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What should you know before opening a restaurant in Taiwan?
Running a restaurant is a dream for most people. As an accountant, I have helped many clients set up their restaurants. I can't give you any good suggestions about how to make a dish or how to find a good location. However, I can help you avoid some risks. Here conclude some points that you should know before opening your dream restaurant.
1. Is the location an illegal structure or the location cannot use for a restaurant purpose
You find a fantastic location for your restaurant. Alternatively, you see a restaurant that the ex-owner is going to retire, and he is willing to sell all the restaurant decoration and equipment to you as well as the secret recipe for a very reasonable price. However, before you sign the lease with the landlord or sign the contract with the ex-owner. You should check if the location is legal to run a restaurant. You can use the address to check the land use standard 土地使用分區. Every city has its "land use standard" 土地使用分區. If you are in Taipei city, you should follow the Taipei City land use standard (臺北市土地使用分區附條件允許使用核准標準).
Ask your real estate agent to check if the location is legal for the use of the restaurant. Please don't ask your landlord for they probably don't even know the rules. In recent years, the Taipei mayor has eradicated many illegal structures in the city. You may need to move to the new location once the restaurant is designated as an unlawful structure to be closed and demolished. The landlord won't compensate your business loss in the decoration and not able to operate.
Taipei mayor vows to end construction of new illegal structures (Formosa News 2015/04/01)
2. The landlord is not willing to report the rent
Some landlords tell you they can't issue the uniform invoice to you. It is possible especially when the location is very popular. He tells you one of the requirements to become his tenant is that you can't report his income. The landlord is against the law. Here we discuss what tax benefit you lost and how you can do it.
Q: How do I account for this payment for my company?
A: Even the landlord does not issue you the uniform invoice, you still can use the (1) lease and (2)the proof of payment such as bank remittance receipt to account for the expense since your company pays the rents.
Q: Can I claim back the VAT on it?
A: If you do not get the uniform invoice, you can't claim it back.
Q: Can I deduct the expense from the company income tax?
A: If you do not get the uniform invoice, you can't deduct the expense from the company income tax.
Q: What can I do if my landlord is not willing to report his rent income?
A: The tax burden for the rent sometimes is less than the landlord thinks. If the landlord is an individual, tell them only 57% of the rent income becomes their taxable income. In some cases, landlords don't quite know how much they should if they file the rent income. I helped some landlords estimate their tax after including the rent. They agree to report the rent after they understand their tax burden. Some landlords may ask the tenant to pay their 10% of leasing tax. This 10% of leasing tax becomes the burden of the restaurant. I am telling you that the company income tax rate is 20%. You can deduct the rent expense. It is your option whether to take the offer or not.
3. Franchising fee withholding tax issue
The franchising fee pays to the foreign company is subject to 20% of the withholding tax for it is a Taiwan source income. The franchisee is responsible for withholding the equivalent of 20% from amounts paid as franchise fees. In some cases, franchising contracts stating that the franchisee pays this 20% withholding tax. That means the Taiwan restaurant pays not only 100% of the franchising fee to the foreign franchiser but also an extra 20% withholding fee to the Taiwan tax authority. For example, you sign a franchising contract with franchising chain restaurant, you are required to pay them NT100,000 net of tax. Therefore, as a franchisee, you need to pay NT100,000 for the fee and NT20,000 for the tax that the Franch chain restaurant should pay but is not willing to pay.
4. Rent a premise at a department store
Once you rent the space at department stores in Taiwan, please read the lease very carefully. The monthly rent is not fixed. Most contracts with the department stores charge a fixed amount of rent plus the promising rate of monthly sales turnover. They might charge a monthly management fee, seasonal decoration fee, advertisement fee, clean fee, etc.
Please also read the termination term very carefully, some department stores may impose a huge penalty on early termination of the lease.
5. HR issues
The company needs to contribute almost 18% monthly salary for labor insurance, health insurance, and pension for every employee it hired. Make sure you already include such extra expenses, when you do the budget.
The overtime is 133% ~ 200% of the regular salary rate.
Work shifts like AM10:30 ~ AM2:30 4 hours to PM5:00~PM9:00 4 hours is hard to hire employees.
Your foreign chefs do not meet the requirements to apply for the work permit
More questions? Let us guide you further
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