Taiwan (Updated April 2024)

Taiwan

Report Topics:

1:- General Information

2:- Cooling-off Period

3:- Pyramid Schemes

4:- Multi-Level Marketing

5:- Prohibition on Products

6:- Credit Restrictions Country

7:- Money Collections

8:- Licenses

9:- Status of Direct Sellers

10:- Earnings Claims

11:- Taxes and Fees

12:- Social Security

13:- Others

General Information

Multi-Level Marketing Supervision Act (“MLMSA,” effective from 29 January, 2014) and the Consumer Protection Law (“CPL,” effective from 13 January 1994, latest amended on 17 June 2015) and the Act Governing Food Safety and Sanitation (“AGFSS” , latest amended on 12 June 2019) contain wide ranging provisions covering trade generally, some of which are of particular relevance to Direct Selling (“DS”) and Multi-level Marketing (“MLM”).

Cooling-off Period

Article 20 of MLMSA

Any participant in multi-level marketing may rescind or terminate the participation contract by giving the multi-level marketing enterprise written notice within thirty days after entering into such contract.

Within a period of thirty days after rescission or termination of the contract takes effect, the multi-level marketing enterprise shall accept the application from the participant for returning of goods, collect or accept goods returned by the participant, and return to the participant all the payment for goods made upon purchase and any other fees paid to the multi-level enterprise.

In returning the payments made by the participant according to the preceding paragraph, the multi-level marketing enterprise may deduct upon the time of returning of the goods the value decreased due to the damage or loss attributable to the participant, and any bonus or remuneration already paid to the participant for purchase of such goods.

If the returned goods as referred to in the preceding paragraph are collected by the enterprise, the enterprise may deduct the shipping costs required for such collection.

Article 21 of MLMSA

After the lapse of the period as referred to in the first paragraph of the preceding article, the participant at any time may still terminate the contract by writing and withdraw itself from the multi-level marketing plans or organizations, and request to return the goods, provided that when six months lapse since the date that the products are deliverable, the participant may not request to return the goods.

Within thirty days from the termination of the contract in accordance with the preceding paragraph, the multi-level marketing enterprise shall buy back all goods possessed by the participant at ninety percent (90%) of the original purchase price. The multi-level marketing enterprise may deducted the bonuses or remuneration paid to the participant for the purchase as well as the amount of the decreased value of the goods.

If the returned goods are collected by the enterprise, the enterprise may deduct the shipping costs required for such collection.

Article 22 of MLMSA

When the participant exercises the right to rescind or terminate the contract in accordance with the two preceding articles, the multi-level marketing enterprise may not claim damages or levy penalties against the participant for such rescission or termination.

When the sold goods are supplied by third parties, and the participants exercise the right to rescind or terminate, the multi-level marketing enterprise shall handle the returning of goods and repurchase according to the preceding two articles, and shall pay the damages or penalties third party suppliers charge the participants.

Article 32 of MLMSA

If any person violates Articles 6.1, 20.2, 21.2, 22, or 23, the competent authority may order the violators to cease/rectify their conduct or take necessary corrective action within a prescribed period and impose a fine ranging from NT$ 100,000 to NT$ 5,000,000. After the lapse of such period, shall such violators fail to cease/rectify such conduct or take any necessary corrective action, the competent authority may again order the violators to cease/rectify their conduct or take necessary corrective action within a prescribed period, and impose a fine ranging from NT$ 200,000 to NT$ 10,000,000 each time until the violators cease/rectify such conduct or take necessary corrective action. If the situation is serious, the competent authority may order the violator to dissolve, suspend or terminate business operation not longer than six months.

Article 19 of CPL

Consumers of distance sales or door-to-door sales may return the goods or rescind the contract in writing within 7 days upon receipt of goods or services without stating the reasons or be responsible for any expenses or costs, except in the case of distance sales with reasonable matters.

Reasonable matters prescribed in the previous paragraph shall be proclaimed by the Executive Yuan.

When traders do not provide consumers with information prescribed in the third subparagraph of the first paragraph of previous Article on matters related for consumer to rescind contracts upon receipt of goods or services, the 7 days period set forth in the first paragraph shall not be counted until the date the information is provided. The right to rescind would be deprived if the 7 days period set forth in the first paragraph has lapsed for 4 months.

The contract would be deemed rescinded when the consumers have delivered or issue in writing within the period set prescribed in the first and third paragraph.

Any agreement made in distance sales or door-to-door sales in violations of provisions prescribed in this Article shall be null and void.

Pyramid Schemes

Article 18 of MLMSA

Multi-levels sales enterprises shall have participants engaged in promoting and selling goods or service in reasonable market price as their major income, instead of earning mainly by introducing new participants.

Article 29 of MLMSA

If any person violates the provisions of Article 18, the violator shall be punished by imprisonment for not more than seven years and at the same time may be fined not more than New Taiwan Dollar (“NT$”) 100,000,000.

Shall any representative, agent, employee or other staff of a juristic person be punished for the violation of Article 18 in conducting business, not only the violator shall be punished in accordance with the preceding paragraph, the juristic person shall also be fined as prescribed in the preceding paragraph.

Multi-Level Marketing

Article 3 of MLMSA

The term “multi-level marketing” as used in this Act means the marketing practice to establish multi-levels organization by having participants introduce new participants into multi-level marketing enterprise, and promote and sale goods or services.

Article 4 of MLMSA

The term “multi-level marketing enterprise” as used in this Act means the companies, sole proprietorships or partnerships, groups or individuals that conduct overall planning or the carrying out of multi-level marketing activities as referred to in the preceding article.

A participant of foreign multi-level marketing enterprise or a third party that introduces or carries out the multi-level marketing plans or organizations of such enterprise shall be deemed a “multi-level marketing enterprise” as referred to in the preceding paragraph.

Article 5 of MLMSA

The term “participants” as used in this Act means persons who may earn commissions, bonuses and other economic benefits by taking part in the plans of a multi-level marketing enterprise and promoting or selling goods or services, and who may earn commissions, bonuses and other economic benefits by introducing other persons to participate, to promote, sell goods or services or introduce more persons.

The persons who enter into contracts with multi-sale enterprises that after meeting specific conditions such persons may get the qualification to promote, sell goods or services, or to introduce other persons to participate shall be deemed as participants from the time such contracts are entered into.

Prohibition on Products

Chapter 2, Section 1 of CPL

There are no prohibitions on the sale of products by direct sellers, per Chapter 2, Section 1 of CPL contains a few of provisions dealing with health and safety.

Article 15 of AGFSS

Foods or food additives with any one of the following circumstances shall not be manufactured, processed, prepared, packaged, transported, stored, sold, imported, exported, presented as a gift or publicly displayed:
1. those that have deteriorated or rotten;
2. those that are unripe and thus harmful to human health;
3. those that are toxic or contain substances or foreign materials that are harmful to human health;
4. those that are contaminated by pathogenic organisms or have been established by epidemiological survey to be cause of food poisoning;
5. those with pesticide or veterinary drugs residue exceeding the permissible tolerance;
6. those that have been contaminated by and contain nuclear fallout or radioactivity exceeding the permissible tolerance;
7. those that have been adulterated or counterfeited;
8. those that have passed their expiry date;
9. those that have never been provided for human consumption and proven to be harmless to human health; or
10. those that contain food additives that are not approved by the central competent authority.

Credit Restrictions Country

No Information.

Money Collections

Please refer to Ш. Pyramid Schemes.

Licenses

Article 6 of MLMSA

Prior to engaging in multi-level marketing operations, a multi-level marketing enterprise, should prepare a report containing the following items, and apply for record by the competent authority:

the basic information and business places of the multi-level marketing enterprise;
the multi-level marketing plans, and conditions of participation;
the content of contracts that will be executed with participants;
the itemized products or services, prices, and source;
the evidence of marketing practice in compliance with laws or regulations other than this Act, or having ex-ante approval issued by other authorities, where the compliance or the ex-ante approval is imposed by such laws or regulations;
the calculation methods, criterion, and reasons, when multi-levels sale enterprises deduct the devaluation amount from the price in repurchasing the goods or services pursuant to the later sentence of Article 21.3 or 24 of the Act;
such other matters as may be required by the competent authority.

When multi-level marketing enterprises fail to provide documents and materials according to the requirements of the preceding paragraph, the competent authority may order them to provide within specific deadlines additional supplemental amendments. If multi-level marketing enterprises fail to provide within specific deadlines additional supplemental amendments, it shall be deemed to not have applied at all, and the competent authority may return their report, and order them to resubmit a complete one for record.

Article 7 of MLMSA

Except for the following situations, when there is any change in the content of submitted documents and materials, the multi-level marketing enterprise shall report in advance:

For changes of enterprises’ basic information as referred in subparagraph 1, paragraph 1of preceding article, a report is not required except for the change of enterprise’s names.
For changes of enterprise’s names, it should be reported within 15 days after the change is in effect.

If multi-level marketing enterprises fail to report the change according to the preceding paragraph, when the competent authority considers it to be appropriate, it may order the enterprises to provide within specific deadlines additional supplemental amendments. If multi-level marketing enterprises fail to provide within specific deadlines such additional supplemental amendments, it shall be deemed to not have reported the changes at all, and the competent authority may return their report, and order them to resubmit a complete one for record.

Article 8 of MLMSA

The format and process of report referred in the preceding two articles will be prescribed by the competent authority.

Article 9 of MLMSA

Multi-level marketing enterprises which intend to cease their multi-level marketing operations, shall file a written report with the competent authority prior to cessation, and shall have announcement in each business place to notify participants about their rights and interests to return goods to multi-level marketing enterprises according to participation contracts.

Status of Direct Sellers

Article 10 of MLMSA

Before a participant takes part in the plan or organization of a multi-level marketing enterprise, the enterprise shall inform the participant of the following particulars, and shall make no concealment, false, or misleading presentations:

paid-up capital and gross business volume of the multi-levels sales enterprise;
multi-level marketing plan, and conditions of participation;
laws and regulations relevant to multi-level marketing;
obligations and responsibilities of a participant, and conditions of withdrawal by a participant from the organization or plan, and rights and obligations arising from the withdrawal;
matters relevant to the goods or services;
the calculation methods, criterion, and reasons, when multi-levels sale enterprises deduct the devaluation amount from the price in repurchasing the goods or services pursuant to the later sentence of Articles 21.3 or 24 of the Act;
such other matters as may be required by the competent authority.

When a participant introduces another person to participate in the organization or plan, such participant shall make no false or misleading presentations on items listed in the preceding paragraph.

Article 11 of MLMSA

When recruiting participants by advertising or other means, a multi-level marketing enterprise shall make it clearly known that it is engaged in multi-level marketing activities; neither may it recruit participants under the disguise of recruiting employees or on other pretense.

Article 13 of MLMSA

A multi-level marketing enterprise shall enter into a participation contract in writings with that who intends to participate in the plan or organization, and the multi-level marketing enterprise shall give the participant an original participation contract.

The writings referred to in the preceding paragraph may not be in the form of an electronic document.

Article 16 of MLMSA

Multi-level marketing enterprises may not recruit incapacitated persons to be participants.

A multi-level marketing enterprise recruiting a person with limited capacity to be a participant shall first obtain the written consent from the legal representative of such a person and also attach the said written consent to the contract.

The written consent referred to in the preceding paragraph may not be an electronic document.

Earning Claims

Article 12 of MLMSA

When promoting or selling goods or services or recruiting participants by means of declared cases of success, a multi-level marketing enterprise or its participants shall concretely explain the time periods, benefits obtained, and course of development of such cases, and may not make false or misleading representations.

Article 34 of MLMSA

If any person violates Articles 7.1, 9－12, 13.1, 14, 15,17, 19, 25.1, or 26, the competent authority may order the violators to cease/rectify their conduct or take necessary corrective action within a prescribed period, and impose a fine ranging from NT$ 50,000 to NT$ 1,000,000. After the lapse of such period, shall such violators fail to cease/rectify such conduct or take any necessary corrective action, the competent authority may again order the violators to cease/rectify their conduct or take necessary corrective action within a prescribed period, and impose a fine ranging from NT$ 100,000 to NT$ 2,000,000 each time until the violators cease/rectify such conduct or take necessary corrective action.

Taxes and Fees

Individual participants in multi-level marketing businesses may obtain the following three types of income according to Article 14 of the Income Tax Act (Letter Tai-Tsai-Sui-831587237 and Letter Tai-Tsai-Sui-10404684260 issued by Ministry of Finance):

Business Income:
Individual participants in multi-level marketing businesses who sell goods or provide services to consumers. From 2016, if individual participants’ cumulative yearly purchase amount exceeds NT$77,000, the retail profit earned from the sales amount that exceeds the NT$77,000 threshold shall be subject to taxation. Tax authorities may calculate the individual participants’ sales amount based on their purchase data at suggested prices.
If the suggested prices are unavailable, the sales amount shall be calculated, according to the categories of the goods purchased by the participants, based on the retail gross margin stipulated in the Profit Standard of the Same Trade Concerned for each profit-seeking enterprise for the respective year. Thereafter, the individual profit income subject to taxation shall be calculated by the net profit margin of earnings derived from incidental trading activities at 6%.
Income from Professional Practice:
Individual participants would receive bonuses or various subsidies from multi-level marketing enterprises generated from their downlines’ purchases. These bonuses and subsidies are considered as commission income. According to Subparagraph2, Paragraph 1 of the Income Tax Act, after deducting direct necessary expenses, the remaining balance should be considered as income. If the taxpayer fails to settle and declare taxes, fails to keep accounts and preserve vouchers, or cannot provide documentary evidence of the income amount, in accordance with relevant laws and regulations, their direct necessary expenses may be calculated by the broker fee rate approved by the Ministry of Finance for the respective year.
Other Income:

According to Subparagraph 10, Paragraph 1, Article 14 of the Income Tax Act, the bonuses or various subsidies individual participants receive from multi-level marketing enterprises because of their purchases made directly from the multi-level marketing enterprises should be categorized as “other income.”

Social Security

Article 10 of MLMSA

paid-up capital and gross business volume of the multi-levels sales enterprise;
multi-level marketing plan, and conditions of participation;
laws and regulations relevant to multi-level marketing;
obligations and responsibilities of a participant, and conditions of withdrawal by a participant from the organization or plan, and rights and obligations arising from the withdrawal;
matters relevant to the goods or services;
the calculation methods, criterion, and reasons, when multi-levels sale enterprises deduct the devaluation amount from the price in repurchasing the goods or services pursuant to the later sentence of Articles 21.3 or 24 of the Act;
such other matters as may be required by the competent authority.

When a participant introduces another person to participate in the organization or plan, such participant shall make no false or misleading presentations on items listed in the preceding paragraph.

Article 11 of MLMSA

Article 12 of MLMSA

Article 14 of MLMSA

The content of written contract should include the following:

matters referred in of Subparagraph Articles 10.1(2)－(7);
breaches of contract by the participants and the measures to the breaches;
the rights and obligations as referred in Articles 20－22, or the provisions that are more beneficial for participants;
the method for handling a request by a participant to return goods, when the contract is terminated because of participants’ violation of business rules or plans, or breaches as referred in Article 15.1, or other reasons attributable to participants; and
the conditions for renew of contracts and the method of handling, when the contracts stipulate specific term of participation.

Article 15 of MLMSA

Multi-level marketing enterprises shall stipulate in contract that the following are breaches of the participant, and shall prescribe methods for handling such breaches in order to prevent such breaches:

promoting or selling goods or services, or recruiting participants to the sales organization, by deceptive or misleading means;
raising funds from other persons in the name of the multi-level marketing enterprise or through its organization;
engaging in sales by means that run counter to public order or good morals;
affecting consumers’ rights and interests by improper direct sales calls;
engaging in sales that violate the Criminal Code or other laws or regulations governing industry and commerce.

Multi-level marketing enterprises shall enforce the handling methods referred in the preceding paragraph faithfully.

Article 16 of MLMSA

Multi-level marketing enterprises may not recruit incapacitated persons to be participants.

The written consent referred to in the preceding paragraph may not be an electronic document.

Article 17 of MLMSA

A multi-level marketing enterprise shall prepare the balance sheet and income statement for its multi-level marketing operations in the previous accounting year before the end of May each year and keep them in its main office.

When the capital of a multi-level marketing enterprise reaches the amount specified in Article 20.2 of the Company Act or the total multi-level marketing business volume in the previous accounting year exceeds the amount announced by competent authority, the multi-level marketing enterprise shall require auditing and certification by a certified public accountant for its financial statements.

Participants may request to inspect the aforesaid financial statements of the multi-level marketing enterprise to which they belong and the multi-level marketing enterprise may not refuse such requests without justifications.

Article 18 of MLMSA

Article 19 of MLMSA

A multi-level marketing enterprise may not engage in any of the following activities:

requiring a participant to pay any fee obviously incommensurate with the cost in the name of training, seminars, social activities, meetings, promotion or other like activities;
requiring a participant to pay any security deposit, breach penalty, or other fee, which is obviously unreasonable;
requiring a participant to purchase goods in a quantity that would obviously be impossible for an average person to sell out in a short period, unless it is agreed that the price shall be paid only after the goods are re-sold;
giving specific persons preferential treatment in a manner contrary to the multi-level marketing organization or plan and therefore damaging other participants’ rights and interests;
unduly request a participant to buy or grant a participant permission in two or more multi-levels sales organizations;
requiring a participant to undertake obviously unfair obligations.

Participants shall not engage in the activities referred in subparagraph 1 through, 3, 5 and 6 against the persons he or she introduce to participate.

Article 25 of MLMSA

A multi-level marketing enterprise shall record the organization development, sales of goods or services, payment of bonuses, and handling of goods returning within the territory of the Republic of China on a monthly basis and keep such records in its primary place of business for inspection by the competent authority.

The materials in the preceding paragraph shall be kept for five years; the same shall apply in the case of an enterprise that ceases multi-level marketing practice.

Article 26 of MLMSA

The competent authority may at any time dispatch personnel to inspect, or order an enterprise to fill forms and provide materials about the operation and development within specific deadline in the methods and format required by competent authority, and the enterprise shall not evade, impede, or refuse.

Article 27 of MLMSA

The competent authority may investigate and handle, upon complaints or ex officio, any violation of the Act.

Article 31 of MLMSA

The competent authority may order the multi-level marketing enterprise violating Article 18 to dissolve, suspend or terminate business operation not longer than six months.

Article 33 of MLMSA

If any person violates article 16, the competent authority may order the violators to cease/rectify their conduct or take necessary corrective action within a prescribed period, and impose a fine ranging from NT$ 100,000 to NT$ 2,000,000. After the lapse of such period, shall such violators fail to cease/rectify such conduct or take any necessary corrective action, the competent authority may again order the violators to cease/rectify their conduct or take necessary corrective action within a prescribed period, and impose a fine ranging from NT$ 200,000 to NT$ 4,000,000 each time until the violators cease/rectify such conduct or takes necessary corrective action.

Article 34 of MLMSA

Others

Article 38 of MLMSA

The competent authority shall designate the multi-level marketing enterprises having applied for record to donate certain property in order to establish a protection institution in charge of protecting the rights and interests of multi-level marketing enterprises having applied for record, and participants, and dispute resolution. The donation amount may be deducted from the protection fund and annual fee as prescribed in Paragraph 2.

The protection institution may collect protection fund and annual fee from the multi-level marketing enterprises having applied for record. The collection methods and specific amount shall be determined by the competent authority.

If the multi-level marketing enterprises having applied for record fail to pay according the preceding two paragraphs, it will be deemed as in violation of Paragraph 1 of Article 32, and sanctioned accordingly.

The enterprises may request the protection offered by the protection institution only after paying fund and annual fee according to the rules issued by the competent authority.

The organizations, duties, fee appropriation, operation procedures, and its monitoring and management shall be determined by the competent authority.

For the complete version of MLMSA, please refer to the link: http://www.ftc.gov.tw/internet/english/doc/docDetail.aspx?uid=1297&docid=13426

For complete regulations about Multi-level Marketing Enterprises and Participants Protection Institute, please refer to the link:

http://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=J0150020