No Gift Tax Issues from Division of Real Estate by Court Decision (Taiwan)

May 2023

Aaron Chen and Sean Tang

The Ministry of Finance issued a press release on March 15, 2023 to state that the division of jointly-owned property (real estate) by court decision does not give rise to gift tax, regardless of whether the allocation of such property also involved monetary compensation.  The main points are as follows:

1. For the division of jointly owned property by court decision, the 68-Tai-Shang-3247 Civil Decision of the Supreme Court and the relevant court decisions held that the matter shall bedetermined fairly pursuant to the authority of the court and not limited to the positions asserted by the parties. In addition, the Mi-Tai-Ting-(1)-00855 Circular of January 30, 1992 from the Secretary General of the Judicial Yuan posited that evenif the court ordered mutual monetary compensation between the parties in allocating the property, it would still be a form of dividing jointly owned property instead of mutual monetary compensation as a condition for resolving mutually agreed obligations between the parties.  Therefore, a court decision on the division ofreal estate does not give rise to gift tax regardless of whether monetary compensation is involved in the allocation of property.

2. However, the Ministry of Finance also cautioned that if the court ordered monetary compensation in dividing real estate, gift tax shall still be levied in accordance with Article 5 of the Estate and Gift Tax Act ifthe party receiving for the compensation were to subsequently release the paying party from the obligation to provide compensation.

It should also be noted that the above press release only applies to the division of real eastate by court decision; the past circulars and opinions of the Ministry of Finance shall apply a division of real estate by contract. In other words, if the value of the land acquired by each person after division is calculated based on the announced value at the time of the division, which gives a different result than if the calculation was done pursuant to the original ownership percentage, and the parties have not reached an agreement on compensation beforehand, this shall be deemed a gift and subject to a gift tax under Article 5, Subparagraph 2 of the Estate and Gift Tax Act.[1] In case of an agreement to divide an estate, after the heirs have settled the estate tax, regardless of how the estate is actually divided among the heirs, there is no need to compare the value of the inheritance received with what the heir is entitled to, nor is there any mutual gift issues between the heirs, so no gift tax will be levied as a result.[2]

[1] See the Tai-Cai-Shui-34896 Circular of the Ministry of Finance issued on July 24, 1978.
[2] See the Tai-Cai-Shui-35311 Circular of the Ministry of Finance issued on August 8, 1978.

The contents of all materials (Content) available on the website belong to and remain with Lee, Tsai & Partners.  All rights are reserved by Lee, Tsai & Partners, and the Content may not be reproduced, downloaded, disseminated, published, or transferred in any form or by any means, except with the prior permission of Lee, Tsai & Partners. 

The Content is for informational purposes only and is not offered as legal or professional advice on any particular issue or case.  The Content may not reflect the most current legal and regulatory developments.  Lee, Tsai & Partners and the editors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The contributing authors’ opinions do not represent the position of Lee, Tsai & Partners. If the reader has any suggestions or questions, please do not hesitate to contact Lee, Tsai & Partners.