• Introduction of Laws and Regulations Concerning Investment in the Tourism Industry in Taiwan by Mainland China Investors
  • July 22, 2013
  • Law Firm: Lee Tsai Partners Attorneys-at-Law - Taipei Office
  • Tremendous business opportunities for the tourism industry have been created as the free and independent travel of mainland China tourists is deregulated.  This essay seeks to briefly introduce relevant laws and regulations concerning investment in the tourism industry in Taiwan by mainland China investors.  Different from the negative listing approach for general investment in Taiwan by foreign nationals, a positive listing approach is still followed by the Taiwan government for restrictions on investment in Taiwan by mainland China investors.  To wit, only the business items that are positively listed can be invested by mainland China investors.  According to the latest positive list promulgated by the Investment Commission on March 30, 2012, the items in the tourism industry that are part of the positive list for investment by mainland China investors include the following: 

     

    (1)   Aviation sector

    Currently, the “air transportation sector” has been deregulated.  However, only branch offices or representative offices can be set up, and Taiwan subsidiaries are still off limits.  In addition, the public construction projects in Taiwan that may be invested (not contracted) by people from mainland China are provided as follows:

    Item

    Restrictive Conditions

    Civil aviation terminals and facilities thereof

    Value-added aviation operation facilities, including necessary plant, warehousing, processing and transportation facilities

    They should be located on the terrestrial sides of aviation terminals and do not involve controlled zones. 

    Shareholding of foreign investors (including mainland China investors) shall be lower than 50% and shall not exceed the shareholding of the largest Taiwan shareholder. 

    Aviation enterprise operation facilities refer to office facilities or facilities with transportation system transit functions of aviation enterprises whose construction and operation are invested with an applied land development area of at least one hectare.

    They should be located on the terrestrial sides of aviation terminals and do not involve controlled zones.

    Shareholding of foreign investors (including mainland China investors) shall be lower than 50% and shall not exceed the shareholding of the largest Taiwan shareholder.

    Aviation training facilities

     

    They should be located on the terrestrial sides of aviation terminals and do not involve controlled zones.

    Shareholding of foreign investors (including mainland China investors) shall be lower than 50% and shall not exceed the shareholding of the largest Taiwan shareholder.

    Transit hotels

     

    They should be located on the terrestrial sides of aviation terminals and do not involve controlled zones.

    Shareholding of foreign investors (including mainland China investors) shall be lower than 50% and shall not exceed the shareholding of the largest Taiwan shareholder.

    Exhibition halls

     

    They should be located on the terrestrial sides of aviation terminals and do not involve controlled zones.

    Shareholding of foreign investors (including mainland China investors) shall be lower than 50% and shall not exceed the shareholding of the largest Taiwan shareholder.

    International convention centers

     

    They should be located on the terrestrial sides of aviation terminals and do not involve controlled zones.

    Shareholding of foreign investors (including mainland China investors) shall be lower than 50% and shall not exceed the shareholding of the largest Taiwan shareholder.

    Parking lots

     

    They should be located on the terrestrial sides of aviation terminals and do not involve controlled zones.

    Shareholding of foreign investors (including mainland China investors) shall be lower than 50% and shall not exceed the shareholding of the largest Taiwan shareholder.

    Maintenance hangars

     

    Facilities of joint military and civil airports are not deregulated.

    Shareholding of foreign investors (including mainland China investors) shall be lower than 50% and shall not exceed the shareholding of the largest Taiwan shareholder.

     

    (1)   Car rental sector

    Currently, mainland China investors are only allowed to operate small passenger vehicle rental (with or without drivers but the vehicles should be smaller than 9 seaters) and small truck rental (without drivers) business.  Please note that if the operation of small passenger vehicle rental in Taiwan is sought, establishment preparation application shall be filed with the competent highway authority on the level of the central government or a municipality under the direct jurisdiction of the Executive Yuan having jurisdiction over the principal place of business of such automobile transportation enterprises (i.e., the local transportation department of the municipality under the direct jurisdiction of the Executive Yuan or the Directorate General of Highways of the Ministry of Transportation and Communication if such enterprises are not located in municipalities under the direct jurisdiction of the Executive Yuan).  The registration certificate of each vehicle of small passenger vehicle rental enterprises shall indicate that such vehicle is a small self-use passenger vehicle for rental or a small self-use passenger and cargo vehicle for rental.  If the lessors need to hire drivers, the lessees are required to hire drivers holding a professional small vehicle driver's license on their behalf.  The rental of large passenger vehicles (such as tour buses) is not yet deregulated. 

    (2)   Dining sector

    The whole dining sector has been deregulated for operation by mainland China investors with deregulated items covering restaurants and hotels, nonalcohol beverage stores and alcohol beverage stores.  Please note that when a restaurant is to be set up in Taiwan, it shall be located in a commercial zone (which should be confirmed with the urban development department of the local government), the establishment of a restaurant should be permitted by the construction license for the building in which the restaurant is located, and fire safety inspection and sanitation and food safety inspection should be passed. 

    (3)   Tourist/leisure sector

    Mainland China investors currently can invest in amusement parks and theme parks, including general service parks which provide mechanic equipment for riding, water entertainment facilities, games, performances and shows, and thematic exhibitions.  However, forest recreation areas are not included.  In addition, the public construction projects for major tourist and leisure facilities that mainland China investors may participate refer to the leisure (recreational) facilities as well as accommodation, dining and narrative facilities, transportation facilities within the areas, transportation access to outside areas, yacht docks and their relevant facilities within scenic areas or special scenic areas and other leisure (recreation) areas recognized by the competent authority for specified business, including all scenic areas in Taiwan.  There are 13 scenic areas on the national level and 44 scenic areas on the level of a municipality under the direct jurisdiction of the Executive Yuan and of a county (city). 

    (4)   Hotel sector

    Currently, mainland China investors are only allowed to operate tourist hotels consisting of international tourist hotels and ordinary tourist hotels, which should have at least 30 single rooms, double rooms and suites.  In addition, international tourist hotels should have restaurants, conference facilities, cafes, bars (beverage lounges), banquet halls, gyms, stores, special cabinets for the safekeeping of valuables, satellite program reception equipment, and ordinary tourist hotels should have restaurants, cafes, conference facilities, special cabinets for the safekeeping of valuables, and satellite program reception equipment.  Ordinary hotels (including motels) and hostels are not yet deregulated. 

    (5)   Wholesaling, retailing and department stores sector

    Currently, mainland China investors are allowed to operate department stores business (which is limited to the other general goods retail business under ROC Standard Industrial Classification No. 4719, with the exception of pharmacies, drugstores, cosmaceuticals stores or the retail of live animals).  The retail goods in this category are mostly general goods, including apparel, furniture, electronic appliances, hardware, cosmetics, jewelry, toys, and sports goods sold in department stores or retail hypermarkets.  

    (6)   Convention and exhibition services

    The items currently deregulated for investment by mainland China investors include convention services such as the organization and management of conferences and international convention centers which are public construction items. 

    (7)   Travel agency business

    Currently, business relating to travel agencies is not yet deregulated for investment by mainland China investors. For example, the J902011 travel enterprises refer to those profit-seeking enterprises which receive compensation for services relating to the design and arrangement of itineraries, food and accommodations and tour guides, as well as agency for the purchase or sale of transport passenger tickets and for handling visa applications for overseas travel.  Such business, which includes tour consultation, is not deregulated.

    (8)   Sports service sector

    The sports service sector which has been deregulated for investment by mainland China investors is limited to 9319 Other Sports Service Sector, which includes enterprises that engage in sports services other than those detailed under 9311 and 9312, e.g., the organization of sports events, sports adjudication, professional guidance to athletes and other sports-related auxiliary services.  However, this does not include:  (1) the rental service for leisure and sports equipment should be included in Subcategory 7731 “Rental Business for Sports and Recreational Articles”; (2) sports guidance services not for tournament purposes should be included in Subcategory 8573 “Sports and Leisure Educational Service Business”; and (3) commercial establishments in the format of sole proprietorship, joint venture, partnership and branch office in Taiwan, which are limited to Schedule IV Trade in Service Early Harvest Sectors and Deregulation Measures - Taiwan’s Deregulation Commitments to Nonfinancial Service Sectors under the Cross-Strait Economic Cooperation Framework Agreement. 

     

    Conclusions

    The restrictions upon investment by mainland China Investors under the current laws and regulations of Taiwan are stricter than those on other general foreign investors.  The Taiwan government adopts a progressive and incremental deregulation policy regarding investment in Taiwan by mainland China investors.  Currently, the tourism industry is an industry that promises good business opportunities and has sufficient deregulated items in Taiwan.