Parent Fined NT$930,000 in Gift Tax for Lending Money to Children! 'It Was a Loan, Not a Gift' Defense Rejected — Tax Authority Reveals Critical Missing Step

Transferring money between accounts to relatives can lead to legal penalties. The Southern Taiwan Office of the Ministry of Finance has released its reconsideration results: an individual made four bank transfers totaling USD 230,000 (approximately NT$6.86 million) to two daughters in 2013 (Minguo Year 102). As the individual failed to file gift tax declarations, the transaction was deemed an unconditional gift. The original ruling required payment of NT$466,880 in back gift tax, plus an equal penalty, resulting in a total penalty of NT$933,760. The taxpayer appealed but was ultimately rejected by the tax authority.

Heavy Penalty of Over NT$930,000 for Transfers to Children! Father's Claim of 'Loan and Advance Payments' Rejected — Tax Authority Explains Key Evidence

The taxpayer argued during reconsideration that the funds sent to his daughters were for 'repaying prior loans from the daughters' and 'advancing expenses for post-retirement travel and insurance,' not unconditional gifts. However, the tax authority stated that the taxpayer failed to provide complete and clear supporting documentation. According to law, any property transfer made unconditionally and accepted by the recipient qualifies as a 'gift.' Taxpayers must file a declaration within 30 days if the amount exceeds the tax-free threshold. In this case, the funds were directly deposited into the daughters’ accounts, making the facts clear; thus, gift tax was legally imposed.

The tax authority emphasized that even if the taxpayer did not intend to evade taxes, failure to file constitutes negligence and must be penalized under the law. The final decision upheld the original ruling, requiring the taxpayer to pay NT$466,880 each in tax and penalty, totaling NT$933,760.

How to Avoid Penalties on Family Loans? Tax Authority Recommends This Essential Precaution

Given frequent financial transactions among relatives, the tax authority specifically warns that to avoid being classified as an unconditional gift, individuals should take preventive measures:

- Draft a legally binding 'loan agreement' in advance. - Clearly specify loan amount, agreed interest rate, repayment method, and repayment schedule in the contract. - Strictly follow the contract terms and retain all records of fund transfers and repayments.

Maintaining thorough documentation and financial trail evidence enables effective explanations when questioned by tax authorities, helping avoid severe penalties due to insufficient proof.

What Is the 2026 Gift Tax Exemption? Are Transfers to Children Considered Gifts?

Transfers to children are generally considered gifts under law, as parents unconditionally transfer funds, enabling children to acquire assets. According to the Ministry of Finance’s official website, the annual gift tax exemption is NT$2.44 million per donor. This means that from January 1 to December 31 each year, regardless of how many recipients, the cumulative total below NT$2.44 million is exempt from gift tax.

As a parent, you may use the annual NT$2.44 million tax-free allowance to gift cash in your name to your children. The children can then invest or purchase property under their own names using these funds. Any interest income or investment returns will belong solely to the children (this portion is not considered a parental gift).

Source: Southern Taiwan Office of the Ministry of Finance