Major Inheritance Tax Reform! Gifts to Spouse Within 2 Years of Death to Be Included in Total Estate for Taxation, Easing Payment via Inheritance Funds

The Executive Yuan today (30th) approved amendments to certain articles of the Inheritance and Gift Tax Act during its 4,014th cabinet meeting. The revised law stipulates that property gifted by the deceased to a spouse or other specific relatives within two years prior to death must be included in the total estate for tax calculation. Major changes are also introduced regarding taxpayer obligations, the surviving spouse's claim for distribution of remaining property, and installment payment rules. The previous restriction limiting installment payments to cases where tax liability exceeds NT$300,000 has been removed, and heirs are now allowed to pay taxes using estate bank deposits.

The Ministry of Finance stated that the amendments aim to align with the constitutional court's ruling while balancing tax fairness and protecting the property rights of heirs and recipients.

Previously, individuals often used lifetime gifts as a tax planning strategy. For example, consider a family with a total estate of NT$50 million, including a deemed estate of NT$10 million gifted to a spouse within two years of death and another NT$40 million in other assets, resulting in a total tax liability of NT$2 million. Under the previous rules, this entire NT$2 million tax bill would be jointly borne by the spouse and two children.

Under the new rules, the taxpayer for the NT$10 million deemed estate will now be the recipient—the spouse—responsible for 40% of the tax, or NT$400,000. The remaining NT$160,000 in tax on the other NT$40 million in assets will be shared among all legal heirs, making tax responsibilities clearer.

Additionally, there is a breakthrough in calculating the surviving spouse's claim for the difference in remaining property. Under the old rules, if a husband gifted NT$10 million to his wife within two years of his death, this amount could not be counted as existing property when calculating the deduction, resulting in a deduction of only NT$7.5 million.

After the amendment, property gifted to a spouse within two years of death will be directly treated as the deceased's existing property, increasing the spouse's deductible claim for remaining property difference to NT$12.5 million, thereby substantially protecting the legal wife's rights.

The amendment also removes the restriction that installment payments were only allowed when the tax liability exceeded NT$300,000 and allows heirs to use estate deposits to pay taxes through a majority decision. Late payment penalties will now be handled in accordance with the Tax Collection Act. The Ministry of Finance will actively engage with cross-party legislative groups to expedite the legislative process and further improve the system.