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Hiring in Taiwan Without a Local Entity: Employer of Record, Permanent Establishment and Work Permits

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An Austin software company wants two people in Taiwan: a Taiwanese sales engineer who already knows the local semiconductor customers, and an American developer who moved to Taipei with her spouse and wants to keep working for the company. The CFO's instruction is simple: no subsidiary, no branch, keep it light. The question is what "light" is allowed to look like under Taiwanese law (a fictional example).

Three structures are in use. Hire directly from the US and pay by wire. Use an employer of record (EOR), a Taiwanese company that becomes the legal employer and seconds the person to you. Or set up your own entity, which is the subject of the firm's columns on subsidiaries and branches and on representative offices. This column is about the first two, and about the three legal systems that decide whether they work: labor law, immigration law and tax law.

Labor law follows the worker

Taiwan's Labor Standards Act defines a labor contract as an agreement establishing an employment relationship with subordination (Article 2). A "contractor" who works fixed hours, reports to a manager in Austin and uses the company's systems is, on those facts, an employee. The consequences are the ones covered elsewhere on this site: notice periods, severance, annual leave and the limits on dismissal. Calling the person a consultant does not switch those rules off, and the fact that the employer sits in Texas does not either.

The insurance side is where a direct foreign hire of a Taiwanese national breaks down in practice. The Labor Insurance Act makes enrollment compulsory for employees of a company or firm with five or more workers, through the employer as the insured unit; smaller employers may enroll voluntarily (Article 8). The Employment Insurance Act requires enrollment of employees who are Taiwanese nationals, or foreign spouses of nationals with residence, regardless of headcount. The National Health Insurance Act names the employer as the insured unit for employees and gives it three days from eligibility to enroll them. And the Labor Pension Act requires the employer to contribute at least 6% of monthly wages to the worker's individual pension account. Each of these systems expects a registered Taiwanese enrolling unit. A foreign company with nothing registered in Taiwan has no practical way to be that unit, which leaves the Taiwanese employee uninsured and the employer in breach. That is the gap an EOR fills.

What an EOR is under Taiwanese law, and the interview trap

Taiwan regulates the EOR model as labor dispatch. The Labor Standards Act defines the dispatching entity as a business engaged in dispatch, the client entity as the party that actually directs and supervises the dispatched worker under a dispatch contract, and the dispatched worker as a person employed by the dispatching entity who provides services to the client (Article 2, items 7 to 10). In an EOR arrangement the Taiwanese provider is the dispatching entity, the dispatched worker is on its payroll and in its insurance, and the US company is the client entity that gives the day-to-day instructions.

One rule catches foreign clients repeatedly. Article 17-1 prohibits the client entity from interviewing the dispatched worker, or otherwise designating a specific person, before the dispatching entity and the worker sign their labor contract. If the client does so and then accepts the worker's services, the worker may, within ninety days of starting work for the client, give written notice demanding a direct labor contract with the client. The client then has ten days to negotiate; if it does not, or if no agreement is reached, a labor contract is deemed to exist between the worker and the client from the day after the deadline, on the terms the worker had while dispatched. Retaliation against the worker for making the demand is void. For a US company with no Taiwanese entity, a deemed direct employment relationship is exactly the outcome the structure was meant to avoid. The sequence matters: the EOR recruits and signs first, then dispatches.

Foreign nationals: the permit belongs to a Taiwanese employer

The American developer in the example raises a different problem. Under the Employment Service Act, a foreign national may not work in Taiwan unless an employer has applied for and obtained a permit (Article 43), and no one may unlawfully harbor a foreign national for work (Article 44). The employer applies to the central competent authority (Article 48), and the work must fall within the listed categories, the first of which is specialized or technical work (Article 46).

The review standards add the individual's qualifications and a pay floor. Article 5 of the Qualifications and Review Standards accepts a professional license, a master's degree, a bachelor's degree with two years of relevant experience, one year of service in a multinational followed by assignment to Taiwan, or five years of experience with special achievements. Article 8 requires pay not lower than the amount announced by the Ministry of Labor; the Workforce Development Agency's current guidance puts that floor at NT$47,971 per month for specialized or technical work.

Here the EOR model meets a wall. Article 57 forbids an employer from hiring a foreign national in its own name to work for someone else (item 2), or assigning the foreign national to work outside the permitted scope (item 3). Article 63 sets the fine for a violation of Article 57, item 2 at NT$150,000 to NT$750,000, with criminal liability for a repeat within five years. An EOR that obtains a permit for your American developer and then places her under your direction is, on the face of the statute, hiring a foreign national in its name to work for another. Whether and how a dispatch structure can be permitted for a foreign professional is a question to put to the Workforce Development Agency in writing before anyone relies on it. Do not assume the Taiwanese EOR provider has checked.

Two statutory routes avoid the problem. First, the Employment Gold Card. Under Article 9 of the Act for the Recruitment and Employment of Foreign Professionals, a foreign special professional may apply directly to the National Immigration Agency for a card combining work permit, resident visa, alien resident certificate and re-entry permit, valid for one to three years. The official Gold Card site describes it as an open work permit that requires neither pre-confirmed hiring nor an application by an employer, and that allows the holder to work for any company or start a business. If the developer qualifies in one of the announced fields, she can work for the US company from Taipei without any Taiwanese employer at all. Second, Article 51 frees permanent residents, among others, from the Article 46 category limits and lets them apply for permission themselves rather than through an employer; a foreign national married to a Taiwanese national with household registration and granted residence needs no permit at all (Article 48, item 2). Article 51 also has a narrow route for a foreign company with no branch or representative office that needs to send its own foreign staff to perform a contract in Taiwan: the Taiwanese contracting party or an authorized agent applies for the permit.

Pension rules changed recently for foreign professionals. From January 1, 2026, foreign professionals doing professional work fall under the Labor Pension Act scheme (Article 24), with a six-month window for employees already in post to elect in writing to stay under the Labor Standards Act pension rules; this affects payroll costs whoever the Taiwanese employer is. The firm's column on payroll for foreign employees covers the mechanics.

The permanent establishment question

The tax exposure has two layers. First, the individuals. Under Article 8 of the Income Tax Act, remuneration for services performed in Taiwan is Taiwan-source income, with one exception: a non-resident individual who stays in Taiwan for ninety days or less in a tax year is not taxed on pay from a foreign employer. A Taiwan-based employee working the whole year is well past that line, and both the Taiwanese engineer and the American developer have Taiwan-source salary whoever pays it.

Second, the company. Article 3 taxes a foreign-headquartered enterprise on its Taiwan business income, and Article 10 defines the two triggers. A fixed place of business includes a management office, branch, office, factory, workshop, warehouse, mine or construction site, excluding a warehouse used only for purchasing. A business agent is an agent who, beyond purchasing, is authorized to habitually negotiate business and sign contracts for the enterprise; who habitually holds the enterprise's stock and delivers it to others; or who habitually accepts orders for the enterprise. A sales engineer in Taichung who closes deals and signs order confirmations in the company's name fits the first and third descriptions. Where either trigger exists, Article 41 requires separate books for the Taiwan income, and Article 73 makes the business agent responsible for filing and paying the enterprise's income tax. Where neither exists, Taiwanese customers paying the US company withhold at source under Article 88, a topic covered in the column on withholding on payments to foreign companies.

There is no treaty relief. The Ministry of Finance's list of Taiwan's full income tax agreements, checked on the date below, does not include the United States; the only Taiwan–US instrument listed is a 1988 agreement on shipping and air transport income. The US "permanent establishment" vocabulary therefore has no treaty definition to fall back on in Taiwan, and the domestic definitions in Article 10 govern. The practical controls are the familiar ones: no authority to conclude contracts in the company's name, no inventory in Taiwan, orders accepted in the US, and a written job description that matches the facts.

A checklist before the first hire

For a Taiwanese national: decide early whether the relationship will be employment, and if so route it through an EOR or your own entity so that labor, employment and health insurance and the 6% pension are in place from day one. Let the EOR recruit and sign before you meet the candidate as the client, or accept that a direct contract may be deemed. Keep the person's authority below the Article 10 agent thresholds unless you are prepared to register and file in Taiwan.

For a foreign national already in Taiwan: check Gold Card eligibility first, then permanent residence or marriage-based exemptions, then whether any Taiwanese employer can lawfully hold a permit for the role. Pay no less than the announced floor, and document qualifications under Article 5 of the review standards. Treat any EOR proposal to "sponsor" a foreigner for your benefit as unverified until the Workforce Development Agency has confirmed it in writing.

For a Taiwan-side assessment, send the draft job descriptions, the proposed contracting structure and the nationality and residence status of each hire to attorney Wei Tseng (曾雋崴), partner at Hovering International Law Firm (昊鼎國際法律事務所), at wei@hoveringlaw.com.tw. Taipei office: 7F-2, No. 35, Sec. 1, Chengde Rd., Datong Dist., Taipei City 103, Taiwan.

Sources

Sources opened and checked on October 7, 2026 (Taiwan time). Chinese statutory text controls over any English rendering in this column.

General information, not individualized legal advice. Sources checked October 7, 2026 (Taiwan time).

Frequently Asked Questions

Can we just sign a contractor agreement with someone in Taiwan and pay them from the US?
You can sign it, but the label does not decide the relationship: Taiwan's Labor Standards Act defines a labor contract by subordination, so a full-time person who takes your instructions and works your hours is likely an employee with statutory severance, leave and insurance rights, whoever signs the invoice. For a Taiwanese national the employer must also enroll them in national health insurance and employment insurance, contribute at least 6% to the labor pension, and, at five or more workers, enroll them in labor insurance, each of which needs a registered Taiwanese enrolling unit. That gap is why employer-of-record arrangements exist.
Can an employer of record sponsor a work permit for our American hire in Taiwan?
Work permits belong to a Taiwanese employer that applies to the Ministry of Labor and meets its review standards, and the Employment Service Act forbids an employer from hiring a foreign national in its own name to work for someone else (Article 57, item 2), with fines of NT$150,000 to NT$750,000. Whether a particular dispatch structure for a foreign professional is permitted should be confirmed with the Workforce Development Agency before relying on it. The Employment Gold Card is the cleaner route: it is an open work permit valid one to three years that the individual applies for without an employer.
Does one salesperson working from home in Taichung create a taxable presence for the US company?
It can. The Income Tax Act treats a business agent as a taxable presence if the person habitually negotiates and signs contracts for the foreign company, habitually holds its stock and delivers goods, or habitually accepts orders for it (Article 10), and a fixed place such as an office also counts. Taiwan and the United States have no income tax agreement covering business profits, so there is no treaty threshold to fall back on, and limiting the person's authority in writing is the practical control.

This article provides general information and is not legal advice on any individual matter.

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