The National Taxation Bureau of Taipei, Ministry of Finance stated that where a national of the Republic of China (R.O.C.) who is habitually resident within the territory of the R.O.C. dies leaving property located outside the R.O.C., such property shall be included in the gross estate, both domestic and foreign, and subject to estate tax.

The Bureau explained that, pursuant to Paragraph 1, Article 1 of the Estate and Gift Tax Act, where an R.O.C. national who is habitually resident within the territory of the R.O.C. dies leaving property, estate tax shall be levied on the entire estate, including property located both within and outside the R.O.C., in accordance with the Act. The term “habitually resident within the territory of the R.O.C.” is defined under Paragraph 3, Article 4 of the same Act as a decedent meeting any of the following conditions:

1. Having a domicile within the territory of the R.O.C. within two years prior to the date of death; or

2. Having no domicile but having a residence within the territory of the R.O.C., and having stayed in the R.O.C. for more than 365 days within the two years prior to the date of death. However, a person who stays in the R.O.C. for a specific period due to employment engaged upon appointment by the R.O.C. government shall not be regarded as habitually resident within the territory of the R.O.C., regardless of the length of stay.

The Bureau provides the following example: Mr. A had a domicile within the R.O.C. within two years prior to his death. At the time of death, he left property located within the R.O.C. amounting to NT$10 million and property located in the United States equivalent to NT$80 million. The taxpayer is required to include the U.S. property in the gross estate, resulting in a total estate of NT$90 million (NT$10 million domestic property + NT$80 million U.S. property), and to file an estate tax return with the competent tax authority at the place of household registration within six months from the date of death. Where estate tax has already been paid in the United States in accordance with U.S. law on the decedent's U.S. property, the taxpayer may, upon submission of tax payment certificates issued by the U.S. tax authority, claim a tax credit against the estate tax payable in the R.O.C. However, the amount of such credit shall not exceed the additional estate tax payable calculated under the applicable domestic tax rates as a result of including the U.S. property in the estate.

The Bureau would like to remind the public that, with the increasing globalization of asset allocation, individuals frequently accumulate wealth through overseas investments. Where overseas property is inherited, taxpayers should carefully understand the relevant regulations to avoid underreporting or incorrect reporting, which may result in additional tax assessments and penalties.

(Contact: Ms. Chen, Head of Legal Affairs Division; Tel: 02-23113711 ext. 2031)