Gifts made within two years of death subject to inheritance tax calculation in Taiwan

The Kaohsiung National Taxation Bureau has issued a clarification on the taxation of gifts made shortly before death, a matter that often causes confusion among Taiwanese families. According to Liberty Times (Taiwan), the bureau emphasized that gifts given within two years of a person's passing are subject to inclusion in the deceased's total estate for inheritance tax purposes, but only if the recipient falls into specific familial categories.

This distinction is crucial. The law stipulates that gifts to a decedent's spouse, or to heirs as defined by civil law and their spouses, must be added back to the estate's total value. This rule applies regardless of whether the recipient would have ultimately inherited the asset had the gift not been made. The key factor is the recipient's relationship status to the deceased at the time of the gift.

For instance, a gift to a brother's wife (a sibling-in-law) would be included, as she falls under the category of a spouse of a legal heir. Conversely, a gift to a friend would not be subject to this rule, as the friend is not a designated heir or their spouse. This clarification aims to ensure fair taxation and prevent potential avoidance of inheritance taxes through pre-death gifting strategies. From a Taiwanese perspective, understanding these nuances of the 'Inheritance and Gift Tax Act' is vital for financial planning and ensuring compliance, reflecting a system that carefully defines familial obligations and tax liabilities.