The 5 most common questions of Government Grants
1. I have a startup company, or am thinking about establishing one. Why should I be aware of Taiwan government grants?
You should know that Taiwan’s government has earmarked billions of US dollars to jump start the island’s startups, and this money is also available to foreign entrepreneurs under certain conditions (which we will talk about here). Moreover, these funds are available through a variety of channels and agencies at the level of the central government as well as local counties and municipalities.
2. What is required to become eligible for these grants?
There are both hard statutory requirements as well as unwritten (but still essential) customary practices for your business to be eligible. Since grants are bestowed upon companies and not individuals, the most fundamental thing you will need is a Taiwan-based legal entity (either a limited company or a stock limited company). If you are a foreign entrepreneur, you will need to go through the process of registering such a local business. On the other hand, a subsidiary or representative office would not qualify for the purposes of a grant.
Moreover, your entity may face certain age and capitalization hurdles before it would realistically be considered for a grant. In respect to age, many grants want to see establishment of at least a year. More importantly, your entity will need to show a certain level of paid-in capital: most likely NTD 1,000,000. This may come as a surprise to some entrepreneurs, as their CPAs have told them that Taiwan no longer requires a minimum paid-in capital amount to capitalize a business. To have a realistic chance of obtaining a government grant, however, approval is heavily tied to your paid-in capital.
For example, one of the easiest grants to apply for is a NTD 1,000,000 startup grant offered by the Taipei City government. In order to receive that grant, however, it is highly recommended that you capitalize your business at NTD 1,000,000 to start. If you are awarded the full amount of the grant, then you would have received a 1:1 match on your initial capital. Most of the time, the grant you receive will be lower than your paid in capital. For example, to successfully received a grant in the multiple NTD million range, say NTD 3 million, your capitalization (paid-in capita) would need to be at minimum twice the grant amount. The general rule of thumb is that for larger (multi-million NTD) grants, paid-in capital will have to be commensurately higher.
3. What costs should I expect as I establish my eligibility for a government grant?
Aside from putting up the paid-in capital for your Taiwan-based business, you must be ready for the practical cost of running it; and again, remember that most grants will want to see a history of a year or longer before approving your application. Specific considerations will include (1) cost of incorporation, (2) monthly registered office fees, and (3) accounting and tax compliance costs.
The cost of incorporation involving a foreign shareholder, irrespective of the foreigner’s residency status, would run between USD 1,500 and USD 10,000, depending on the shareholding setup of your business entity, e.g. how many foreign shareholders you will have and the timing of their investments. Again, the rule of thumb here is that the more complicated your shareholding becomes, the higher the costs will be due the fact that each foreign investment requires government approval. (Foreign investors must be approved by the Investment Commission of the Ministry of Economic Affairs.) The setup time would lengthen to about 3 months (as opposed to 1-2 weeks for a company solely with domestic shareholders), and you would face higher costs in terms of the additional paperwork.
Monthly registered office fees should be considered because a Taiwan company must be registered at a commercial address (which can be different from its mailing address). The cost for maintaining such an address typically runs about USD 110 per month in Taipei city.
Finally, accounting and tax compliance costs should amount to around USD 1,500 per year. As a Taiwan-based entity, the business will have obligations including:
4. How long will it take to receive a government grant?
Applying for a grant, getting it reviewed, and seeing the money disbursed may easily take 9-12 months, so entrepreneurs should plan accordingly.
5. How can my business use the grant money it receives?
A good way to think about these programs is to consider them as a form of subsidy. You cannot apply for a “blank check” grant based on a project and decide what you will spend the money on. Rather, the majority of the grants in Taiwan are subsidies, meaning you need to spend the money first, and after you have shown proof that you have spent the money, then the government will give you the subsidy per your grant proposal. In other words, the money you spend up front for certain purposes may be reimbursed later under the terms of your grant.
Furthermore, you must be careful how you allocate and track these “subsidized” expenses. An expense would not be recognized for these purposes unless it is properly documented. For example, consider an entrepreneur who uses his or her credit card to purchase a SaaS subscription from a company that is not registered in Taiwan. Unfortunately, the grant authorities would not recognize this as a “valid” expense.
Finally, be aware that the bulk of any government grant that you receive might be restricted to the specific purpose of subsidizing salaries. Foreign workers may be eligible for subsidies, but only if they have Taiwanese residency (ARC or APRC) and that for certain grants there may be minimum requirements as to how many Taiwanese citizens you must hire. Thus, a strategy of receiving a grant to pay a team of contractors or remote workers, while you worked on your “MVP” as a solo entrepreneur would not work in Taiwan.