Taiwan collection profile

Financial information in Taiwan is readily available for listed companies, which are required to publish quarterly and annual financial reports in accordance with the regulations of the Taiwan Stock Exchange and the Financial Supervisory Commission. These reports are publicly accessible and provide a reliable basis for credit assessment. In contrast, non-listed companies have limited disclosure obligations, making financial information less transparent and more difficult to obtain. Commercial credit rating agencies and information providers do offer supplementary data, but the reliability of such sources can vary.

 Liability for business debts is determined by legal structures, which are described as follows:

Taiwanese law recognises several corporate structures, each with distinct implications for liability. Sole proprietorships (獨資) entail unlimited personal liability for the proprietor, while partnerships (合夥) impose joint and several liability on all partners. Companies limited by shares (股份有限公司) are the predominant corporate form for larger businesses, with shareholders’ liability limited to their capital contributions. Limited companies (有限公司) are commonly used by small and medium enterprises, offering similar limitations on liability.

Foreign companies may operate in Taiwan through branch offices, which are not separate legal entities; consequently, the parent company remains liable for the branch’s debts. Representative offices are also permitted, but these are restricted to non-commercial activities such as purchasing, participation in bidding, conducting negotiations with, signing contracts with, and obtaining quotations from counterparts in Taiwan on behalf of its foreign parent company, and collecting market information, and cannot engage in profit-making operations.

Debt collection is subject to the Civil Code, the Code of Civil Procedure, and relevant commercial regulations. The Personal Data Protection Act may also apply. 

Business claims are adjudicated in the civil court system, with the appliable proceedings are determined by the amount in dispute or the nature of the claim. Depending on the claim amount: (a) Small-Claim Proceedings are used in disputes in which the claim amount is up to NT$100,000; (b) Summary Proceedings are used in disputes in which the claim amount is between NTD 100,001 and NTD 500,000; and (c) Ordinary Proceedings are used for those disputes for which Small-Claim Proceedings and Summary Proceedings do not apply. Appeals against decisions made in Small-Claim Proceedings and Summary Proceedings are heard by a panel of judges of the District Court; appeals against decisions made in Ordinary Proceedings are heard by the High Court; and further appeals to the Supreme Court are possible where the claim amount is more than NTD 1,500,000 and if the litigant’s reason for appeal is that the judge of the lower court did not apply or erroneously applied the laws and regulations. 

Legal representation is permitted but not generally mandatory for civil litigation. However, in the third instance of any litigation, the legal representation is mandatory. Taiwan is a member of the World Trade Organisation and has entered into various free trade agreements; however, Taiwan is neither a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards nor a party to the Hague Convention on Recognition and Enforcement of Foreign Judgments in Civil Matters. That said, Taiwan courts generally recognise foreign final binding arbitral awards or judgments provided that the exemptions set out in the Article 49 of the Arbitration Act or Article 402 of the Civil Procedure Code respectively are not fulfilled. 

Debt collection costs are generally not recoverable from the debtor unless the contract provides otherwise, and in practice, such costs are seldom paid by the debtor.

Ownership protection through retention of title (RoT) clauses is recognised under Taiwanese law, provided the clause is clearly stipulated in the contract. Extended RoT clauses, which cover goods that have been transformed or incorporated into other products, are less commonly enforced and may be subject to judicial scrutiny.

Bank transfer is a payment method which is fast, secure, and widely used in Taiwan for both domestic and international transactions. Cheques are still in circulation but are a bit less popular due to concerns over fraud, loss of the instrument itself and tighter banking regulations. Letters of credit are frequently used in export transactions, offering security for both buyer and seller. Export credit insurance is also available to mitigate the risk of customer insolvency.

When debts become overdue, Taiwanese courts encourage parties to seek amicable settlement before commencing formal legal proceedings. Mediation is available through court-sponsored programmes, and parties who refuse to participate in court mediation without due cause may be subject to cost sanctions.

If amicable efforts fail, legal action begins with a written demand for payment, followed by the filing of a complaint with the appropriate court. The creditor may file a written application to the competent court for a payment order. If the debtor fails to raise an objection within twenty days of service, the creditor is entitled to take the payment order as the legal grounds upon which to initiate compulsory enforcement proceedings. The court may order remedies such as damages, specific performance, or injunctions, although punitive damages are rare.

To support a claim, the claimant should provide all relevant documentation, including purchase orders, invoices, statements of account, contracts, delivery evidence, and any correspondence substantiating the debt.

The limitation period for commercial claims is 15 years from the date on which the claim arises, as stipulated in Article 125 of the Civil Code. Article 126 of the Civil Code stipulates that periodic payments, such as rent or interest payments, are subject to a 5-year limitation period. In addition, Article 127 of the Civil Code provides that payment for goods or payment of service fees (and other types of payment stipulated in that Article) is subject to a 2-year limitation period.  Claims based on negotiable instruments, such as cheques, are subject to shorter limitation periods from 1 to 3 years.

Provisional measures are available to preserve assets or evidence pending final judgment. Courts may grant provisional attachments or injunctions, and ex parte orders are possible in urgent cases, although the applicant may be required to provide security.

Appeals must be lodged within twenty days of judgment, and the High Court reviews both factual and legal issues. Further appeal to the Supreme Court is permitted if the reason for appeal is that the judge of the lower court did not apply or erroneously applied the laws and regulations.

Once a judgment becomes final, enforcement proceedings may be initiated. Enforcement measures include asset seizure, garnishment, and compulsory auction.

The duration of legal action varies: summary judgment may be obtained within six to twelve months, while full proceedings can take one to three years. Mediation or settlement is generally faster, often concluding within two to three months depending on the parties’ willingness to cooperate.

Legal costs are significant, but it is impossible to predict any theoretical or general range of legal fees since they will vary substantially from case to case. The court fee for the first instance is generally set at 1% of the claim amount. The prevailing party may recover the court fee from the losing party, but their lawyers’ fees are generally not recoverable. Contingency fee arrangements are not prohibited in collection matters, but lawyers typically charge fixed or hourly rates.

Alternative dispute resolution methods, including mediation and arbitration, are widely encouraged in Taiwan. Mediation is non-binding unless a settlement agreement is reached, while arbitration awards are binding and enforceable under the Arbitration Act. ADR is generally more cost-effective, confidential, and faster than litigation.

Parties may agree to submit disputes to a foreign jurisdiction in their contract, but Taiwanese courts may refuse to enforce foreign law if it contravenes public policy or mandatory provisions. Foreign forum clauses must be explicit and agreed in writing.

Taiwan is not a party to the Hague Convention on Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters or the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Nevertheless, foreign judgments and arbitral awards may be recognised and enforced under the Code of Civil Procedure or Arbitration Law, respectively, subject to jurisdiction, due service of process, reciprocity and public policy review. Recognition requires that the foreign judgment is final and not contrary to Taiwanese public order and good morals.

Insolvency proceedings in Taiwan may be initiated either out-of-court or through formal judicial processes.

Informal workouts and debt restructuring are possible but require unanimous creditor consent, which can be difficult to obtain. Formal procedures include composition and settlement agreements under the Bankruptcy Act. The Company Act and Bankruptcy Act provide for court-supervised restructuring (reorganisation), but such procedures are complex and infrequently used.

In winding-up proceedings, the liquidator is either stipulated by the law or appointed by the company to manage the liquidation and distribution of assets.

Priority order in debt collection is as follows:

1. Compulsory enforcement costs (Article 29 of the Compulsory Execution Act).
2.  Land value increment tax, land tax, house tax, and business tax arising from the auction or sale of goods in execution (Article 6, Paragraph 2 of the Tax Collection Act
   
3. (1) Mortgage rights, which are satisfied in the order of registration, with earlier registrations taking precedence (Article 874 of the Civil Code); and
   (2)  In cases in which an employer ceases operations, undergoes liquidation, or is declared bankrupt, employees’ claims for wages within six months, retirement payments, and severance pay have the same priority as claims secured by first-ranking mortgages, pledges, or liens (Article 28 of the Labor Standards Act).
   
4. Customs duties, delinquent surcharges, late declaration fees, interest, fines, and recovery of goods’ value payable or collectible under the Customs Act, as well as expenses required for handling, auctioning, or destruction of goods, where no proceeds or insufficient proceeds exist for deduction (limited to cases where the taxpayer has been notified prior to handling) (Article 95, Paragraph 4 of the Customs Act).
5. General unsecured creditors

A Taiwanese court can order the cancellation or reversal of suspicious transactions, particularly in cases of financial crime like money laundering or fraud. A creditor may file a lawsuit within one year of becoming aware of a fraudulent transfer in order to assert its invalidity, as provided in Articles 244 and 245 of the Civil Code.

Insolvency proceedings typically last one to two years, although complex cases may take longer.