Introduction to TAIWAN

Hong Kong is a free market economy with a liberal regulatory framework, an efficient payment system and soundmacroeconomic fundamentals. Hong Kong’s high degree of trade and financial openness makes it highly reliant onworld demand and global capital flows while its currency board system (the HKD is pegged to the USD) means itsmonetary policy is tied to that of the US Federal Reserve. At the same time, the Hong Kong economy is highlyintegrated with Mainland China, through trade, tourism and financial links.

Annual average real GDP growth slowed to 2.8% in 2014-2018 from 3.5% in 2007-2011. The Hong Kong economy fellinto recession in 2019 due to slower world trade growth, slower Chinese growth, US-China tensions, social protestsand weaker domestic confidence. The COVID-19 shock exacerbated negative growth. Merchandise exports, tourism,private consumption and investment all fell sharply in H1,2020 after several quarters of decline. Since Q3, 2020,activity (except tourism) has rebounded strongly, driven by large fiscal stimulus, loose monetary conditions and thesurge in China’s external trade. Real GDP is projected to grow by 7.2% in 2021, after falling by 1.7% in 2019 and 6.1% in2020. Hong Kong’s medium-term economic outlook has been weakened by recent institutional and legaldevelopments. At the same time, it remains supported by its strong macroeconomic fundamentals, high-qualityservices sector serving as a gateway to Chinese markets and role as a key financial hub for Chinese firms.

Summary

BNP Paribas presence

BNP Paribas has had a presence in Taiwan since 1981, the largest French bank in the country, and one of the mostsignificant foreign banks, with branches in Taipei, Taichung and Kaohsiung. These branches offer comprehensive localand cross-border cash management and international trade finance services to Taiwanese, Chinese and foreigncorporations. Cash management and international trade finance services are part of a wider suite of services fromcorporate advisory, capital markets, and specialist financing through to wealth management, asset management andinsurance offerings.

Currency

Currency

New Taiwan dollar (TWD).

Exchange Rates

2016 2017 2018 2019 2020

Exchange rate:TWD per USD

31.99 30.51 30.24 30.84 29.57

Sources: Central Bank of the Republic of China (Taiwan), June 2021.

Central Bank

The Taiwanese central bank is the Central Bank of the Republic of China (CBC – www.cbc.gov.tw).

Bank accounts

Resident / non-resident status

A profit-seeking enterprise that is incorporated in Taiwan or its head office is in Taiwan is considered to be aTaiwanese resident company, unless it is regarded as a resident in another country under a Taiwanese taxtreaty.

Bank accounts for resident entities

Within Taiwan Outside Taiwan

Local CurrencyPermitted without restriction, fullyconvertible.

Permitted without restriction, fully convertible.

Foreign CurrencyPermitted without restriction, fullyconvertible.

Permitted, fully convertible. A resident companymust be present in a foreign country to open aforeign currency account

Bank accounts for non-resident entities

Within Taiwan Outside Taiwan

Local CurrencyPermitted with restrictions, convertible. Only foreign banks,insurers or securities firms with Ministry of Finance approvalare permitted to hold TWD cheque accounts

Permitted, fullyconvertible.

Foreign Currency Permitted without restriction, fully convertible. Not applicable

Lifting fees

Per-item-based charges and/or subscription fees are applied on payments between resident and non-residentbank accounts.

BNP Paribas Cash Management Capabilities

Liquidity Management

Physical cash pooling

Notional pooling - Balance compensation

Notional pooling - Interest optimisation

Supported by BNP Paribas

Not required / permitted in TAIWAN or not supported by BNP Paribas

Collections

Cash collections

Cheque collections

Direct debit collections

Domestic incoming transfers

Virtual IBAN

Virtual accounts

International incoming transfers

Card acquiring

Supported by BNP Paribas

Not required / permitted in TAIWAN or not supported by BNP Paribas

Payments

Cash withdrawals

Cheque payments

Direct debit payments

Domestic outgoing transfers

Commercial cards

Virtual cards

International outgoing transfers

SWIFT gpi

Real-time international payments through BNP Paribas' network

Card issuing

Supported by BNP Paribas

Not required / permitted in TAIWAN or not supported by BNP Paribas

Channels

Local e-Banking

Global e-Banking - Connexis

SWIFT/ host to host

Supported by BNP Paribas

Not required / permitted in TAIWAN or not supported by BNP Paribas

Payments & Collections

Market overview

The Taiwanese government is investing heavily in promoting digital payments and has set a target of 90% of mobilephone users using mobile payments by 2025. Mobile payments totalled TWD 120.9 billion in the first seven months of2020, a 156% increase year on year. LINE Pay, Apple Pay and JKoPay are the most popular mobile payment methods.This emphasis on mobile and electronic payments has seen a marked decline in the use of cheques by companies andconsumers. The launch of internet-only banks (three banks were granted licences in 2019, LINE Bank, Next Bank andRakuten Bank) is likely to further increase the adoption of digital payments.

Electronic banking services are available from most banks. There is no national electronic banking standard in Taiwan,so companies use banks’ proprietary services.

Several electronic banking systems operate in Taiwan, including the Internet Banking System, Mobile Banking, andFEDI, which connects companies to their bank accounts via their PCs. Online payments can be made via an FXMLsystem.

Online and mobile banking services are provided by Taiwan’s leading banks.

FISC, an electronic funds transfers system, operates a Mobile Banking Payment System linking telecoms companieswith financial institutions. Mobile banking transactions increased 51% and 74% in value and volume terms in 2019.Internet banking transactions increased 14% and 74% in value and volume terms.

Payment systems

CIFS Type • Real-time gross settlement.

Participants• 39 domestic banks, 29 local branches of foreign banks, 8 bills financecorporations, and 6 clearing institutions. All direct participants musthave settlement accounts with the CBC.

Transaction types processed

• High-value and urgent TWD-denominated electronic payments.• RMB-denominated payments.• Credit card payments• Net obligations from the TCH and ACH payment systems.

Operating hours • 09:00–17:40 CST, Monday to Friday.

Clearing cycle details (e.g.cut-off times)

• Payments are cleared and settled in real time.• Payment cut-off time = 17:00 CST.• TCH and ACH net obligations cut-off time = 15:30 CST.

System holidays • The system is open on all business operating days.

IRS Type • Net settlement system.

Participants • 47 direct.

Transaction types processed• Low-value and bulk TWD-denominated electronic payments. There isa maximum threshold of TWD 50 million.

Operating hours • 09:00-15:30 CST, Monday to Friday.

Clearing cycle details (e.g.cut-off times)

• Payments are cleared and settled on a same-day basis.• Cut-off time = 15:00 CST.

System holidays

• The IRS is closed on all Taiwanese bank holidays.• Taiwan’s bank holidays are:• 2nd half 2021: September 21, October 10, December 31..• 2022: January 31, February 1-3, 28, April 5, 6, May 2, June 3, September10, October 10.

ACH Type • Designated time net settlement system.

Participants • All financial institutions with a CBC account.

Transaction types processed • Direct debits and credits.

Operating hours • N/A

Clearing cycle details (e.g. cutoff times)

• Direct debit payments are cleared and settled within a two-day cycle.• Direct credit payments are cleared and settled on a next-day basis viathe CIFS at 15:00 CST.

System holidays

• The ACH is closed on all Taiwanese bank holidays.• Taiwan’s bank holidays are:• 2nd half 2021: September 21, October 10, December 31..• 2022: January 31, February 1-3, 28, April 5, 6, May 2, June 3, September10, October 10.

TCH Type • Designated time net settlement system.

Participants• All financial institutions approved to operate checking depositbusiness with the exception of credit cooperatives and farmers andfishermen associations.

Transaction types processed• Paper-based payments (cheques, bank drafts and promissory notes)which are truncated into electronic items before being processed.

Operating hours • 09:00–17:30 CST, Monday to Friday.

Clearing cycle details (e.g. cutoff times)

• The TCH operates a number of clearing cycles for different paymenttypes.• Intracity cheque payments are settled on a two-day cycle.• Intercity cheques payments are settled within seven days.• eCheque payments are settled on a same-day basis.• Final settlement takes place via the CIFS at 15:00 CST.

System holidays

• The TCH is closed on all Taiwanese holidays.• Taiwan’s bank holidays are:• 2nd half 2021: September 21, October 10, December 31..• 2022: January 31, February 1-3, 28, April 5, 6, May 2, June 3, September10, October 10.

Credit transfers

Credit transfers are used by companies to pay salaries and suppliers, and to make tax payments.High-value and urgent TWD-denominated credit transfers are settled in real time via the CIFS.High-value and urgent transfers can also be made through FISC and are processed on a same day basis.Low-value and non-urgent TWD-denominated credit transfers can be settled on a same-day basis via the IRS,or settled within two working days via the ACH. Final settlement takes place via the CIFS.The FISC operates a clearing and settlement platform for processing domestic and cross-border EUR, JPY, USDand RMB payments.USD-denominated credit transfers can also be settled in real time via a USD Settlement System operated byMega International Commercial Bank.Cross-border credit transfers can also be settled via correspondent banking networks. Most banks have a directconnection to the SWIFT network. Some banks can access TARGET2 for high-value transfers or STEP1/STEP2 forlow-value transfers through their correspondent banking partners.The volume and value of ACG credit (debit) transfers rose by 0.9% and 1.0% in 2019, on 2018 figures, to 124.3million, with a value of TWD 31,016 billion.

Direct debits

Direct debits are used for regular payments, such as utility bills.Direct debit payments can be settled on a same-day basis via the IRS or settled within two working days viathe ACH.Final settlement takes place via the CIFS.

Cheques

The cheque is a popular cashless payment instrument. It is primarily used by companies.Cheques are truncated into electronic items before being processed via the TCH. Cheques are still manuallyprocessed in the Hualien, Taitung and Penghu clearing houses.Final settlement takes place via the CIFS on a next-day basis for eCheques, within two working days forintracity cheques and within seven working days for intercity cheques. Foreign cheques take 14 days to clear.The volume and value of cheque settlement fell 5.5% and 6.2% in 2019, on 2018 figures, to 83.6 million, with avalue of TWD 14,936 billion.

Card payments

Card payments are increasingly popular, especially for retail transactions.Taiwan has a National Credit Card Centre and a Shared Credit Card and ATM System for processing cardpayments. Credit card payments can also be settled via the CIFS.As of December 2020, there were 33 million active credit cards in circulation in Taiwan.Credit cards are issued by 33 institutions. Visa and MasterCard-branded credit cards are the most widely issued.As of December 2020, there were 350,000 cash cards in circulation. Fourteen financial institutions were issuingcash cards.All cards issued have EMV chips.

ATM/POS

There were 31,216 ATMs in Taiwan at the end of 2020.All ATMs and POS terminals are EMV-compliant.Payments are processed via the National Credit Card Centre or the Shared Credit Card and ATM System andsettled via the CIFS.

Electronic wallet

Four electronic stored value card institutions (Easycard Corp., Ipass Corp., icash Corp. and Yuan Hsin DigitalPayment Coporation) and one commercial bank are engaged in electronic stored value card business in Taiwan.E-money cards in Taiwan are restricted to a maximum value of TWD 10,000.There were 135.2 million stored-value pre-paid cards in circulation at the end of 2020.There are 28 e-payment institutions in Taiwan and as of December 2020, there were 11.8 registered users.JKoPay and IPASS are the largest e-payment institutions.E-money payments are settled via the individual schemes.

Channels

Market overview

Liquidity management

Domestic: notional pooling

Domestic notional pools are available; banks require approval from the Ministry of Finance before offering thisservice.Domestic notional pooling can be carried out in TWD and some foreign currencies but can take place onlyacross single currency accounts within the same entity.Non-resident companies are permitted to set up a notional pooling structure if the accounts involved are in thename of the same legal entity.

Domestic: cash concentration

Domestic cash concentration structures are available.Resident and non-resident bank accounts can participate in the same cash concentration structure.

Cross-border notional pooling

Cross-border notional cash pools are not permitted in Taiwan.

Cross-border cash concentration

Cross-border sweeping is not permitted in Taiwan.

Short term investments

Market overview

Interest payable on credit balances

Current accounts are non-interest bearing.

Demand deposits

Demand deposits denominated in TWD or major foreign currencies are available for terms up to one year.Interest earned by non-residents on foreign currency accounts held at Offshore Banking Units is not taxed.

Time deposits

Time deposits are available in TWD or major foreign currencies with terms ranging from overnight to one year.Time deposits are not permitted for investors from abroad.

Certificates of deposit

Domestic banks and the CBC issue certificates of deposit with terms ranging from one to 12 months.Certificates of deposit can be issued paying fixed or variable interest.

Treasury (government) bills

The Taiwanese government issues Treasury bills (T-bills) via the CBC. The minimum investment is TWD 5million.T-bills are issued with terms ranging from 63 to 364 days.The minimum denomination is TWD 5 million for initial auctions and TWD 1 million at buy-back auctions.

Commercial paper

Domestic commercial paper is issued by companies. Most paper is issued as short-term, unsecured promissorynotes with terms ranging from one month to one year.

Money market funds

Domestic money market funds are available as short-term investment instruments.Foreign investors are prohibited from investing over 30% of their funds in money market funds with terms ofless than 12 months.

Repurchase agreements

Repurchase agreements with maturities ranging from overnight to one week are commonly available inTaiwan.

Banker's acceptances

Banker's acceptances are not widely used in Taiwan.

BNP Paribas insights

BNP Paribas Trade Finance Capabilities

Trade payments

Documentary credits

Documentary collections

Supported by BNP Paribas

Not required / permitted in TAIWAN or not supported by BNP Paribas

Guarantees

Bank guarantees

Standby letters of credit

Supported by BNP Paribas

Not required / permitted in TAIWAN or not supported by BNP Paribas

Supply chain management

Receivables

Payables

Inventory

Supported by BNP Paribas

Not required / permitted in TAIWAN or not supported by BNP Paribas

Trade channels

Connexis Trade

Connexis Supply Chain

SWIFTNet Trade for Corporates

Connexis Connect

Supported by BNP Paribas

Not required / permitted in TAIWAN or not supported by BNP Paribas

International trade

General trade rules

As a member of an Economic Cooperation Framework Agreement (ECFA) with China, trade and investmentrules with China are being liberalised on an on-going basis.Taiwan operates five free trade zones (in the harbours of Taipei Port, Suao Port, Kaohsiung Port, Keelung Portand Taichung Port).

Trade agreements

Taiwan has signed trade agreements with El Salvador, Guatemala, Honduras, New Zealand, Nicaragua, Panama,Singapore and Japan.Taiwan has signed an Economic Cooperation Agreement with Paraguay.

Imports / exports

ImportsIntegratedcircuits

Refinedpetroleum

CrudePetroleum

Photographyequipment

Natural gas

PrimaryImportsources

China (21.0) Japan (16.0%) USA (11.0%)South Korea(6.0%)

ExportsIntegratedcircuits

LCDsOfficemachinery

ComputersRefinedpetroleum

Exportmarkets

China (26.0%)

USA (14.0%)

Hong Kong (12.0%)

Japan(7.0%)

Singapore(7.0%)

SouthKorea(5.0%)

Import / export volumes

2016 2017 2018 2019 2020

Exports- goods USD m 309,283 342,706 345,495 330,743 342,303

- services USD m 41,291 45,213 50,209 51,838 41,263

Imports- goods USD m 238,323 261,448 278,461 273,072 267,136

- services USD m 51,778 53,936 56,831 56,905 37,767

Current account as % GDP 13.5 14.7 12.2 10.7 14.2

Source: Central Bank of the Republic of China (Taiwan), June 2021.

Trade finance - imports

Documentation

The following documentation is required in order to import goods into Taiwan:customs declarationcommercial invoicebill of ladingdelivery orderterminal handling receiptspacking list.

Import licences

Approximately 115 items classified as controlled are prohibited unless approved by BOFT as special cases, and16 items are allowed to be imported with conditions.

Import taxes and tariffs

Taiwan use the Customs Cooperation Council Nomenclature (CCCN) to classify goods and set duty rates.Tax rates vary from 8% to 30%.

Financing requirements

None

Risk mitigation

None

Prohibited imports

Prohibited imports are published on a negative list.Taiwan prohibits the import of certain items in order to protect fauna and flora, for health and safety or moralreasons, and/or for national security.

Trade finance - exports

Documentation

The following documentation is required in order to export goods from Taiwan:commercial invoicecustoms declarationpacking listterminal handling receiptbill of ladingcertificate of origin (in certain circumstances)dangerous goods certification (in certain circumstances).

Export licences

Licences are required from the BOFT when exporting goods classified as controlled or permissible.

Export taxes and tariffs

None

Financing requirements

None

Risk mitigation

The Export-Import Bank of the Republic of China (Eximbank) is the country’s state-owned provider of exportcredit insurance. Eximbank provides assistance to foreign-owned companies so long as they are domesticallyregistered. Domestic and foreign commercial banks also provide private export financing.

Prohibited exports

Prohibited exports are published on a negative list.Taiwan prohibits the export of certain items in order to protect fauna and flora, for health and safety or moralreasons, and/or for national security.

Regulatory requirements

Reporting regulations

Foreign exchange transactions involving the TWD of an amount equivalent to or over USD 1 million requiresupporting documentation and must be reported by 12:00 local time the following business day of the contract.Transactions with a value above TWD 500,000 must include a declaration statement.A limit of USD 50 million is imposed on inward and outward remittances converted from or to TWD (excludingimport/export of goods and provision of services) by any single corporate entity.

Reporting method

Data is submitted by banks electronically to the CBC’s Department of Banking.Transactions must be reported to the CBC’s Department of Banking immediately on the contracting day if thetransaction amount is greater than USD 1 million (USD 500,000 for individuals). This requirement does notapply to transactions relating to the export or import of goods processed with a documentary bill.Forward contract and cross-currency swap transactions must be reported to the CBC’s Department of Bankingbefore 12:00 CST the following business day.Banks submit reports on behalf of their customers, although the resident entity is ultimately responsible forcompliance.

Exchange controls

Exchange controls are administered by the Ministry of Finance, the CBC and the Ministry of Economic Affairs.Foreign currency conversions that are related to trade do not have exchange controls.Financial institutions wishing to participate in foreign exchange business must have prior approval from theCBC.Resident entities are permitted to remit foreign exchange not exceedingUSD 50 million a year (USD 5 million for resident individuals or foreign nationals with a valid Alien ResidentCertificate). This amount excludes payments for imports, exports, staff wages and salaries. Transactions abovethese limits are subject to CBC approval.Foreign entities borrowing from abroad require permission from the CBC Foreign Exchange Department andthe MOEA Investment Commission.There are no restrictions on the transfer of profits out of Taiwan.

Taxation

Resident / non-resident

A profit-seeking enterprise that is incorporated in Taiwan or has its head office in Taiwan is considered to be aTaiwanese resident company, unless it is regarded as a resident in another country under a Taiwanese taxtreaty.

Financial instruments

Gains may be exempt from income tax if they are derived from transactions in connection with financialinstruments that are treated as securities or futures. The related costs, however, may not be deductible.Gains derived from transactions in connection with other types of financial instruments may be treated asordinary income and taxed at the standard corporate income tax rate.

Interest and financing costs

If the interest rate on loans from non-financial institutions is higher than the standard interest rate determinedby the Ministry of Finance, the excess interest expense may be disallowed.

Foreign exchange

Foreign exchange gains and losses derived within Taiwan are normally taxable.

Advance tax ruling availability

A taxpayer can apply to the tax authorities for a ruling to confirm its tax position or clarify a tax issue.The Ministry of Finance publishes a list of all public tax rulings.

Capital gains tax

Capital gains are treated as ordinary income and taxed at the standard corporate income tax rate.A profit-seeking enterprise’s gains derived from the sale of land before1 January 2016 and a domestic company’s securities are exempt from income tax, but are subject to land valueincremental tax (LVIT) and alternative minimum tax (AMT), respectively.As from 2016, a new tax regime applies to the sale of real estate (including land and houses) purchased after 1January 2016. Under the new regime, a resident company is subject to corporate income tax (17%) on thecapital gains from the sale of real estate. A non-resident (including a company and an individual) will be subjectto a 45% income tax on the capital gain from the sale of real estate that has been held for less than one year, or35% if the property has been held for more than one year. The incremental net value of the real estate sold stillwill be subject to LVIT, but the incremental net value of the land can be deducted from the taxable capital gainwhen calculating the income tax.Capital gains from properties other than securities and real estate mentioned above are subject to income taxat 20%.

Withholding tax (subject to tax treaties)

Payments to: Interest Dividends Royalties Other income

Resident entities 10% (1) 0% (1) 10% (1) 10/20% (1)

Non-resident entities 15/20% (2) 21% 20% 20% (3)

1. These are maximum withholding tax rates for payments to resident companies; the final withholding taxrate, however, varies greatly due to certain tax rulings and other provisions within the Taiwanese tax system.

2. A 15% withholding tax applies to interest paid to a non-resident on short-term bills, interest on securitisedcertificates, interest on corporate bonds, government bonds or financial debentures, as well as interest derivedfrom repurchase transactions for those bonds or certificates. The rate in all other cases is 20%, unless reducedunder a tax treaty.

3. Payments made to an offshore company for technical services provided to a Taiwan entity are subject to a20% withholding tax if considered Taiwan-source income. It may be possible to obtain ‘apportionmenttreatment’, with only the part of the income deemed to be from a Taiwan source subject to the 20%withholding tax. Alternatively, if the costs associated with the provision of the services are difficult to calculate,the service provider can request a hypothetical taxable income of 15% of total business turnover for servicesprovided (10% for certain transport industries), which will be taxed at the 20% rate, resulting in an effective taxrate of 3% or 2%, respectively. Approval of the National Taxation Bureau is required in both cases.

Tax treaties / tax information exchange agreements (TIEAs)

Taiwan has 32 income tax agreements.

Thin capitalisation

A profit-seeking enterprise, such as a subsidiary or a Taiwan branch of a foreign company, is subject to thincapitalisation rules. Interest expense of such an enterprise from related party debt exceeding a 3:1 debt-to-equity ratio is not deductible for tax purposes. Companies in the financial industry, such as banks, financialholding companies, insurance companies, securities firm, etc., are not subject to the thin capitalisation rules.

Transfer pricing

Taiwan has transfer pricing rules requiring transactions between related parties to be conducted on arm’s-length terms. The transfer pricing guidelines provide a specific definition of related parties, which includesdirect and indirect control, as well as control over a board of directors. The following transfer pricing methodsare accepted: comparable uncontrolled price, resale price, cost plus, comparable profits, profit split or othermethods provided by the Ministry of Finance.Taxpayers are required to prepare contemporaneous documentation of related-party transactions. The taxauthorities can adjust the income of taxpayers in appropriate cases. Penalties may be imposed for failure tocomply with the arm’s-length principle and the documentation requirements. Advance pricing agreements can be requested.Transfer pricing rules have been extended to apply to business reorganisations, so that the profit allocationunder a business restructuring must be in compliance with the arm’s-length principle. A Taiwan entity of amultinational enterprise that carries out a business restructuring is required to document in its transfer pricingreport information demonstrating the arm’s length nature of the restructuring by analysing certain factors.Country-by-country reports is required for financial years commencing on or after 1 January 2017 where theMNE group’s consolidated revenue is at least TWD 27 billion in the preceding fiscal year.

Stamp duty

Under Taiwan’s Stamp Tax Law, documents executed in Taiwan are subject to stamp duty. The taxpayer is theperson who signs the taxable documents. If both contracting parties keep original taxable documents, theneach original would be subject to stamp duty, and thus each party would be a stamp duty taxpayer. Thefollowing documents are subject to stamp duty:

Taxable document Rate

Monetary receipts 0.4% except 0.1% for money deposited by bidders

Deeds for the sale of movable property TWD 12

Contracting agreements 0.1%

Contracts for the sale, transfer or partition of realestate

0.1%

Cash pooling

Taiwan has no specific rules for the taxation of cash pooling arrangements.

Financial transactions / banking services tax

Other than STT and special BT, Taiwan has no specific taxes on financial transactions/banking services.

All tax information supplied by Deloitte Touche Tohmatsu and Deloitte Highlight 2021 (www.deloitte.com).

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Market data updated as of 27 - 10 - 21