Inheritance, gift tax rate cut to 10%

In her capacity as convener of the finance committee, Lawmaker Lu Hsiu-yen ruled to pass the 10 percent tax rate as proposed by the Cabinet, following six hours of heated discussions on the revisions.

The Inheritance and Gift Tax Act was last revised on Jan. 13, 1995. To meet the changes in taxation environment over the past 13 years, and to attract return of sizable overseas funds held by Taiwanese people, the Cabinet has asserted that the inheritance and gift tax rate should be drastically cut to an uniform level of 10 percent from the existing 10 tax brackets with the maximum rate of 50 percent.

Under the Cabinet proposal, the inheritance tax exemption amount is set at NT$12 million, up from the existing NT$7.79 million. And the gift tax exemption is doubled to NT$2.2 million per person from the existing NT$1.1 million.

Take a four-member family for example. After taking into account the NT$12 million tax exemption sum, spouse tax deduction of NT$4.45 million, children tax deduction of NT$900,000, and funeral expense deduction of NT$1.11 million, as much as NT$18.46 million in inheritance value won't be taxed. In other words, such a family won't be subject to any inheritance tax payment as long as the inheritance value recorded after the death of its elderly member falls under NT$18.46 million, compared to the existing corresponding level of NT$4.21 million.

During the committee meeting, Finance Minister Lee Shu-der said that the inheritance tax rate is cut to 10 percent, the national coffers will suffer a loss of NT$16 billion in annual tax revenues. But a sizable amount of overseas funds held by Taiwanese people, estimated at NT$5 trillion to NT$6 trillion, is expected to return to Taiwan for investment in the real estate market or bank deposits, which, in turn, will generate tax revenues for the national coffers.

After approving the cut on inheritance and gift tax rate to 10 percent, the finance committee of the Legislative Yuan failed to determine the inheritance tax exemption amount.

The Cabinet proposed to boost the amount to NT$12 million, but Lawmaker Pan Wei-kang of the ruling Kuomintang proposed raising the amount to NT$30 million.

Finally, the finance committee decided to present both proposals up for further deliberation by the plenary session of the Legislative Yuan.

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