By Agence France-Presse
The US firm has racked up fines since it entered the Taiwan market in 2013 for running a business without the proper registration to operate as a taxi service.
Taiwan's suspension comes after Uber halted services in Hungary last July due to new legislation that stops drivers from making money with their own vehicles.
Last month Taiwanese authorities hiked the maximum possible penalty for Uber drivers to Tw$25 million ($803,639) -- the highest in the world.
The Transport Ministry Thursday said it was preparing to charge the firm Tw$230 million in penalties and would issue an order to halt operations.
The order would be executed by the Taipei's office of commerce, an official at the transport ministry told AFP.
Preempting the order, Uber said in a statement on its website that it would suspend service on the island from February 10.
"In the face of this impasse, we must create a new path forward," the company said.
"We hope that pressing pause will reset the conversation and inspire President Tsai to take action," it added.
Uber had in November warned President Tsai Ing-wen in an open letter that actions against the firm were scaring away foreign investors.
Tsai's administration is pushing for Taiwan to foster its own "Asian Silicon Valley" to help kickstart the economy by encouraging and fostering start-up technologies.
But Uber on Thursday slammed the government for shunning new business models.
"Unfortunately, the government has moved further and further away from embracing innovation and setting the stage for a 21st century transportation policy," it said.
Uber has also taken heat on social media in the United States in recent days for continuing to operate during a New York taxi strike against Donald Trump's immigration ban.
The firm this week said it was committed to assisting drivers affected by the restrictions.
Across the world, the smartphone app has faced stiff resistance from traditional taxi drivers, as well as bans in some places over safety concerns and questions over legal issues, including taxes.
Uber says it is not a transport company like taxi companies, and that it is simply a platform connecting drivers and passengers.
It had intended to reconcile with cab drivers with a new service UberTAXI in Taiwan that lets customers order taxis with its app.