Taiwan Gift Tax on Overseas Share Transfers
Mr. Wang is a resident of Taiwan for tax purpose (Note 1). On June 30, 2026, he gifted a 50% ownership interest in Company A, an overseas company, to his son. Many people assume that because the overseas company was incorporated abroad, its shares constitute property located outside Taiwan. As a result, they mistakenly believe that gifting such shares to their children is not subject to gift tax reporting in Taiwan.
However, Taiwan’s Estate and Gift Tax Act adopts both the territoriality and personal jurisdiction principles. Accordingly, for residents who ordinarily reside in Taiwan, gifts of either domestic or overseas property fall within the scope of Taiwan’s gift tax.
Accordingly, in the total value of property gifted during the same calendar year exceeds the annual gift tax exemption (TWD 2.44 million per donor for 2026), the donor is required to file a gift tax return with the competent tax authority in Taiwan within 30 days from the day following the date on which the gift is made. The donor may not disregard the gift tax filing obligation merely because the gifted property is located overseas.
How is the value of equity interests in an overseas company determined?
If the gifted equity interests are in an overseas company that is neither listed on a stock exchange, OTC listed, nor traded on an emerging stock market, the value of the equity interests should, in accordance with the applicable regulations, be determined based on the company’s net asset value as of the data of the gift. This value is then used as the tax base for calculating gift tax. Applying this to Mr. Wang’s case above, Company A is neither listed on a stock exchange, OTC listed, nor traded on an emerging stock market. AS of the data of the gift, the company’s net asset value was TWD 54 million. Accordingly, the value of the 50% equity interest gifted by Mr. Wang was TWD 27 million.
Based on the 2026 annual gift tax exemption of TWD 2.44 million, the net taxable gift amount is TWD 24.56 million after deducting the exemption from the gifted equity value of TWD 27 million. Applying the 10% gift tax rate, the gift tax payable is TWD 2.456 million.
Let us take this discussion a step further. If a Taiwan company gifts its equity interest in an overseas company to its son, would the transaction also be subject to gift tax? There are several tax considerations involved, which Kaizen will analyse as follows:
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Taiwan Company are not Subject to Gift Tax
Gifts made by a Taiwan legal entity are not subject to gift tax and therefore do not require a gift tax return to be filed.
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When a Taiwan Company Gifts Shares to Its Son, the “Donation Expense” Generally Cannot Be Deducted for Tax Purposes
Under Article 36 of Taiwan’s Income Tax Act and Article 79 of the Guidelines for the Examination of Profit Seeking Enterprise Income Tax, deductible donation expenses are generally limited to donations made to the government, qualified public-interest or charitable organizations, and other donations specifically recognized under applicable laws and regulations. A company cannot simply transfer its assets to any individual and treat the transfer as a tax-deductible expense.
Taiwan’s Ministry of Finance has also indicated that when a profit-seeking enterprise donates shares in which it has invested, the amount of the donation should be determined based on the book cost of the shares.
For example, assume that the overseas company shares have a book cost of TWD 10 million and a fair value of TWD 30 million.
If the company transfers the shares to its son free of charge, the donation expense recorded at the book cost of TWD 10 million would, in principle, not be deductible from the company’s taxable income for corporate income tax purposes. In addition, any other gains or losses recognized in the company’s accounts because of different accounting treatments for the investment, such as the cost method, FVOCI, FVTPL, or equity method, would need to be separately reconciled for tax purposes.
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The most important, the Son May Be Subject to Taiwan Individual Income Tax on the Shares Received
Article 4, Paragraph 1, Subparagraph 17 of Taiwan’s Income Tax Act generally provides that property acquired through inheritance, bequest, or gift is exempt from income tax. However, the provision contains an important exception: “property donated by the profit-seeking enterprise is not exempt.”
Therefore, the son cannot simply argue that the shares are exempt from income tax because they were received as a gift, since the property was transferred to him by a profit-seeking enterprise.
Under the income classification set out in Article 14 of Taiwan’s Income Tax Act, the income arising from the gratuitous acquisition of the shares may initially be classified as Category 10 – Other Income. In general, income under this category refers to income that does not fall within the other nine categories and is calculated based on the amount of income less the related costs and necessary expenses.
Accordingly, if the son is a Taiwan tax resident, approximately TWD 30 million of other income may be included in his consolidated individual income tax return for the year. As a result, the son could face a substantial individual income tax liability.
However, Taiwan’s tax authorities also apply the substance-over-form principle for tax purposes. Where a company is effectively controlled by the father, Taiwan’s Ministry of Finance has issued cases involving the use of a controlled company to arrange the transfer of economic benefits to relatives within two degrees of kinship, in which the transaction was recharacterized as a gift based on the substance-over-form principle.
For example, where the original shareholder controls the company’s board of directors and arranges for new shares to be issued at an undervalued price to relatives within two degrees of kinship, the Ministry of Finance has expressly provided that the transaction may, based on the substance-over-form principle, be treated as a gift made by the original shareholder to the relatives.
Kaizen has extensive experience in providing tax consulting services for both companies and individuals. We welcome you to contact our professional team. Based on the specific circumstances of your case, we will provide tailored and professional tax advice.
Note 1:
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A resident is considered to “ordinarily reside in Taiwan” if either of the following conditions is met:
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Has a domicile (registered household): The individual has a domicile in Taiwan, meaning that the individual has completed household registration in Taiwan.
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Has a place of residence but no domicile: The individual does not have a domicile in Taiwan but has a place of residence in Taiwan and, during the two years preceding the date of death or the date on which the gift is made, has stayed in Taiwan for a cumulative period exceeding 365 days. Exception: An individual who comes to Taiwan for employment at the invitation of a Taiwan entity and has a specified period of residence in Taiwan is not considered to “ordinarily reside in Taiwan,” regardless of the length of their stay.
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