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11.2. Tax Consequence of Business Emigration, Corporate Inversions and the Cessation of Business


Dissolution of a company requires liquidation under Taiwan law, unless the dissolution is a result of merger, division, acquisition, or bankruptcy.

When the liquidation process is complete, a liquidation income tax return must be filed reporting any resulting gains or losses within 30 days. Any income tax due must be paid.

After the liquidation, if the value of residual assets repatriated to shareholders exceeds their original paid-in capital, the excess amount is treated as a dividend and subject to withholding tax. This does not apply to resident shareholders.

Closure of a Branch or Permanent Establishment

Income from the closure of a branch or permanent establishment is considered liquidation income and subject to the same rules as dissolution covered above.

Conversion of Business Type

Taiwan law allows for the conversion of business type for incorporated entities. The following conversions are allowed:

  • A limited company may be converted into a company limited by shares
  • An unlimited company can be reincorporated into an unlimited company with restricted liability shareholders
  • An unlimited liability company with restricted liability shareholders is permitted to convert into an unlimited company

The losses carried forward by limited company to a company can continue to be carried forward if converted to a company limited by shares.

Unincorporated entities such as sole proprietorships and partnerships are not allowed to convert into an incorporated entity or vice versa.