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🇹🇼 Taiwan /Economy & Trade

Taiwan Passes "Big Wife Clause" Amendment to Estate Tax Law

From Liberty Times · () Chinese

Translated from Chinese, summarized and contextualized by DistantNews.

At a glance

News Named sources Approved/passed
  • Taiwan's Executive Yuan passed an amendment to the Estate and Gift Tax Act, establishing a "beneficiary pays" principle for gifts made within two years of death.
  • Under the new rules, recipients of gifts will be responsible for paying estate tax based on the proportion of their inherited assets to the total estate.
  • This change aims to prevent situations where heirs must pay taxes on assets they did not receive, following a constitutional court ruling.

Taiwan's Executive Yuan has approved an amendment to the Estate and Gift Tax Act, introducing a significant shift in how estate taxes are handled for gifts made shortly before death. The amendment establishes a "beneficiary pays" principle, meaning individuals who receive assets as gifts within two years of the deceased's passing will be liable for the associated estate tax.

This reform aims to address a constitutional court ruling from October 2024, which found certain provisions of the existing law partially unconstitutional. The ruling was prompted by a case where a non-marital daughter was left to shoulder a substantial estate tax burden after her father gifted a large amount of stock to his spouse within two years of his death, and other heirs renounced their inheritance.

This amendment clarifies the "beneficiary pays" principle. In the future, property gifted by the deceased to their spouse or specific relatives within two years of death, while still included in the total estate for tax calculation, will have the related estate tax borne by the recipient based on the proportion of gifted property to the total estate.

— Lee Nan-hanA CPA from PwC explains the core change in the revised Estate and Gift Tax Act.

Under the revised law, the estate tax will be calculated based on the ratio of the gifted property to the total estate value. The recipient of the gift will then be responsible for paying the tax on that portion, regardless of whether they ultimately inherit other parts of the estate or even renounce their inheritance. This ensures that those who benefited from pre-death gifts contribute to the tax liability.

Key changes include clarifying that renouncing an inheritance does not exempt individuals from these tax obligations related to gifts received. The amendment also adjusts the calculation for the spousal remainder interest deduction and modifies rules regarding the start dates for estate tax reporting and assessment periods for property confirmed by court judgment after death. Additionally, the requirement for a minimum taxable amount of NT$300,000 for installment payments and the associated late payment penalties have been removed, aligning with general tax collection laws.

After the amendment, the situation where heirs have to pay taxes without benefiting can be avoided.

— Chang Chi-chinThe co-head of E&Y's family office comments on the impact of the new law.
DistantNews Editorial

Originally published by Liberty Times in Chinese. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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