Taiwan's transport ministry said Uber Technologies Inc is operating a taxi-hailing service "in violation of the law", and that it is investigating the possibility of blocking access to the US company's website and mobile app.
Ministry of Transportation and Communications Deputy Director Liang Guo Guo said on Monday that Uber only possesses a licence to provide information services, rather than transport services.
"If Uber obtains the proper licence it can continue operating in Taiwan," Liang said. "The company has not made clear how it plans to proceed."
The announcement adds to an array of challenges the start-up has faced during its breakneck expansion, including bans in various cities across the world and accusations of violating user privacy. It has also had to tighten screening after an Uber driver in India was arrested for an alleged rape.
The company continues to attract funding, however, most recently from Chinese Internet giant Baidu Inc.
Liang said that as of the end of this week, Uber will face fines in excess of T$3 million ($95,102) for a range of transgressions including operating a transportation service without a licence.
It has paid T$150,000 (S$6,255)and is contesting the remainder in court, Liang said.
Uber did not immediately respond to a request for comment.
Taiwanese authorities are investigating whether they have the legal authority and enforcement capabilities to shut down Uber's website and mobile app on the island.
"It's quite vexing as there's no precedent for this kind of issue," Liang said.