Introduction of the Revision of Article 22 and the Addition of Article 67-3 of the Statute for Industrial Innovation

Introduction of the Revision of Article 22 and the Addition of Article 67-3 of the Statute for Industrial Innovation

2025/06/04

I. Foreword

Taiwan is enhancing overseas investment screening and technology security through modifications to the Statute for Industrial Innovation (hereinafter the Statute). The current updated Statute has demonstrated the international trend in tightening control over technology sector through means of investment. In a globalized arena of technology competition, Taiwan is spearheading the development of such a control mechanism.

At the outset, the Statute was enacted in 2010 for elevating industrial innovation, improvement of the industrial environment and enhancement of industrial competitiveness. It’s broadly inclusive in the sectors within the purview of its governance in agricultural, industrial and service businesses. On April 18, 2025, the Legislative Yuan passed a bill modifying several provisions, including Article 22 and the newly added Article 67-3. Subsequently, on May 7, 2025, the President of the Republic of China (Taiwan) promulgated the modified provisions, including Article 22 and the newly added Article 67-3. The effective dates for Articles 22 and 67-3 will be determined by the Executive Yuan.

The Statute has now been revised to reflect the growing geopolitical and economic pressures Taiwan faces as a global leader in semiconductors and high-tech manufacturing in response to increasing concerns over technology security and capital outflows. The critical essence here to safeguard key know-how lies in Article 22 and 67-3.

Article 22 governs the approval process for overseas investments, while Article 67-3 stipulates penalties for non-compliance. The revised Article 22 now is explicitly allowing the Ministry of Economic Affairs (hereinafter MOEA) to reject or conditionally approve outbound investments if they are deemed to fit into certain conditions. Together with the newly-added Article 67-3, those who are violating Article 22 will be subject to penalties.

These amendments reflect a broader regulatory shift toward strengthening screening of outbound investments, particularly in sectors involving sensitive technologies. This article discusses the current legislative trend and the implication of latest statutory revision on Article 22 and 67-3.

II. Article 22: Expanding the Scope of Investment Screening

Under its original form, Article 22 required company incorporated in accordance with the provisions of the Company Act of Republic of China (Taiwan) to obtain prior approval from relevant authorit(ies) for overseas investments exceeding NTD one and a half billion (approximately USD forty-eight million). This threshold-based approach was primarily designed to monitor large-scale capital outflows and ensure such investments aligned with national industrial policy.

However, the latest amendment significantly redefines the scope of the authority’s review. Firstly, the subject matter of the Statute has been expanded to include juridical person organized and registered pursuant to the Limited Partnership Act of Republic of China (Taiwan). Therefore, persons subject to the application of the Statute are now limited partnerships and companies registered according to the applicable law. Secondly, Article 22 now provides foundation to the MOEA to require prior approval for outbound investments based not only on the investment amount but also on the nature, destination and strategic importance of the investment. Specifically, the amendment allows the MOEA to review and disapprove when it is determined the investment is of:

1. Impact on national security, such as defense and military

2. Impact on national economic development with significant adverse effects, such as undermining the supply chain resilience and security of Taiwan’s internationally leading position in or key industries of.

3. Influence on the Government to comply with international treaty, agreement or pact, such as the overseas investment or operation of the company influencing the Government to sign or voluntarily comply with international treaties agreement or pact, or is a breach of implementation of relevant treaties, agreement or pact.

4. Violation of the Labor Standards Act entailing major labor-capital issues that have yet to be resolved, such as malicious closure of factory closure and relocation of capital that affects labors' rights.

In fact, similar provision regulating investment for the concern of national security is not new. A comparable regulatory mechanism may be traced back to Article 3 of the MOEA Guidelines for Reviewing and Supervising Investments in Semiconductor and LCD Panel Industries in Mainland China (在大陸地區投資晶圓鑄造廠積體電路設計積體電路封裝積體電路測試與液晶顯示器面板廠關鍵技術審查及監督作業要點, hereinafter the Guidelines). The Guidelines require that investments, such as establishing or acquiring 12-inch wafer foundries, IC design, packaging and testing operations exceeding USD fifty million, or LCD panel plants in Mainland China be subject to investment review by a Key Technology Task Force convened by the MOEA. Notably, this task force may include representatives from national security agencies, underscoring the long-standing policy to integrate security considerations into industrial and investment regulation. The alignment of the amended Statute with these existing security-based review frameworks reflects a broader institutionalization of national security as a key factor in Taiwan's outbound investment governance.

In considering the above factor and in evaluating the conditions on the approval process, the amended Article 22 has added that the MOEA is authorized to consult with relevant authorities on providing the rules implementing the review of the specific investment destination country or regions, the specific industry or know-how, the threshold investment amount, the application procedures and other compliance matters. Importantly, the MOEA may fully or conditionally reject application of approvals if the investment is deemed to be contrary to national interests.

This expanded regulatory framework is aimed at preventing the leakage of critical technology and intellectual capital to particular countries or regions that may pose strategic or economic risks to Taiwan. It aligns with global trends where countries are re-evaluating their foreign investment regimes to address national security concerns.

III. Article 67-3: Aligning with the Purpose of Revision of Article 22 Through Stronger Penalties

The newly added Article 67-3 introduces a robust penalty regime to enforce compliance with the amended Article 22. Previously, the Statute did not provide penalties for parties’ failure to seek required investment approvals. However, such a provision lacked sufficient enforcement mechanisms. Therefore, to prevent leakage of key know-how leading to erosion of industry competiveness and forming foundation to the threat of the country, for purpose of legal compliance, Article 67-3 has explicitly laid out the consequences to violation of Article 22. Under the revised provisions, companies that fail to comply with investment approval rules now face:

1. Fine(s) not less than NTD fifty thousand and not more than NTD one million and;

2. Mandatory withdrawal from the overseas venture, order of correction, cease the investment, where applicable.

3. In the event that the violator fails to comply with imposed conditions or fails to rectify the violation within the required time limit, the authority may impose fines not less than NTD five hundred thousand and not more than NTD ten million upon the violator for each and every violation in order to enforce regulatory control.

In addition, to ensure effective enforcement of regulatory conditions and instructions issued by the MOEA, Article 67-3 further provides penalties targeting non-compliance with terms attached to overseas investment approvals or corrective orders issued under Article 22. Specifically, with regard to the conditions, restrictions, or other requirements MOEA imposed under Article 22 Paragraph 3 when granting approval for overseas investments, failure to fulfill the foregoing may lead to fine(s) not less than NTD five hundred thousand and not more than NTD ten million per violation. This enforcement mechanism serves to deter regulatory breaches in sensitive outbound investment activities.

In light of rising global concerns over economic security and the protection of key technologies, Article 67-3 has been added to strengthen the regulatory framework for outbound investment. In sum, the introduction of Article 67-3 serves to reinforce the legal force of Article 22 by establishing a clear and enforceable penalty framework. This provision fills a critical gap in the Statute by providing the relevant authorit(ies) with the necessary tools to ensure compliance and deter unauthorized outbound investments.

IV. Conclusion

The amended Article 22 and newly added Article 67-3 are not merely administrative changes but represent a strategic recalibration of Taiwan’s industrial and security policy. Taiwan’s economic model has long emphasized innovation, global integration and export-driven growth. But with growing external pressure to align with allied democratic nations on technology controls, the policy is now steering toward balance with caution. It is also strengthening its national security through reducing vulnerability to economic coercion. Such a move not only gestures to preserve Taiwan’s competitive edge in strategic industries, but also ensures that public subsidies and domestic R&D efforts are not inadvertently diverted to foreign rivals.

This shift also reflects the evolution in Taiwan’s approach to outbound investment regulation. The amended legislation introducing a more comprehensive review criteria under Article 22, along with the enforcement mechanism in Article 67-3, enhances the ability to respond proactively to emerging risks, whether they stem from the nature of the technology, the destination of the investment, or potential violations of domestic legal and labor standards.

Looking ahead, these legislative changes could prompt companies to re-evaluate their international strategies. At the same time, it is expected that a strengthened policy in domestic innovation ecosystem through targeted incentives should be introduced to balance the current trend of investment screening. In sum, the latest changes underscore a broader shift toward reinforcing economic security and industrial self-reliance while navigating the complexities of a rapidly shifting global technological landscape.

Disclaimer:

This article was prepared as part of the work at the Institute for Information Industry. While it is published under the author's name, its title and content do not necessarily represent the personal views of the author. This article is intended for informational purposes only and does not constitute legal advice.