China insists self-ruled Taiwan is part of its territory and has threatened to seize the island by force.
Officials in the United States -- Taipei's main backer and biggest arms supplier -- have previously cited 2027 as a possible timeline for a Chinese invasion of Taiwan.
Taiwan's "Han Kuang" exercises, which the ministry said would be held from July 9-18, are conducted every year across Taiwan to simulate defending the island against Chinese attacks.
In a report submitted to parliament on Wednesday, the ministry said this year's scenarios would be based on China's "grey-zone" intrusions and "possible actions of the Chinese Communist military's invasion of Taiwan in 2027".
"Commanders at all operational and tactical levels will plan scenarios and situations from a practical perspective based on the possible actions of the enemy," the report said.
The aim was to "verify the ability of troops at all levels to execute plans, thereby building a military force that can respond quickly and maintain 'high combat readiness'," the report said.
Beijing regularly deploys fighter jets, warships and coast guard vessels near Taiwan, and has held several major military drills around the island in the past year.
Analysts have dubbed these actions "grey zone" tactics that fall short of an act of war and serve to exhaust the island's armed forces.
- 'Early warning signs' -
Defence Minister Wellington Koo warned Wednesday that the time it would take for China to switch from an exercise to combat was "not necessarily as long as we used to think".
"We have some key early warning signs that we need to monitor," Koo told reporters, without elaborating.
Koo made the remarks as Taiwan's military held a five-day "Rapid Response Exercise", which the defence ministry said was aimed at enhancing "readiness and response capabilities".
This drill will be held twice a year and also at "unscheduled" times based on their assessment of "the intensity" of China's military exercises, Koo told parliament.
"This is part of realistic combat training, sharpening commanders' decision-making and unit capabilities," Koo said.
The drills coincided with more than 50 Chinese aircraft taking part in "joint combat" patrols around Taiwan on Monday, defence ministry data show.
That came days after Taiwanese President Lai Ching-te called China a "foreign hostile force".
Beijing's foreign ministry said the actions were in response to US support for Taiwan and a warning to the "Taiwan independence separatist forces".
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