supervising Taiwan's competitive environment? What should investors know about merger control?

The Fair Trade Act regulates disputes over the restriction of competition.

The term “combination” means:

(a) a merger with another enterprise;

(b) holding or securing shares of, or a capital contribution to, another enterprise, such that at least one-third of its total voting shares or total capital is reached;

(c) acquiring or leasing all or a major portion of the business or property of another enterprise;

(d) jointly operating with another enterprise on a regular basis or operating upon entrustment by another enterprise;

(e) directly or indirectly controlling another enterprise's business operations or personnel appointments and dismissals.

When enterprises are to combine, a filing is to be made first to the authority if:

(a) the combination of the enterprises will cause them to have a market share of at least one-third;

(b) one of the enterprises involved in the combination has a market share of at least one-quarter; or

(c) the sales turnover of the enterprises involved in the combination during the preceding financial year exceeds the amount announced by the competent authority.

The bill to amend the Fair Trade Act passed the third reading on January 22 2015. Its key points are as set forth below:

(a) provisions on combinations:

(i) if an enterprise combination reaches the market share threshold or the previous financial year sales turnover threshold set forth in the Fair Trade Act, a filing should be made with the Fair Trade Commission (FTC); when calculating the sales turnover, the sales turnover of an enterprise that is controlled by or controlling the enterprise involved in the combination, and of an affiliated enterprise where both it and the enterprise involved in the combination are controlled by the same enterprise or enterprises should be included;

(ii) where a single enterprise reinvests to establish a subsidiary and holds 100% of its shares or capital contributions, or where an enterprise involved in a combination or its 100% held subsidiary holds at least 50% of the voting shares of, or capital contributions to, another enterprise and further combines with such enterprise, or where another form as announced by the FTC obtains, there is no need to make a filing with the FTC;

(b) relevant provisions on a concerted action: the FTC may presume agreement on a concerted action based on a consideration of factors such as the state of the market, the features of the goods or services, costs, profit and the economic rationality of the acts of the enterprises. Furthermore, the new Fair Trade Act adds that, for any other joint action necessary to promote industry development, technical innovation or operational efficiency, an application for an exceptional permit for concerted action may be made to the FTC.


Author biography

Daniel Lee
Partner

Daniel graduated from Taiwan University in 1994 with an LLB degree and obtained an LL.M. degree from Taiwan University in 1997 and Harvard Law School in 2001.
Daniel is qualified to practice Taiwan, New York and PRC laws and has worked at leading law firms including
Lee and Li, Davis Polk & Wardwell, Morrison & Foerster and Weil Gotshal & Manges before joining Jingtian & Gongcheng.
Daniel specialises in securities law and capital markets, cross-border M&A, foreign direct investment and general corporate counseling. He has represented numerous issuers based in Taiwan, Hong Kong and mainland China in their IPOs and international capital markets bond and equity transactions, covering a wide range of industry sectors including banking and financial services, high-tech, energy, real estate and infrastructure. He has also acted as international or PRC legal counsel in several cross-border M&A projects in the PRC.
He is a native Mandarin speaker and is fluent in English.

竞天公诚律师事务所的李卓儒律师重点阐述了最大宗的两岸交易并提供了投资台湾的综合观察，涵盖争议解决、知识产权保护以至税务优惠和竞争环境

1. 过去12个月，有什么影响两岸的主要法规出台?

(1) 行政院已在2013年12月27日将自由经济示范区特别条例（下称「特别条例」）草案提呈立法院审议。但目前二者均尚未经立法院审查/审议通过。

(2) 大陆地区人民来台投资许可办法第8条第2项原为配合自由经济示范区第一阶段推动计划，研拟在国家安全无虞的情况下，放宽陆资投资限制，陆资在示范区内投资制造业，比照外人投资限制，投资服务业则比照世界贸易组织（WTO）待遇。但由于目前立法院还未通过两岸服务贸易协议，且自由经济示范区特别条例之立法尚未完成，故于2015年3月13日经立法院决议删除。

2. 最近有什么反映投资动向的重大两岸交易?

(1) 2014年投资审议委员会核准陆资重大投资案件，包括中国银行股份有限公司以美金5,993万美元增资大陆商中国银行股份有限公司在台分公司、纳爱斯浙江投资有限公司以美金4,436万元投资台湾妙管家股份有限公司、以及英属维尔京群岛商七彩虹集团有限公司以美金4,399万元投资亿城国际开发股份有限公司。另2015年3月核准大陆商厦门金圆投资集团有限公司以新台币1亿元投资设立金圆实业有限公司。

(2) 2014年台湾对中国大陆之重大投资案件，包括联华电子股份有限公司以7.11亿美元投资联芯集成电路制造（厦门）有限公司、鸿海精密工业股份有限公司分别以3亿美元增资富泰华精密电子（济源）有限公司及鸿富锦精密电子（成都）有限公司、以及台湾聚合化学品股份有限公司等7家公司以2.64亿美元投资古雷联合石油化工有限公司。

3. 内地的法院裁判及仲裁判决在台湾是否可执行? 在执行上仍有什么挑战?

(1) 两岸人民关系条例第74条规定「在大陆地区作成之民事确定裁判、民事仲裁判断，不违背台湾地区公共秩序或善良风俗者，得声请法院裁定认可。」，其认可适用较为简易之非讼程序。

(2) 最高法院见解认为，前开规定是「基于两岸之特殊关系，为解决实际问题，对于在大陆地区作成之民事确定裁判、民事仲裁判断，特以非讼程序为认可裁定，并仅就以给付内容者，明定其有执行力，而未赋予实质确定力。立法者既系基于两岸地区民事诉讼制度及仲裁体制差异，为维护我法律制度，并兼顾当事人权益（见该条文立法理由），而为上开规定，自不容再援引民事诉讼法、仲裁法关于外国民事确定裁判、外国仲裁判断效力之相关规定及法理，认在大陆地区作成之民事确定裁判及仲裁判断，经中华民国法院裁定认可者，即发生既判力。」(最高法院104年度台上字第33号)

(3) 综上，无论是中国之终局判决或仲裁判断，经台湾法院裁定认可后，亦仅具执行力而无既判力。

4. 过去一年，台湾的智慧产权制度有什么变化? 有什么标志性的案例是外国投资者需要注意的?

(1) 知识产权法之重大修法

A. 著作权法修正：2014年1月7日三读通过著作权法修正案，修正要点如下。

a. 包括中央或地方政府机关、非营利机构或团体、依法立案之各级学校，均得为视、听觉障碍者制作无障碍格式版本，供视、听觉障碍者非营利使用，且为制作上述无障碍格式版本，可规避或破解著作权人所采取之科技保护措施。合法制作之无障碍格式版本除可以在上述机关、团体或学校及视听觉障碍者间流通或散布外，并可自国外输入专供视听觉障碍者使用。

b. 合理使用判断基准：「一、利用之目的及性质，包括系为商业目的或非营利教育目的；二、著作之性质；三、所利用之质量及其在整个著作所占之比例；四、利用结果对著作潜在市场与现在价值之影响」。

c. 将条文文字中之「重制物」修正为「国外合法重制物」，明确该款系规范禁止「真品」平行输入之意旨。

B. 专利法修正： 2014年1月3日三读通过专利法修正案，其要点如下：

a. 查扣程序：申请人必须向海关以书面释明侵害之事实，并提供担保金。

b. 废止查扣：申请查扣后，申请人如未提起侵权诉讼、诉讼经驳回确定未侵权、申请人主动撤回查扣或被查扣人提供反担保时，海关应废止查扣。

c. 损害赔偿：如未来经法院确定判决没有侵权时，对于被查扣人因查扣所产生之损害应负赔偿责任。

C. 营业秘密法修正：营业秘密法于2013年1月30日修正，其要点请参阅问题5第(3)点。

D. 公平交易法修正：2015年1月22日立法院三读通过「公平交易法」的修正案，新修正之公平交易法重点请参问题10第(4)点。

(2) 重大商标诉讼—金莎巧克力案

以意大利商费列罗公司认为，乌克兰商如胜糖果在2011年10月间所获准的「ROSHEN」商标，与该公司「ROCHER」、「FERRERO ROCHER」等系列商标构成近似，向智慧财产局提起「异议」，但被智慧财产局审定「异议不成立」，义商费列罗于是打起行政官司。

智慧财产法院认为，无论是从外文字字母排组，或者发音及图样二者都有差异，给予消费者的观念认知自有所别，近似不高，不致使消费者混淆而误认，故判决智慧财产局胜诉。

5. 挪用商业秘密在区内是一个大问题。内地投资者如何更有效保护其商业秘密?

(1) 在民事责任部分，因故意或过失不法侵害他人之营业秘密者，负损害赔偿责任。数人共同不法侵害者，连带负赔偿责任。

(2) 侵害营业秘密之刑事责任，规定如下：

A. 意图为自己或第三人不法之利益，或损害营业秘密所有人之利益，处五年以下有期徒刑或拘役，得并科新台币一百万元以上一千万元以下罚金：

B. 意图在外国、大陆地区、香港或澳门使用，加重处罚，且非告诉乃论。

C. 若法人之代表人、法人或自然人之代理人、受雇人或其他从业人员，因执行业务，犯营业秘密法，除行为人应负担刑事责任外，法人或自然人亦科罚金。但法人之代表人或自然人对于犯罪之发生，已尽力为防止行为者，不在此限。

6. 台湾的负面清单上有哪些行业? 有什么外资股权限制是需要注意的?

(1) 负面表列之业别，禁止类有10项（包括但不限于化学材料制造业、化学制品制造业、基本金属制造业、机械设备制造业及陆上运输业等），限制类有16项（包括但不限于农、牧业、烟草制造业、化学材料制造业、电力及燃气供应业等）。

(2) 第三地区投资之公司，若为大陆地区人民、法人、团体或其他机构投资第三地区之公司，且有下列情形之一者：一、直接或间接持有该第三地区公司股份或出资总额逾30%。二、对该第三地区公司具有控制能力仍属陆资。

7. 台湾有没有吸引内地或外国投资者的税务优惠?

(1) 外国营利事业或其在台湾境内设立之分公司，自行申设或委托自由港区事业于自由港区内从事货物储存或简易加工，并将该外国营利事业之货物售与国内、外客户者，其所得免征营利事业所得税。但当年度售与国内客户之货物，超过其当年度售与国内、外客户销售总额10%者，其超过部分不予免征。

(2) 特别条例草案提供租税优惠如下：

A. 针对在区内从事储存、简易加工活动，将货物售与国内、外客户者，其所得免征营所税；内销免征营所税以销售总额10%为限。

B. 首次来台工作之外籍及陆籍人士，前三年的薪资所得已半数计入综合所得总额。且免申报海外所得。

C. 台商所得、海外盈余汇回示范区进行实质投资免税。

8. 在台湾自由经济示范区内投资有什么优惠?

输入区内供营运之货物及自用机器、设备免征进口税、货物税、烟酒税、烟品健康福利捐、推广贸易服务费及商港服务费。

9. 有什么劳动法可保障内地或外国企业有稳定的雇用制度?

(1) 外国人受聘雇来台工作，应由雇主申请聘雇许可。

(2) 外国专业人员每次申请工作许可期间最长为3年，聘雇期间届满前可再申请展延，且无展延次数的限制。

(3) 大陆地区人士如已取得其他国家国籍者，且旅居大陆地区以外国家4年以上，比照外国人规定申请工作许可。

(4) 目前尚未开放大陆地区人民来台工作。

10. 哪个监管机构负责监管台湾的竞争环境? 投资者需要认识哪些有关并购的管制?

(1) 公平交易法规范限制竞争之相关争议。

(2) 结合指：

A. 与他事业合并。

B. 持有或取得他事业之股份或出资额，达到他事业有表决权股份总数或资本总额三分之一以上。

C. 受让或承租他事业全部或主要部分之营业或财产。

D. 与他事业经常共同经营或受他事业委托经营。

E. 直接或间接控制他事业之业务经营或人事任免。

(3) 事业结合时，有下列情形之一，应先向主管机关提出申报：

A. 事业因结合而使其市场占有率达三分之一。

B. 参与结合之一事业，其市场占有率达四分之一。

C. 参与结合之事业，其上一会计年度销售金额，超过主管机关所公告之金额。

(4) 2015年1月22日三读通过「公平交易法」修正，重点如下：

A. 结合行为相关规定：

a. 事业结合达公平法市占率门坎或上一会计年度销售金额门坎者，应向公平会申报。其销售金额之计算，应将与参与结合之事业具有控制与从属关系之事业及与参与结合之事业受同一事业或数事业控制之从属关系事业之销售金额一并计入。

b. 单一事业转投资成立并持有百分之百股份或出资额之子公司，或是参与结合之一事业或其百分之百持有之子公司，已持有他事业达百分之五十以上之有表决权股份或出资额，再与该他事业结合者，以及其他经公平会公告之类型，皆明定为免向公平会申报结合之态样。

B. 联合行为相关规定：公平会得依市场状况、商品或服务特性、成本及利润考虑、事业行为之经济合理性等因素，推定有联合行为之合意。此外，新公平法增列凡其他为促进产业发展、技术创新或经营效率所必要之共同行为，得向公平会申请例外许可联合行为。


作者简历

李卓儒
合伙人

李卓儒律师1994年毕业于台湾大学法学院，获得法学学士学位，于1997年毕业于台湾大学法律研究所，获得法学硕士学位，并于2001年毕业于美国哈佛大学法学院获得法学硕士学位。
李律师同时具有台湾地区、美国纽约州以及大陆地区律师执照，并在台湾、香港以及上海三地的一流国内外事务所执业超过十余年：在加入竞天公诚前先后工作于台湾理律法律事务所、美国达维律师事务所、美国美富律师事务所以及美国威嘉律师事务所。
李律师主要业务领域是证券发行和资本市场、跨境并购、外商投资以及一般公司业务。在证券发行和资本市场领域，李律师曾参与包含台湾、香港以及大陆数十家公司的海外上市以及国际资本市场债券以及股权发行案，担任中国及国际法律顾问，涉及领域包含银行金融业、各类高科技产业、能源、房地产、基础设施等。李律师也曾在多宗中国境内企业跨境并购项目中担任中国及国际法律顾问。
李律师的工作语言是中文和英文。