If a party cannot substantiate the purposes of a cash withdrawal and the funding sources of his/her child’s deposit, and that an agency findsthat the party converts the money withdrawn from his/her account into a certificate of deposit of his/her child in a short proximity of time, the agency has fulfilledthe burden of proof to substantiate the criteria for imposing gift taxes (Taiwan)

2019.2.21
Fang-Wei Lin

The Supreme Administrative Court rendered the 108-Pan-76 Decision of February 21, 2019 (hereinafter, the “Decision”), holding that when a party cannot substantiate the purposes of a cash withdrawal and the funding sources of his/her child’s deposit, and that an agency finds that the party converts the money withdrawn from his/her account into a certificate of deposit of his/her child in a short proximity of time, the agency should be deemed to have fulfilled the burden of proof to substantiate the criteria for imposing gift taxes.

According to the facts underlying this Decision, the National Taxation Bureau of the Northern Area held in an administrative disposition that the Appellant had been subject to a gift tax under Article 4, Paragraph 2 of the Inheritance and Gift Tax Law but had failed to file the gift tax pursuant to applicable requirements, and he was therefore required to pay the unpaid tax and subject to a penalty for tax evasion.  This finding was based on notification from the Taxation Administration concerning the materials as found as well as the conversion of several funds withdrawn from bank accounts into certificates of deposit of the Appellant’s son by the Appellant and an individual who was not a party to this lawsuit during 2004 through 2006.  Dissatisfied, the Appellant brought an administrative action.

According to this Decision, the Appellee had produced evidence regarding the facts concerning the criteria of taxation to substantiate that funds had been withdrawn from the Appellant’s accounts for conversion into his child’s certificates of deposit, namely, the withdrawal slips for withdrawing funds from the Appellant’s accounts and the account opening data registration slips or deposit slips for the conversion into his son’s certificates of deposit.  According to the closeness and proximity of time between the withdrawal of cash and the conversion into certificates of deposit (1 to 10 minutes on the same day in the same bank or around 30 minutes between different banks on the same day) and the inability of the Appellant to substantiate the purposes of such fund withdrawals as well as the funding sources of his son’s certificates of deposit, the Appellee’s finding, based on the above objective factual evidence, that the Appellant’s withdrawal of cash from his bank accounts before its conversion into his son’s certificates of deposit constituted an objective fact of property transfer and receipt and was sufficient to support the finding that the Appellant had had the intent to give the money to his son, who had not refused to receive the money.  Since this satisfied the provision of gifting under Article 406 of the Civil Code and Article 4, Paragraph 2 of the Inheritance and Gift Tax Law, based on the foregoing provisions, it is certainly difficult to conclude that the Appellee failed to fulfill its burden of proof to substantiate the criteria for taxation when imposing a gift tax on the Appellant.

In addition, it was further pointed out in this Decision that since the Appellant had failed to to substantiate his argument that after making the above cash withdrawals, he handed them over to a third party immediately instead of converting the same into his son’s certificates of deposit, nor could he produce relevant materials for the Appellee to verify, the Appellant’s assertion that this aspect was not investigated in the original decision was also groundless.  Therefore, the appeal was rejected.