Taiwan has demanded Chinese e-commerce giant Alibaba withdraw from the island within six months for violating investment restrictions on mainland-controlled firms, officials said Tuesday.
The island's Investment Commission has ordered Alibaba to withdraw or transfer its holdings from its Taiwanese branch, saying that it registered as a foreign company when it was in fact a mainland company.
Alibaba can appeal the ruling, which also carries a T$120,000 ($3,820) fine.
Although restrictions on Chinese investment have eased since Beijing-friendly President Ma Ying-jeou came to power in 2008, foreign companies are still subject to fewer limitations than mainland firms.
China and Taiwan have been governed separately since the end of a civil war in 1949, but Beijing still considers the island part of its territory, awaiting reunification.
Alibaba is registered as a foreign company in Taiwan under the name Alibaba.com Singapore E-commerce Private Ltd.
"Alibaba violated Taiwan's investment regulations which stipulate that mainland Chinese investors cannot apply to set up companies as foreign investors," said commission spokeswoman Chu Ping.
She said Alibaba should be registered as a Chinese firm as more than 30 percent of it was controlled by mainland investors, information which came to light after the company's IPO on the New York Stock Exchange last year.
Chu said it could re-register in the future as a mainland company.
Alibaba can appeal to Taiwan's cabinet and the commission would reconsider its decision should it make a successful appeal, Chu said.
The company said in a statement that it would seek to clarify the issue and "take proper actions" to protect its interests if necessary.
It said the Taiwan branch was set up as a foreign company in 2008 and had acted in accordance with the island's regulations.
"Since Alibaba Group, the parent company of Alibaba.com, went public in the US last September, the authority took a different view about the internal structure of Alibaba Group and deemed it as a mainland Chinese company," the statement said.
"We will actively communicate with the authority and provide the required supporting materials to comply with the latest requirements," it said.
In 2009 Taiwan partially lifted its decades-old ban on investment in the island by Chinese companies or individuals as ties improved under President Ma, who came to power on a platform of boosting trade with China and was reelected in 2012 for a final four-year term.
Alibaba founder Jack Ma spoke to around 2,000 students at National Taiwan University on Tuesday but did not broach the issue, instead encouraging young people to become entrepreneurs.
"I want to help Taiwan's small businesses to sell their products to the mainland and the world," he said.