To Do Business in Taiwan - Example

Accounting Issues while doing business in taiwan] The different accounting issues which foreign subsidiary has to deal with while doing business in Taiwan like income taxes, exemptions, and other issues which the business and the accountant needs to look at Table of Contents Executive Summary 3 Introduction 4 Accounting Issues 4 Anti-Monopoly Law 5 Tax Benefits 7 Conclusion 10 References 11 Executive Summary Conducting business on a global arena requires that the foreign subsidiary is able to look at different accounting and other issues which help to improve the overall condition for the accountant. The foreign susbidiary looking to do business in Taiwan has to look into issues related to taxation as it has an effect on the final bottomline. Further, being able to integrate the different exemption and tariff requirements as laid down by the law will ensure better goverance and reduce the chances of a legal battle. The foreign subsidiary further has to look towards adhering to the requirements of the law and look towards developing a strategy which focuses on all aspect of the taxation requirements so that the business is able to meet the legal burden and continue with their operations smoothly. Ignoring any factor will affect the business as it could lead toward legal problems or fines or even closure of the business. Further, being able to understand the different situations and taxation requirements will also help the foreign subsidiary in Taiwan to gain various tax benefits which will thereby transform into better business opportunities and ensure that the foreign subsidiary is able to gain all advantage. Introduction Developing a business which looks to work on the global arena and having a subsidiary abroad is one of the most complex issues that managerial has to deal with (Edstrom and Galbraith, 2007). It has been seen through various researches that using the traditional principles which focuses on formal process doesn’t work in the international arena and requires global mindsets which helps to deal with the different accounting and others issues that the business has to deal with (Barlett & Ghoshal, 2009). Further, foreign subsidiaries have to deal with legitimacy complex and specialization issues in relation to the accounting stature (Li, Karande & Zhou, 2009). This paper looks to present the manner in which the accounting and other issues that business looking towards a foreign subsidiary in Taiwan. This will present the manner in which the different accounting issues will have to be dealt while looking towards developing a foreign subsidiary in Taiwan. This thereby makes the paper to focus on foreign subsidiaries looking towards a business opportunity in Taiwan after understanding the external environment so that transition economies take place (Ouchi, 2009). Accounting Issues It has been seen that organization looking at foreign subsidiaries need to focus on the uncertainty that the task environment creates and the manner in which differentiation and integration of factors help to ensure proper use of accounting issues (Lawrence & Lorsch, 2007). This makes it important that the foreign subsidiaries understand the transition cost that the business has to consider while looking to operate as a foreign subsidiary (Roth, 2008). Transition cost has relevance in case of foreign subsidiary which makes it important that the business looks to understand the manner in which the cost has relevance on foreign subsidiaries working in Taiwan The fact that the transition cost is very high in Taiwan it increases the likelihood of the chances of market failure. Having a low transition cost will ensure that the chances of failure are low as the extra cost has to be passed on to the consumer which would transform into development of hierarchy and increase the risk for the business. This will thereby make it difficult for the business to be effective in its foreign subsidiary and will make it difficult to reap the same benefits that were reaped in the host country. The other accounting issue that the foreign subsidiary has to deal with in Taiwan is the manner in which compensation of employees is treated (Scofield and Wilhelm, 2009). The accountant need to ensure that certain expenses which have been incurred on employees like housing allowances, meal and laundry allowances, home leave allowances, relocation allowances are exempted from taxes (Scofield & Wilhelm, 2009). This would require that the accountant is able to identify those expenses and treat them correctly as it would otherwise have an effect on the working condition of the business. Being unable to deal with the treatment of expenses correctly would mean that the business has ignored some of the relevant tax aspect of the business which would thereby have an effect on the manner the business is done and might thereby have an effect on the manner in which the business is done by the foreign subsidiary. Another issue which is very pertinent in case of foreign subsidiary is the organizational culture which is different (Chu and Herrero, 2007). It is important that the organization structure and accounting issues are dealt and implemented based on the country of origin. This will increase the difficulty level for foreign subsidiaries in Taiwan as they will have to deal with the accounting issues of the foreign country. This requires that foreign subsidiaries working in Taiwan develop their organizational roles and strategies based on the requirements of local place (Bartlett & Ghoshal, 2009). This will help to give the required leverage that foreign subsidiaries require and will help to mold the manner in which work needs to be carried out in Taiwan. Anti-Monopoly Law Taiwan has also developed an anti-monopoly law which requires that foreign subsidiaries looking to do business in Taiwan understands the impact of the law that the business will have to face in relation to the accounting issues. This would mean that the foreign subsidiary business can be halted due to the breach of the law which would mean that the business will have to deal with different accounting issues which would also lead towards the closure of the business (Paik and Sohn, 2009). The foreign subsidiary also has to deal with the manner in which the government has laid rules which prohibits certain goods to be traded and dealt in (Donaldson, 2009). This is an area that the accountant has to look into as it would otherwise prohibit the restricted goods act which would mean that the business will have to deal with different legal requirements and fines. This could also complicate the matter to such an extent that the business has to look towards stopping the business in the foreign country and will lead towards legal actions (Li, Kirande & Zhou, 2009). This makes it important that the accountant clearly presents the different issues and areas which the business has to look into so that the business is able to gain efficiency which will help the business to be able to deal with the issues in the most productive manner. The government has also prescribed the tariff rate on different goods and services which need to be abided at all cost (Gencturk and Aulakh, 2011). This could lead towards different accounting issues which the accountant needs to address. The inability of the foreign subsidiary to ensure proper tariff rates on the different services and products would lead towards legal problems and fines. This could hamper the manner in which the foreign subsidiary was looking to conduct business and requires that the accounting aspect in relation to the matter is properly looked into. This will also help the foreign subsidiary to ensure that the correct prices are charged after applying the tariff for the relevant product or services which will indirectly help the business to ensure that they match the legal requirements as prescribed by the country. This will also transform to different tariff exemption that the government looks to provide (Sue-Chan and Dasborough, 2006). Since, adhering to the tariff requirement is a legal consideration for every foreign subsidiary and being able to ensure it will help the business to develop a strategy through which the business is able to look into the taxation aspect and ensure proper dealings. This will help to bring the required transparency and flexibility in the accounting system and will thereby make the business to de able to deal with the different situations easily. The accountant also needs to consider the importance of anti dumping that the government has passed. This would require that the accountant is able to understand the manner in which breaching the anti dumping law will affect the financials of the company (Mustaffa, Rashid, & Sambasivan, 2007). The accountant needs to develop a mechanism through which the business evaluates the different factors and considers the manner in which the anti dumping act will have an effect on the business prospect and would also result into anti dumping tax. This is an area that the accountant needs to look into and by considering the manner in which anti dumping law and its aspect will be dealt in an important area for the accountant to consider as it will help in the business to be carried out effectively. Tax Benefits Doing business in Taiwan also ensures that the foreign subsidiary is able to get certain tax benefits which make it a destination which different companies look at. The Taiwan government has various tax sops like exemptions or reductions, discounts on taxable income, super deductions of expenses and investment tax credits on qualifying expenditures (Griffiths & Zammuto, 2008). This makes the foreign subsidiary get an opportunity to get various tax incentives due to the various accounting benefits that the business will get. This has made the foreign subsidiaries look towards Taiwan due to the various tax benefits enjoyed by them. The only important thing that the foreign subsidiary has to look into is the different criteria which exists and makes the foreign subsidiary eligible for different tax incentives (Greenwood & Hinings, 2006). The government has made the tax incentive structure in such a manner that certain incentives are provided when the foreign subsidiary is able to meet the criteria that the government has passed for business enterprise whereas other incentives are provided when the business has achieved certain transaction (Greenwood & Hinings, 2006). This thereby is an accounting issue which foreign subsidiaries need to look into as it would otherwise have an effect on the overall business scenario. This issue needs to be handled in the most effective manner as it would otherwise transform into a situation where the business is only able to visualize the benefits but unable to achieve it. This requires that the accounting department understand the details and look towards incorporating it in their business environment so that the business is able to receive certain tax incentives. The foreign subsidiary working in Taiwan has to understand the manner in which income tax is levied in the country. The government has ensured a flat 25% income tax for foreign subsidiary which the businesses working in Taiwan need to look into (Li & Samsell, 2009). The foreign subsidiary while looking to work in Taiwan needs to understand the manner in which the income tax structure will have an effect on the overall working. Along, with it the foreign subsidiary also has to consider the different items on which the government has allowed income tax exemption. This requires that proper accounting planning is done by the foreign subsidiary as it will otherwise have an effect on the final profits and the outcome of the business. This will thereby require that proper financial planning is done so that the business is able to deal with the requirements of the income tax in an efficient manner and ensure maximum chances of being able to deal with the financial issues. This will thereby help to develop the business of the foreign subsidiary and will thereby have an impact on the working condition of the foreign subsidiary. The government has also ensured the manner in which VAT needs to be looked into for companies looking to do business in Taiwan. The government allows certain VAT incentives to foreign subsidiary which is a concern for the accountants and need to be looked into. The government allows certain VAT incentives which the accountant needs to look into and needs to plan the manner in which the business will be conducted (Li & Filer, 2009). The government has looked towards VAT incentive of 17% on exports of goods and services from the country (Paik and Sohn, 2009). This is an area which foreign subsidiary needs to look into carefully as it will have an impact on the manner the business looks to understand the business environment. Being able to develop accounting solutions to the problem and ensuring a mechanism through which the business is able to ensure better profits will ensure that the business is able to take advantage of VAT issues which will thereby gradually lead towards better control of the accounting issues and will help to ensure effective business development. The government also provides an incentive of 5% for transfer of intangible assets to the country (Miller and Eden, 2006). This is an issue which the business accountant needs to look into as developing a mechanism through which the foreign subsidiary is able to gain effectiveness. This will require that the accountant is able to concentrate on a strategy through which the foreign subsidiary is able to ensure benefits. This will have a positive impact on the performance as it will ensure that the business is able to save on taxes and ensure certain incentives which will help to cut cost and ensure that the business is able to maximum leverage for the business. The accountant through this aspect will be able consider the different factors through which the business is able to ensure certain technology benefits which will help to ensure that the business is able to get the required incentive for the business. The accountant along with it also needs to consider the other taxes that the business will have to incur while doing their business in Taiwan. It is important for the accountant that the different aspect related to the taxation purpose is considered as it will lead towards widespread effect on the business (Sue-Chan and Dasborough, 2006). The accountant needs to look into the manner in which the different taxes will have an impact on the business and needs to consider the manner in which the overall business will be affected. This requires that the accountant is able to look into different factors which has an effect on the business and needs to improve it. In case the accountant doesn’t consider this situations and identify the manner in which the financials of the foreign subsidiary will be affected then it could make the business fail. This could also create a situation where the business is unable to gain with the different issues that need to be addressed from time to time. Along with it the accountant needs to ensure that all the rules of the business are considered so that the business is able to fetch maximum efficiency. This requires that the foreign subsidiary is able to consider the manner in which the different rules have different effect on the working environment. This will also require that the accountant of the foreign subsidiary is able to understand the different rules clearly so that the business is able to understand the different factors which will have an effect on the business which will require that all the factors which are important for the business is looked into. Conclusion Thus, the foreign subsidiary looking towards working in Taiwan has to deal with a lot of accounting and other issues. The foreign subsidiary has to deal with issues related to taxation, duties, laws and general environment which need to be looked completely. Ignoring any factor will affect the business as it could lead toward legal problems or fines or even closure of the business. This highlights the importance of considering every area and factor which has relevance on the working condition of the foreign subsidiary as ignoring any could have an effect on the business. Further, being able to understand the different situations and taxation requirements will also help the foreign subsidiary in Taiwan to gain various tax benefits which will thereby transform into better business opportunities and ensure that the foreign subsidiary is able to gain all advantage. Thus, the foreign subsidiary needs to look into a lot of efforts and after considering the factors the foreign subsidiary has to ensure proper planning and adhering to the rules so that the business is able to gain effectiveness and ensure maximum growth and opportunity for growth in a foreign land. References Bartlett, C., and Ghoshal, S. 2009. Managing across borders. Boston: Harvard Business School Press Chu, M., and Herrero, G. 2007. Tata Consultancy Services Iberoamerica. Harvard Business School Case #9-705-020. Donaldson, L. 2009. The contingency theory of organizational design: Challenges and opportunities, In Burton, R.M. (ed.) Organization design: The evolving state-of-the-art. 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