| Criteria | Score (4-0) | Rationale |
| Laws on VC/PE fund formation and operation | 3 | Transparent laws permit widespread fund activity, though with some restrictions (minimum capital of NT$200m to start a fund, banks with a limit of 5% ownership in any one fund, and qualified securities limited to 10% in any one fund and 10% of total net worth) (EIU Country Finance Report). |
| Tax treatment of VC/PE funds & investments | 3 | Complex tax structure. No capital gains or withholding on disposal of marketable securities, though there is a 0.3% financial transactions tax. A separate levy on financial firms beyond the corporate income tax was phased out in 2005. There are tax incentives for holding shares for three years or more in selected sectors (CF). Income from business operations is taxed only once, as personal income (EIU Country Commerce Report). |
| Protection of minority shareholder rights | 1 | There are no independent directors, and the voice of minorities remains very weak in the family or small network-based SMEs that dominate Taiwan's economy (EIU Country Commerce Report). |
| Restrictions on institutional investors (pension funds, insurance firms) investing in VC/PE | 2 | Insurance: most restrictions removed in 2001; only remaining ones are that insurers' stake in an individual company's stocks or bonds not exceed 10% of its capital and that its stakes in all stocks and bonds not exceed 35% of capital. Pension fund are underdeveloped and government-run and invest very conservatively. (EIU Country Finance Report) |
| Protection of intellectual property rights | 3 | Economist Intelligence Unit IP Protection Index. Assessment of the protection of intellectual property in this country. |
| Bankruptcy procedures/creditors' rights/partner liability in cases of an invested company's bankruptcy | 2 | Corporate reorganisation, which is part of company law, applies only to public companies or those issuing bonds, and it can be time-consuming; firms often use recourse to it as a bargaining chip to extract better terms from creditors. Reorganisation allows creditors to share in bankrupt firm's assets on a proportional basis (EIU Country Finance Report, EIU Country Commerce Report). In an international IDB study, Taiwan ranks moderately on de jure and de facto creditor rights. |
| Capital markets development and feasibility of exits (ie, local IPOs) | 3 | Average of Economist Intelligence Unit's Indices for Stockmarket, Financial distortions, Foreigners' access to capital market and Access to investment finance |
| Registration/reserve requirements on inward investments | 2 | Some foreign exchange controls and substantial monitoring remain. No reserve requirements, though individual investors are limited to US$5m investments (EIU Country Finance Report). |
| Corporate governance requirements | 2 | Listed companies must include independent directors from 2002, when the exchange also introduced a voluntary code of governance. As compared to OECD average, World Bank rates country slightly below average in director liability and investor protection and slightly above in disclosure. Governance remains a problem as small groups or families have tended to run Taiwan's numerous SMEs with little input from "outsiders" (EIU Country Commerce Report). |
| Strength of the judicial system | 3 | Economist Intelligence Unit's Fairness of judicial process ranking. Assessment of the extent to which the legal process/the courts can be interfered with or distorted to serve particular interests. |
| Perceived corruption | 2 | Economist Intelligence Unit's Corruption Index. Assessment of the pervasiveness of corruption among public officials. |
| Quality of local accounting industry/use of international standards | 3 | Convergence to international standards has been officially mandated and is underway (EIU Country Finance Report, CS, International Forum for Accountancy Development) |