The Company Act of Taiwan was amended on July 1, 2015 to add a special section on close companies, allowing a close company to contribute equity capital by service or goodwill within certain percentage.

Close companies although breaking the equity capital contribution model of cash or assets in the past, so that entrepreneurs can contribute equity capital to set up companies by service or goodwill to reduce financial pressure in the initial phase of starting a company, to obtain a stock by service or goodwill, special attention should be paid to avoid being heavily taxed.

Although contribution of capital by service or goodwill enjoys convenience, the stock obtained is included in the individual income tax.

If the articles of association stipulate that the shareholding obtained by service value should not be transferred within a certain period of time, the income from the shareholders calculated at the current price of each share on the disposal date after the expiry of the period, should be taxed. However, if the articles of association do not restrict the transfer of the shareholdings for a certain period of time, the date of acquisition of the shares is deemed as the disposal date, and the shareholders' income calculated from the offsetting amount recorded in the articles of association, should be taxed as individual income tax of the shareholders. A new business is a high-risk, high-paying investment. The timing of taxation and the tax rate also increase the volatility of the entrepreneurial risk, which will affect greatly the tax burden of individuals.

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