Selling Unlisted Shares to Son: 'Paying Securities Tax Isn't Enough!' — One Missing Step Could Still Trigger Gift Tax

Many business owners consider transferring company shares to the next generation through either direct gifting or selling to their children. Some believe that as long as a genuine sales contract is signed, the child pays money, and securities transaction tax is paid, gift tax can be avoided. However, since parents and children are within two degrees of kinship, even legitimate sales transactions do not conclude the tax process.

The Ministry of Finance clearly states that property sales between relatives within two degrees must still file a gift tax return. Only when buyers can prove they actually paid the price—and that the funds were neither lent by the seller nor borrowed from third parties with the seller’s guarantee—can the transaction be recognized by the tax authority as a true sale and thus exempt from gift tax.

Even if a father genuinely sells shares to his son, a gift tax declaration is still required. Many people confuse "not having to pay gift tax" with "not having to file a gift tax return." According to Article 5 of the Inheritance and Gift Tax Act, property sales between close relatives are presumed to be gifts unless the buyer provides solid evidence of payment made with independent funds—not provided or guaranteed by the seller.

For example, if a father sells company shares worth NT$5 million to his son, and the son transfers NT$5 million from his own bank account, this alone does not exempt the transaction from gift tax procedures. A gift tax return must still be filed, along with proof of fund sources and payment, for the tax authority to verify the authenticity of the transaction. The Ministry of Finance’s tax portal also reminds taxpayers that whether the agreement is labeled as a gift or a sale, a gift tax return is required. For sales, supporting financial documentation must be submitted and approved to avoid gift tax assessment.

Therefore, the key is not whether the contract says "sale," but whether the son can prove the money was truly his own and was actually transferred to the father.

Paying money isn’t always safe—low prices may still trigger gift tax

Beyond actual payment, the sale price itself cannot be arbitrarily set. The Inheritance and Gift Tax Act stipulates that if property is transferred at a significantly undervalued price, the difference between the fair market value and the sale price is treated as a gift.

Thus, if a father holds company shares with a clearly higher appraised value but deliberately sells them to his child at a very low price, even with actual payment, the transaction may still involve gift tax. For instance, if shares are clearly worth more than NT$100 per share but are sold at NT$10 per share to children, the tax authority may examine whether the price is "significantly unreasonable" and assess the difference as a taxable gift.

Therefore, at least two points must be observed in parent-child share sales: (1) there must be verifiable payment flow, and (2) the transaction price must not deviate significantly from fair market value.

Unlisted shares within tax scope require 0.3% securities transaction tax

If the transaction involves unlisted shares that are legally issued and fall within the scope of securities transaction tax, private sales must also comply with tax rules. The current securities transaction tax rate for stocks is 0.3% of the transaction value. Although the tax is borne by the seller, the buyer acts as the withholding agent and must collect the tax on the settlement date and submit payment via a deposit slip the following day.

For example, if a father sells unlisted shares worth NT$5 million to his son, the securities transaction tax would be NT$15,000.

However, paying this NT$15,000 only completes the securities tax obligation—it does not replace the need for gift tax filing or proof of payment flow. In other words, "paying securities tax" and "avoiding gift tax treatment in family transactions" are entirely separate matters.

Companies cannot approve share transfers without verifying tax payment

Another often-overlooked party is the issuing company itself. Article 6 of the Securities Transaction Tax Regulations requires that when shareholders apply for transfer registration, the issuing company must inspect the "prior securities transaction tax payment certificate." If the transaction lacks tax payment, the company must report it to the competent tax authority.

Therefore, when a company receives a shareholder’s request for share transfer registration, it cannot simply proceed by treating it as "just a father transferring shares to his son." If securities tax is legally due, the tax payment certificate becomes a crucial verification document for processing the registration.

If a company fails to report an unreported securities tax transaction, Article 6 holds the company liable for "reimbursing the tax amount." The Ministry of Finance’s tax portal confirms this rule. It should be noted that "reimbursing the tax" is not the same as being fined, so headlines should use "the company may have to reimburse the tax" rather than "the company may be penalized."

Not all 'private equity' transactions require 0.3% securities tax

There is another important exception. While people commonly refer to any private company stake as "unlisted shares," tax law treats them differently.

The Ministry of Finance’s April 2026 update clarifies that if a limited company shareholder transfers capital contributions, or a joint-stock company has not issued physical shares and only transfers equity, or even if shares are issued but not certified under Article 162 of the Company Act, the transaction is considered a property transfer, not a securities transaction.

In such cases, the rule of "paying 0.3% securities tax on legally issued unlisted shares" does not apply. Income tax treatment also differs.

For example, if a joint-stock company does not issue shares and a shareholder transfers equity, any capital gain exceeding the acquisition cost is generally included in annual comprehensive income for personal income tax purposes.

Therefore, before determining whether securities tax applies, the first step is to confirm whether the transferred asset is a legally issued "share" or merely a company "equity interest" without formal issuance.

Profits from legally issued unlisted shares may trigger minimum tax

If the transaction involves shares issued or privately placed by unlisted, non-OTC, and non-TPEx companies, income tax follows a different rule.

Since 2021, individuals selling qualifying unlisted shares must include the capital gains in their basic income amount—commonly known as the minimum tax system.

However, exceptions exist. If the issuing or privately placed company is a domestic high-risk startup designated or deemed designated by the competent authority, and the company has been established for less than five years at the time of sale, the capital gains may be excluded from the basic income amount.

For the 115th fiscal year (2026), the formula for calculating individual minimum tax is: Basic Tax = (Basic Income Amount – NT$7.5 million) × 20%.

Thus, profits from unlisted shares are not directly taxed at 20%. Instead, relevant items are first included in the basic income amount, then after deducting NT$7.5 million, the basic tax is calculated and compared with regular income tax. Only if the minimum tax threshold is met will additional tax be due.

Transferring unlisted shares to children: Four key checks

Therefore, when a father "sells" company shares to his son, he must not focus solely on a sales contract and securities tax payment.

First, confirm whether the transferred asset is a legally issued share subject to securities transaction tax, or merely an equity interest without issued shares, as tax treatments differ.

Second, if it is a share sale, ensure securities transaction tax is properly withheld and paid.

Third, since father and son are within two degrees of kinship, even a genuine sale requires a gift tax return, supported by complete documentation of fund sources and payment, to be recognized as a true sale and exempt from gift tax.

Fourth, if the shares are legally issued unlisted shares, confirm whether the resulting capital gains must be included in the individual’s basic income amount; for equity transfers without issued shares, capital gains may fall under property transaction income and follow different income tax rules.

While it may seem like simply moving company shares from father to son, the process may simultaneously involve gift tax filing, securities transaction tax, income tax or minimum tax, and the issuing company’s verification duties during transfer. Omitting any single step could result in new tax issues during a tax audit, even if the family believed the transaction was complete.

Source: Ministry of Finance, Ministry of Finance Tax Portal, Taipei National Taxation Bureau