China claims Taiwan as part of its territory and has threatened to use force to bring the self-ruled island under its control.
There has been a series of spying cases in Taiwan, as China maintains military and political pressure on Taipei to accept its claims of sovereignty.
The retired lieutenant general surnamed Kao was among six people indicted for violating the national security law, the Taiwan High Prosecutors Office said in a statement.
The group visited China multiple times, separately and together, from 2018 to 2024, where they met Chinese military intelligence personnel for instructions and funding "to initiate and develop organisations for China", prosecutors said.
Their actions posed a "serious threat" to "national security and social stability", the statement said.
Kao and another defendant used Chinese funds to form "an armed organisation" that would act as an "internal collaborator" if China attacked Taiwan, prosecutors said.
They also engaged in "scouting, contacting, wooing and absorbing retired and active servicemen", putting national security in a "dangerous state".
Prosecutors have sought a minimum jail term of 10 years for Kao, saying he failed his "high duty of loyalty to the country as a retired lieutenant general deputy commander for the sake of personal gain".
The other defendants face up to eight years in jail, prosecutors said.
The statement did not say how much money Kao or the others received.
Taiwan's intelligence agency said in a recent report that the number of people prosecuted for spying for Beijing has "increased significantly", from 10 in 2022 to 64 in 2024.
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