Brother Sells House to Sister: Signing a Sales Contract Isn't Enough! Tax Authority Reveals 'One Key': Without This Proof, It May Be Considered a Gift

A brother plans to sell a house, and his sister happens to want to buy it. Both agree on a price and sign a formal sales contract. Many people in Taiwan might assume that as long as the document clearly states it's a 'sale,' it naturally has nothing to do with a gift. However, tax law does not treat transactions between siblings so straightforwardly. According to the Estate and Gift Tax Act, property sales between relatives within the second degree of kinship are 'deemed gifts' by default. To prove it is a genuine sale, the key is not merely having a written contract, but being able to provide concrete proof that the purchase price has been paid. In other words, even if the brother and sister have signed a sales contract, if they cannot prove that the sister actually paid the price, they may still face gift tax implications.

### Why Could a Brother Selling a House to His Sister Be Treated as a Gift?

Siblings are considered second-degree collateral relatives, so a property sale between them falls under Article 5, Paragraph 6 of the Estate and Gift Tax Act. Under current regulations, property sales between relatives within the second degree of kinship are generally treated as gifts. However, this does not apply if the parties can provide 'concrete proof of payment' and the payment was not funded by a loan from the seller to the buyer, or by a loan obtained by the buyer from a third party with the seller's guarantee.

Suppose the brother sells the house to the sister for NT$10 million, and both sign a sales contract for that amount. Relying solely on this contract is insufficient to prove the transaction is a genuine sale. The tax authority will also verify whether the sister actually paid the amount and whether the related fund flows can be substantiated. The key lies in 'concrete proof of payment'—financial records that clearly demonstrate the payment process.

### A Sales Contract Isn't Enough: What the Tax Authority Really Looks At Is 'Whether the Money Was Paid'

The Taipei National Taxation Bureau under the Ministry of Finance explains that if parties within the second degree of kinship can submit concrete proof of payment, and the payment was not provided as a loan by the seller or obtained through a loan guaranteed by the seller, and the transaction is verified as genuine, gift tax can be waived.

What qualifies as 'concrete proof of payment'? The law does not require a specific type of document. Past interpretations by the Ministry of Finance state that there are no formal restrictions on proof of payment under Article 5, Paragraph 6 of the Estate and Gift Tax Act. As long as the source of funds and payment vouchers are provided, and they sufficiently prove the transaction is a genuine sale rather than a nominal sale to evade gift tax, it should not be treated as a gift.

In 2024, the Northern Region National Taxation Bureau publicly clarified that for sales between relatives within the second degree, supporting financial records such as bank account passbook covers and internal pages from both the payer’s and recipient’s accounts can be submitted to prove actual payment.

Therefore, 'concrete proof of payment' has no fixed format. The crucial point is whether verifiable financial records demonstrating actual payment can be provided. For example, if the sister transfers the purchase amount via bank transfer to the brother’s account, she should retain all relevant remittance, receipt, and transaction records. If the funds involve a loan, related loan and disbursement documents should also be preserved to ensure the entire payment process is traceable.

### Even If the Sister Actually Transfers NT$10 Million, It Doesn’t Necessarily Mean There’s No Problem

The issue isn’t just about 'whether a transfer occurred'—the source of the funds may also be scrutinized. Suppose the brother sells the house to the sister for NT$10 million, and the sister indeed transfers NT$10 million to the brother’s account. On the surface, it appears payment is complete. However, if in reality the brother first lent NT$10 million to the sister, who then used that money to pay the brother, the mere appearance of a NT$10 million transfer on paper cannot be considered sufficient to meet the exception under Article 5, Paragraph 6 of the Estate and Gift Tax Act.

Because the law explicitly states that if the payment comes from funds loaned by the seller to the buyer, or from a loan obtained by the buyer with the seller’s guarantee, it still falls under the 'deemed gift' rule. However, this does not mean the sister must use only her own bank deposits to buy the house. If the sister independently applies for a mortgage or other financing from a bank, and the loan is neither provided by the brother nor guaranteed by him, the presence of bank financing in the purchase funds does not automatically constitute a gift. Ultimately, each case will be reviewed based on the transaction details and financial records.

In June 2026, the Taipei National Taxation Bureau issued a reminder regarding the transfer of pre-sold properties: when parents transfer pre-sale rights to their children, if the children actually pay the construction fees previously paid by the parents and can provide proof of the payment process and source of funds, and the tax authority verifies the sale as genuine, gift tax can be waived. If such proof cannot be provided, gift tax will still apply. Since both parent-child and sibling relationships fall within the second degree of kinship, this rule applies equally to property transactions between siblings.

### Can the Sister Assuming the Brother’s Mortgage Debt Be Considered Payment?

Another scenario may arise in family property sales: the buyer does not transfer the full price directly to the seller but pays part in cash and assumes the seller’s existing debt. For example, the brother sells the house to the sister, who pays part in cash and formally assumes the brother’s existing mortgage debt. As long as the assumed debt is verified as genuine, this portion may still be recognized as payment of the purchase price.

Ministry of Finance interpretations state that if a buyer within the second degree of kinship pays part in cash and assumes the seller’s debt to cover the price, and the debt is verified as genuine, the amount of that debt can be considered as payment and not treated as a gift. Any portion for which payment proof cannot be provided will be handled according to regulations. However, if there is only a private agreement that the sister will pay the mortgage in the future, whether this constitutes a recognized debt assumption depends on the contract, debt relationship, and actual payment records.

### Siblings Buying Property: The '30-Day' Rule After Signing the Contract

Property sales between relatives within the second degree of kinship still involve gift tax reporting procedures. The Taipei National Taxation Bureau explains that such transactions must still file a gift tax return. If concrete proof of payment is provided and the conditions are met, and the tax authority verifies the sale as genuine, gift tax can be waived.

The Northern Region National Taxation Bureau further clarified in a 2024 public response that the taxpayer—the seller—must file a gift tax return within 30 days of signing the sales contract and submit supporting documents such as the sales contract and financial records of payment for tax authority review. If the final payment has not been completed by the filing deadline, the return can still be filed first, with subsequent transaction records submitted later as required by the tax authority.

Ministry of Finance interpretations also state that if a sale between relatives within the second degree conforms to general market practices, even if part of the payment is made after the property title transfer, it can still be recognized as valid if the tax authority verifies the sale as genuine. Therefore, property sales between siblings are not impossible, nor will they automatically incur gift tax just because of the family relationship. Beyond the sales contract, the contract terms, actual payment, and related financial flows must all align. If the brother genuinely sells the property, the sister genuinely pays, and the entire payment process can be fully documented and verified by the tax authority, the transaction can be treated as a genuine sale. However, if only the contract states 'sale' but no concrete proof of payment can be provided, gift tax issues may still arise.

### References

- Ministry of Finance Legal Database, Estate and Gift Tax Act, Article 5 - Taipei National Taxation Bureau: 'Is Gift Tax Reporting Required for Property Sales Between Relatives Within the Second Degree of Kinship?' - Northern Region National Taxation Bureau: Public Response on 'Evidence for Intra-Family Sales Within the Second Degree' - Taipei National Taxation Bureau: 'Transferring Pre-Sold Properties to Children: The Key to Gift Tax Assessment Is Proof of Fund Payment,' June 15, 2026 - Ministry of Finance Interpretation: 'Proof of Payment Under Paragraph 6, Article 5 of This Act Has No Formal Restrictions' - Ministry of Finance Interpretation: 'If Payment Proof Involves Assumption of Seller’s Debt and Is Verified as Genuine, It Is Not Treated as a Gift'