Amendment to Regulations Governing Investment Permit to the Investor from Mainland China

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[2021/01/13]

In consideration of the increasing level of complexity of direct foreign investment models, the Investment Commission of the Ministry of Economic Affairs published the amended Regulations Governing Investment Permit to the People of Mainland China on December 30, 2020 in order to avoid the evasion of review for investment in Taiwan by investors of the Mainland China through multiple layers of investment.  The main points of this amendment are as follows:

1. Strict prohibition against investment in Taiwan by investors of Mainland China through investment companies in a third area.

1. The definition of a “third-area invested company” is amended: To calculate the threshold of “30%” shareholding by investors of Mainland China, the original “consolidated shareholding calculation” is replaced by “calculation by layer,” which determines the shareholding of China investors by layer.  That is, whether the shareholding of China investors exceeds 30% is determined based on shareholders at each level.  If China investment represents 30% shareholding among the shareholders of a level above a certain shareholder, such shareholder is deemed an investor of the Mainland China and its entire shareholding in the shareholder of the lower level will be counted as Mainland China shareholding.

2. The criteria for the determination of “control” is amended.  If Mainland China investors are able to control a company’s finances, operation and human resource guidelines, etc., or if Mainland China investors are able to control the board of directors or other organization that determines the company’s operating direction, they can be deemed Mainland China investors through a third area.

2. The types of investment in Taiwan by investors of the Mainland China that require permission are expanded: In consideration of the diversification of investment acts, the Investment Commission included “contract or other means of control” and “merger and acquisition” as investment types.  When a Mainland China investor controls a sole proprietorship, partnership, limited partnership or non-listed company through contract or other means of control, including investment in any business or property of any non-listed company in Taiwan by any Mainland China investors in any third area, a prior application must be filed.

3. Enterprises held by political parties, government and military of the Mainland China are prohibited from making investments in Taiwan.