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Free Trade Zones in Taiwan
Ministry of Transportationand Communications, Taiwan, R.O.C.
2010
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I. The Planning of FTZs
II. The Special Features of the System
III. Introduction to Each FTZ
IV. Operating Models for FTZ Enterprises
Contents
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The Planning of FTZs The meaning and status of FTZs
Special zones that are “inside national territory but outside customs”: Creating an excellent environment for transnational business operations by lowering barriers to the flow of goods, commerce and people.
The creation of special zones for “logistics, transshipment, and value adding”: Combining the functions of seaports and airports with meeting all the needs for supply-chain management, to strengthen users’ competitive advantage.
Special zones as trial points for “comprehensive trade liberalization”: Placing stress on autonomous enterprise management, while expanding liberalization across the plane through point and line trial implementation.
Ships or airplanes arrivingat seaports or airports
Simple-processing, storage, & transshipment operations zone
Flow of goods at import/export points
Tax Area, Bonded Zone
Multi-stage value-addedoperations zone
Businessservices center
Flow of people at entry/exit points
FTZs
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Convenient business entry
(Convenient entry visa for business people, with facilities provided for exhibition and trade activities)
Practical organizational form(Can set up in a zone as a branch, office, operations department, etc.)
Tax preferences(Goods,machines and equipment for operation and private use are exempted from relevant taxes and fees. Goods purchased domestically are free from business tax. Foreign for-profit businesses storing and/or performing simple processing are exempted from business income tax.)
Relaxation of foreign-worker hiring ratio (Foreign workers
may constitute up to 40% of employees)
Diversified operational scope (Can carry out
rearrangement, processing, fabrication, etc.)
FTZs
The Special Features of the System
Free flow of goods(Exempt from customs checking,
inspection, and escort; adoption of reporting or monthly reporting
system)
Single-window administrative service (Each FTZ has a single administrative
service and management authority)
Special coordinating mechanism(An FTZ Cross-Departmental Working Group is specially charged with deliberating on related policy and coordinating inter-zonal affairs)
Service side
Service side
Cost side
Cost side
Efficien
cy side
Efficien
cy side
Fu
nction
al F
un
ctional
side
side
Source: Compiled by CEPD,MOTC.
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The Special Features of the System - Efficiency Side
Other FTZs
Bonded zonesProcessing zones
Science parks
Tax areas
Reporting
Customs clearance under bonding regulations
Customs clearance under export/import regulations
Guard
Reporting
FTZ Enterprise
FTZ Enterprise Reporting
1. No customs clearance, and no document checks as a rule.
2. Simple entrepot consignment operations handled under provisions of Customs Act.
3. No limitation on storage time.
5. Can opt for monthly reporting, with inter-zonal customs reporting of FTZ goods.
6. Can opt for monthly customs reporting and clearance.
7. Can opt for monthly customs reporting and clearance.
4. Can opt for monthly reporting.
FTZ
Logistics
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Cost side 1: Tax preferences
Tax areas
Other FTZs
Bonded zones
FTZ enterprise
FTZ enterprise
Subject to bonded cargo regulations.
Zero-rated business tax.
Subject to export cargo regulations.
Subject to import cargo taxation.
Exempt from payment of tax
1. Goods and equipment imported are exempt from related taxes and fees.
6. Taxed on value on leaving FTZ minus value added in the FTZ. 7. Shipped back to FTZ after processing outsourced outside zone. 8. Exempt from trade promotion service charges unless shipped to tax area.
3. Zero-rated business tax for domestic procurement.
4. Zero-rated business tax for goods stored in FTZ for export by sales from bonded area to exporting company or from tax area to bonded area .
5. Zero-rated business tax for operator outside FTZ transporting goods to zone under instructions of foreign customer and obtaining foreign exchange.2. Zero-rated business
tax on sale of services within FTZ.
The Special Features of the System- Cost Side (1/2)
FTZ
Exempt from payment of tax
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Cost side 2: Tax preferences Preferential measures for business income tax:
Foreign for-profit businesses or their branch companies in Taiwan that apply for establishment or delegate free-trade-zone enterprises to store and/or perform simple processing in FTZs and sell the products in and out of Taiwan shall be exempted from business income tax. In the event that the annual domestic sales exceed 10% of the total of annual domestic and foreign sales, the exceeded portion shall not be exempted from business income tax.
Overseas customer
FTZ enterprise
Owner of foreign goods
100% of the total sales exempted from tax
Commissioning to store & simple
processing
The Special Features of the System- Cost Side (2/2)
Domestic Customer
10% of the total sales exempted from tax
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The Special Features of the System - Functional Side
Tax areas / bonded zonesGuard
FTZ Enterprise
FTZ Enterprise
1. May import and store unopened goods from China. 2. Allowing FTZ enterprises to
conduct a diverse range of business, including trade, logistics, transshipment, value-adding, and technical services.
FTZ Enterprise
FTZ Enterprise
3.The entity applying for establishment as an FTZ enterprise is a company or the Taiwan branch of a foreign company, while the operating entity can be an office or other operating unit.
FTZ
Applying entity
5. Permitted imports from China may be shipped to tax zones
4. May be labeled as “Assembled in Taiwan” after rearrangement that does not amount to substantive transformation.
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The Special Features of the System- Service Side (1/2)
1.Policy review of FTZ
development
2.Reviewing on the case of FTZ
application and establishment
3.Coordination of cross-
department affaires
convener : Political Deputy Minister of MOTCVice-convener : Director of Department of Aviation and NavigationStaff Members : vice-chiefs of bureau,department and office from MOF and MOEA
1.Execution of FTZ affaires
2.Single-window administration
services
FTZ enterprises
FTZ enterprises
FTZ Cross-Ministries
committee,MOTC
FTZ Working Group
Convener : Vice-Chief of administrationStaff:harbor bureau(CAA)Staff members: National Immigration Agency, Customs, Harbor Police( air police),Fire Control, Local Government and other relevant ministries and commissions
1.Coordination of FTZ issues
2.reviewing on cases of FTZ business application and establishment
3.reviewing on the certificate letter of owner of foreign goods
FTZ Administrative
Authorities(CAA、 HB)
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The Special Features of the System - Service Side (2/2)
Application by business to operate in FTZ
Eligibility
Undertaking of trading, warehousing, logist
ics, container (cargo) terminal, entrepot, tra
nsshipment, freight forwarding, customs re
porting service, assembling, rearrangement,
packing, repair, processing, manufacturing,
inspection, testing,exhibition, technical serv
ices, or FTZ storage businesses.
Documentation required1. Application form.
2. Business plan (including financial plan).
3. Goods control plan.
4. Explanation of customs reporting and
book keeping. 5. Investors’ identification documents.
Application Qualified
Operatio
n
Approv
al
After 6 months in operation, check whether operating in accordance with submitted documentation.
Review by FTZ management authority
jointly with
Handled and assisted by
specially assigned personnel
Customs and other related agencies
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FTZs and Industrial Zones
Hsinchu Science Park Electronics and information Software Opto-electronics (photonics)
Kaohsiung Petrochemicals Steel Electronics
Yunlin Science Park Textiles Opto-electronics (photonics)
Nangang Software Park Software Knowledge-based industries
Southern Taiwan Science Park Opto-electronics (photonics) Machinery Food Biotechnology Environmental protection
Central Taiwan Science Park Opto-electronics (photonics) Precision machinery Nano materials Aviation and space industry
Keelung Port FTZTaipei Port FTZ
Taichung Port FTZ
Taoyuan Air Cargo Park FTZ
Kaohsiung Port FTZ Source: Compiled by CEPD,MOTC
Introduction to Each FTZ
Suao Port FTZ
Opto-electronics (solar energy)Chemical Engineering, ironware machineryComputer peripherals
Lize & Londe Industrial Park
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Operating Models for FTZ Enterprises
FTZ
Source: Compiled by CEPD,MOTC.
Final goods
Semi-finished products
Raw materials
Value-adding consolidation of goods from different countries,
international distribution hub, andregional maintenance & repair services
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Value-adding consolidation of goods from different countries Raw materials, semi-finished goods and finished goods from Taiwan and abroad are brought together and stored in the zones, where they undergo rearrangement, simple processing, value-adding, out-contracted processing, and so on, prior to re-export.
Operating Models for FTZ Enterprises
Overseas
FTZ Tax areas / bonded zones
Storage, value-adding
Out-contracted processing
ReportingMonthly customs reporting
ReportingMonthly customs
reporting
Source: Compiled by CEPD,MOTC.
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International logistics and distribution services Final goods produced in Taiwan and abroad are brought together for storage and inventory management in the zones, or for rearrangement, simple processing, and other such value-adding services, before being distributed to local customers or shipped to customers overseas.
Operating Models for FTZ Enterprises
FTZ
StorageInventory management
Distribution
(Simple processing)
Overseas customers
Local customers
Tax areas / bonded zones
Monthly customs reporting
Monthly customs reporting
Reporting
Reporting
Overseas
Source: Compiled by CEPD,MOTC.
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Regional maintenance and repair services Providing domestic and overseas manufacturers with services for inventory management of parts for maintenance and repair, and for testing, maintenance, repair, and re-export of goods returned for repair by customers.
Inventory managementTesting, maintenance
& repair
FTZ Tax areas / bonded zones
Monthly customs reporting
Monthly customs
reporting Out-contracted
testing & repair
Overseas
Reporting
Reporting
Operating Models for FTZ Enterprises
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Invest in Taiwan, operate Invest in Taiwan, operate
globally !globally !
End