Couples often choose to tie the knot at the end of the year as a symbol of good luck. Within six months from the date of registration of marriage, parents each may give an amount of NTD 1 million dowry to their child excluding the yearly NTD 2.2 million of tax-free gift tax allowed for each individual. In other words, parents each have a total of NT 3.20 million tax-free gift tax quota to give; in total, newly-weds may receive an amount of NTD 12.8 million tax-free gift tax.

Furthermore, in the situation where the gift tax may take place during split-year, both parties’ parents may each give another NTD 2.2 million, tax-free, to their child. Overall, couples may in total receive up to NTD 21.6 million of tax free gift from their parents.

According to Taiwan’s “Estate and Gift Tax Act”, the gift tax is for the purpose of taxation towards the giver. If the amount given to the receiver exceeds the tax-free limit, the giver will be taxed. For instance, if the amount parents give to their children exceeds the limit, the IRS will tax 10% to 20% from the parents.

According to the Act, each individual has an amount of NTD 2.2 million of tax free quota per year and each parent will be allowed to give an additional NTD 1 million within six months from the date of registration of marriage. That is, each parent will be allowed to give NTD 3.2 million to their decedents without incurring tax. In the situation where the first giving occurs at the end of the year and the second giving takes place in the following year, each parent will be allowed of a tax-free amount of NTD 5.4 million to give.

Nevertheless, when filing the gift tax, parents will need to furnish the gift tax agreement, ID of the parents and both the newly-weds as well as the household registration reflecting the marriage registration. Only with all the aforementioned documents are provided will the tax mitigation take place legally.

According to the Act, if the amount given exceed the limit of gift-tax and the net taxable gift (the total amount given minus the tax-free amount) is under NTD 25 million, the individual will need to pay 10% gift tax; in another case, if the net taxable gift falls in between NTD 25 million to NTD 50 million, the individual will need to pay an amount of NTD 2.5 million of tax and an additional 15% gift tax of the amount which exceeds NTD 25 million. As for the individuals whose net taxable gift is over NTD 50 million, an amount of NTD 6.25 million of tax will incur and the individual will be further taxed a 20% of the amount exceeding NTD 50 million.

Take the case of the Chen’s for example, their daughter got married in October, 2019. If Mr. Chen gives his daughter NTD 5 million within one month from the date of registration of marriage, the amount which has exceed the NTD 2.2 million quota plus NTD 1 million gift tax limitation, Mr. Chen will need to pay an amount of NTD 180 thousand of tax (NTD 5 million –NTD 3.2 million) *10%.

If at the same time Mrs. Chen gives her daughter NTD 3 million, since the amount is still within the NTD 3.2 million tax-free limitation, Mrs. Chen wouldn’t be taxed any gift taxs.

However, if Mr. Chen chooses to give the same amount during the split-year, giving NTD 3.2 million in November, 2019 and another NTD 1.8 million in January, 2020, Mr. Chen could avoid being taxed. This is due to the fact that although equally Mr. Chen gives the same amount of NTD 5 million to his daughter, the split-year situation, the gift tax limitation of NTD 2.2 million per year allows Mr. Chen to save up to NTD 180 thousand. The tax saved could be used in other places such as buying a few more stocks, showing the importance of tax mitigation.

News Source：【工商時報 2020/10/31】