The Investment Commission yesterday said it plans to appeal a ruling by an administrative court in favor of Taobao Hong Kong Ltd (香港淘寶), insisting the online retailer has failed to comply with investment rules in Taiwan.
“Although Taobao registered as a foreign company, its Chinese shareholders have de facto control of the firm, in violation of Taiwan’s investment regulations,” commission Executive Secretary Emile Chang (張銘斌) said by telephone.
Taobao Hong Kong’s parent company, Alibaba Group Holdings Co (阿里巴巴), in 2008 entered Taiwan by registering as a Singaporean company, Alibaba.com Singapore E-Commerce Private Ltd, instead of as a Chinese company, according to Ministry of Economic Affairs data.
In 2013, Taobao registered in Taiwan as a Hong Kong-based company, Taobao Hong Kong, the data showed.
The commission in March last year fined Alibaba NT$120,000 and demanded that it withdraw its investment from Taiwan, because Alibaba Hong Kong’s Chinese shareholders, although owning less than a 30 percent stake, have de facto control of the firm, and it failed to change its business registration to a Chinese company in Taiwan.
The commission in May last year ordered Taobao Hong Kong to leave Taiwan altogether for the same reason, doubling the fine to NT$240,000 and saying the company should voluntarily change its business registration after the fine.
Both Alibaba and Taobao Hong Kong filed administrative appeals with the Executive Yuan’s Administrative Appeals Commission and were allowed to continue operating in Taiwan during the legal proceeding.
The Taipei High Administrative Court last week ruled against the commission.
The court said Taobao Hong Kong entered Taiwan as a foreign company a year before its parent company launched an initial public offering and disclosed its shareholders’ information on the New York Stock Exchange.
The ruling said that while Taobao Hong Kong’s Chinese shareholders might have control of the company, no regulations in Taiwan stipulate that the company must change its business registration.
The administrative court concluded the Investment Commission cannot fine Taobao Hong Kong, nor ask it to withdraw its investment from Taiwan.
Chang said the Investment Commission would file an appeal after it receives a formal copy of the ruling.
“We still think it [Taobao Hong Kong] is not a foreign company, but a Chinese company, so it should abide by Chinese investment regulations,” Chang added.
Chang said the Investment Commission plans to amend its investment regulations, requiring foreign companies to reapply for business permits in Taiwan if their Chinese investors have real control of the company.
The administrative court last month ruled in favor of the Investment Commission in Alibaba’s case and the company appealed the ruling, the agency said.
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