Executive Yuan Announces Inheritance Tax Reform! Major Changes to Gift Tax Rules with 'Lowered Tax Threshold' – Full Details Here

To prevent individuals from using lifetime gifts to evade inheritance tax and to ensure tax fairness and protect heirs’ rights, the Executive Yuan formally passed the partial amendment to the 'Inheritance and Gift Tax Act' today (30th). Going forward, property gifted by the decedent within two years prior to death to their spouse, statutory heirs (such as children, grandchildren, siblings, etc.), and their spouses—known as 'deemed inheritance'—will be included in the total estate value for taxation. The tax burden will now fall on the 'recipient' in proportion to the value of the property received, preventing heirs who received no gifts from unjustly bearing massive tax liabilities.

Background of the Amendment: Preventing a Repeat of the 'Wealthy Father Gifts to Former Spouse, Illegitimate Daughter Bears Entire Tax' Tragedy

This amendment stems from the Constitutional Court's 'Constitutional Judgment No. 11 of 2024' issued in October 2024. Under previous rules, gifts between spouses were exempt from gift tax, but if made within two years of death, they were still included in the estate for inheritance tax purposes.

This clause became controversial in a recent case where a man surnamed Chen gifted stocks worth 300 million NT dollars to his former spouse one year before his death. After his passing, the former spouse and legitimate children chose to disclaim inheritance, resulting in the entire inheritance tax burden from the high-value stocks falling solely on the only heir who accepted—the man’s illegitimate young daughter. The Constitutional Court subsequently ruled that the existing system, lacking clear standards for tax liability, was unconstitutional. In response, the Ministry of Finance completed a comprehensive review and revision of the regulations within two years.

2026 Inheritance and Gift Tax Act Amendment: 5 Key Highlights

1. Clarifying Tax Liability for 'Deemed Inheritance' (Article 6) When property gifted by the decedent within two years of death to their spouse, statutory heirs, and their spouses is included in the estate for taxation:

Proportional Tax Calculation: The inheritance tax liability is calculated based on each recipient’s proportion of the total estate value.

Designated Recipient as Taxpayer: The 'recipient' becomes the taxpayer, with their liability capped at the value of the property received.

Revised Role of Executor: The executor, previously considered the 'taxpayer,' is now revised to 'act on behalf of the taxpayer to file, pay, and request reconsideration.'

2. Optimizing the Surviving Spouse’s Right to Property Distribution (Article 17-1) When calculating the deductible amount for the surviving spouse’s right to claim property distribution, property gifted to the spouse within two years of the decedent’s death will be treated as part of the decedent’s existing estate. Additionally, the taxpayer fulfilling this payment obligation cannot offset it with the 'deemed inheritance' received by the spouse.

3. Clarifying Reporting and Assessment Periods for Additional Assets (Article 23) The draft adds clear provisions on the inheritance tax reporting period and the starting date for assessment when property is determined to belong to the decedent via a final court judgment (or equivalent document) after their death.

4. Easing Tax Payment Methods and Allowing 'Majority Vote' Use of Estate Deposits (Article 30)

Eliminating Installment Threshold: Removes the previous requirement that installment payments could only be applied for if the tax due exceeded 300,000 NT dollars.

Majority Vote Solution: Allows heirs to use a 'majority vote' to directly pay inheritance tax from bank deposits within the estate, preventing tax default due to disagreement from some heirs.

Offset Approval Mechanism: If a recipient applies to use estate assets to offset or pay the deemed inheritance tax, consent from all heirs is required.

5. Aligning Late Payment Penalties with the Tax Collection Act (Article 51) Removes existing provisions on late payment penalties and forced execution for non-payment, fully reverting to unified handling under the 'Tax Collection Act'.

The Ministry of Finance stated that this amendment to the Inheritance and Gift Tax Act balances the property rights of heirs and beneficiaries, effectively upholds tax fairness, and enhances convenience in tax filing and payment procedures. Following the Executive Yuan’s approval, the Ministry will actively engage with legislative party caucuses to expedite the bill’s passage through the three readings and official implementation.