Insights
Gift tax-tax saving strategy
Gift tax income revenue is nearly half of that of inheritance tax in the tax year of 2021, with an amount of 18 billion NTD.
In 2023, the gift tax exemption for a person in that year is 2.44 million NTD. In addition to the exemption, CYW also provides information for the pursuit of tax saving effects in the field of gift tax.
Gift from both parents
As mentioned, each person, including parents, has the exemption in a year. Parents are advised to gift the siblings separately to enjoy 4.88 m (2.44X2) exemption. The asset transition between parents is not applicable to gift tax.
Real estate vs cash
As CYW indicated in the field of inheritance tax, the tax authority estimates the value of real estate differently. That difference is also applicable in gift tax. When you decide to gift someone, the gift tax obligations are different when you gift them in cash or when you purchase a house with that cash and then transfer the title.
Multiple gifts and real estate
If parents decide to transfer real estate to their children, parents and grandparents are able to gift the grandchildren 9.76 million NTD (2.44*4) cash, and then the owner of the real estate sells the real estate to their children at a value not lower than the perceived value to mitigate gift tax obligations.
Cost of the capital
When trust is involved to transfer annuity of an asset to a beneficiary. Cost of capital could be a tax saving strategy, too. When a trustor, usually parents, create a trust in hopes of benefiting their siblings via the function of a trust, the difference of the present value and future value of the annuity amount is applicable to gift tax obligations.
In the financial market, the formation of a discount rate for an asset is never easy, and therefore for simplicity and for generalization purpose, the discount rate to discount the annuity of the trust to calculate the present value of the annuity is the rate used by Chunghwa Post, a national owned bank.
The lower the rate, the larger the present value, and the less difference of future value and present value of a dollar and therefore the less gift tax obligations.