Introduction

Estate planning in Taiwan for international clients requires careful consideration of Taiwan’s legal system, tax laws, and cultural factors. This guide provides a comprehensive overview of the key aspects of international estate planning in Taiwan, addressing wills, trusts, taxation, asset protection, and special considerations for international clients.

Understanding these elements is crucial for individuals with assets in Taiwan or those seeking to include Taiwan in their global estate plans. This guide will help you navigate the complexities of international estate planning in Taiwan and ensure the effective transfer of your assets to your heirs according to your wishes.

Overview of Taiwan’s Legal System for Estate Planning

Civil Law Jurisdiction

Taiwan operates under a civil law framework, unlike common law jurisdictions such as the United States or the United Kingdom. In civil law systems, legislation is codified into comprehensive statutes, and judicial decisions hold less sway in shaping legal principles.

For estate planning, this means the Civil Code of Taiwan is the cornerstone for all inheritance, wills, and trust matters. International practitioners should prioritise familiarising themselves with these statutory provisions, as they dictate how estates are both administered and distributed.

Key Laws Governing Inheritance and Estate Planning

Several principal statutes form the backbone of Taiwan’s estate planning regime:

• Civil Code
  • Governs intestate succession and will formalities.
  • Establishes forced heirship rules to protect certain heirs.
• Trust Act
  • Regulates the creation, operation, and termination of trusts.
  • Provides a flexible mechanism for asset protection and succession planning.
• Estate and Gift Tax Act
  • Imposes taxes on lifetime transfers and inheritances.
  • Sets thresholds and rates that directly impact net estate value.
• Act Governing the Application of Laws to Civil Matters Involving Foreign Elements
  • Determines when foreign wills and estates are recognised in Taiwan.
  • Clarifies the applicable law for cross-border succession issues.

Understanding these statutes is essential for crafting compliant, effective estate plans—whether your clients hold assets in Taiwan, reside abroad, or have beneficiaries across multiple jurisdictions.

Wills and Succession Planning in Taiwan

Will Formalities Under Taiwan Law

In Taiwan, a will allows individuals to specify how their assets will be distributed after their death. Taiwan’s legal system, based on civil law, has specific requirements for creating a valid will. There are five recognised methods for making a will in Taiwan:

• Handwritten Will: The entire will must be handwritten and signed by the testator, including the date. Any changes must be noted and signed.
• Notarised Will: The testator declares their wishes orally before a notary public and at least two witnesses. The notary writes, reads, and explains the will, which is then signed and dated by all parties.
• Sealed Will: The testator signs the will, seals it in an envelope, signs the seam, and declares it as their will before a notary public and at least two witnesses. The notary records the date and declaration on the envelope, which is then signed by all parties.
• Dictated Will: The testator dictates their wishes to at least three witnesses, one of whom writes it down, reads it aloud, and explains it. The document, including the date and the writer’s name, is then signed by all parties.
• Nuncupative Will: This type of will is only valid in situations of imminent death or when other methods are impossible. It requires at least two witnesses and must be either written down by one witness or recorded on an audio device. A nuncupative will becomes invalid after three months if the testator is able to make a will using one of the other four methods.

Enforceability of Foreign Wills

Taiwan’s legal framework recognises foreign wills under certain conditions. A foreign will is considered valid in Taiwan if it meets the legal requirements of any of the following:

• The testator’s home country at the time the will was made.
• The country where the will was made.
• The country where the testator resided at the time of death.
• The country where any real estate mentioned in the will is located.

This approach ensures that a will made according to the laws of a relevant jurisdiction is recognised and can be enforced in Taiwan.

Intestate Succession Rules

When someone dies in Taiwan without a valid will, their assets are distributed according to intestate succession rules outlined in the Taiwan Civil Code. The order of inheritance prioritises family members, starting with:

1. Lineal descendants (children, grandchildren, etc.)
2. Parents
3. Siblings
4. Grandparents

The surviving spouse shares the inheritance with other heirs based on a defined ratio. For example, if the spouse inherits alongside the deceased’s children, they receive an equal share. If there are no other heirs, the spouse inherits the entire estate.

Taiwan also has a system of forced heirship, which guarantees a minimum share of the inheritance to certain heirs, even if a will exists. These reserved portions protect the interests of close family members and cannot be overridden by the deceased’s wishes. For instance, a child is entitled to half of what they would have received under intestate succession, regardless of the will’s provisions.

Trusts as an Estate Planning Tool in Taiwan

Types of Trusts Available

In Taiwan, trusts are governed by the Trust Act and may be created either by contract (a living trust) or by will (a testamentary trust).

Living trusts require several key elements to be clearly defined:

• Trust property: The specific assets transferred into the trust.
• Purpose of the trust: The objective or goals that the trust must fulfil.
• Beneficiary: The person or persons for whose benefit the trust is established.

Moreover, the settlor must transfer legal title of the trust property to the trustee. Although Taiwanese law does not strictly mandate a written contract for a living trust, a written document is highly recommended to minimise future disputes.

By contrast, a testamentary trust arises by a unilateral legal act on the settlor’s death. Its validity depends entirely on the will’s compliance with statutory formalities. Accordingly, the will must also specify:

• The trust property and its description
• The trust purpose and any conditions
• The beneficiary
• The trustee

Tax Considerations for Trusts

Taiwanese tax law treats living and testamentary trusts differently:

• Testamentary trusts are subject to estate tax upon the settlor’s death, making them less attractive for tax-saving strategies.
• Living trusts do not incur estate tax at the moment of death, but all subsequent distributions may trigger gift or income tax events.

In addition, foreign trusts can offer enhanced confidentiality—since the settlor’s identity is not publicly disclosed—and may benefit from the robust trust frameworks of well-established jurisdictions.

Cross-Border Trust Issues

When your trust structure spans multiple jurisdictions, you must carefully navigate varied legal and tax regimes. Key considerations include:

• Validity and enforceability: Each jurisdiction may impose different formal requirements for trusts.
• Taxation of trust income and assets: Cross-border trusts can face both home-country and foreign-country tax liabilities.
• Reporting obligations: Foreign trusts often trigger additional disclosure or compliance requirements in the settlor’s and beneficiaries’ home countries.

For these reasons, engaging advisors with cross-border trust expertise is essential to ensure your structure complies with all relevant laws and achieves your estate planning objectives.

Tax Considerations for International Estate Planning in Taiwan

Estate and Gift Tax Overview

Taiwan’s estate and gift tax regime applies to all individuals holding assets in Taiwan, irrespective of nationality. However, whether your worldwide assets or only Taiwanese-situs assets are taxed depends on continuous residence status.

Continuous residence is defined as meeting either of these criteria within the two years preceding death or gift transfer:

• Domicile in Taiwan at any point during that two-year period.
• At least 365 days of physical presence in Taiwan (foreign government employees seconded for a specified period are excluded).

For estate tax, the taxable estate is calculated by:

1. Valuing the total estate at the date of death.
2. Subtracting allowable deductions and exemptions (per Articles 17, 17-1, and 18 of the Estate and Gift Tax Act).
3. Applying a flat 10% rate to the net taxable estate.

Similarly, gift tax applies annually to property transfers:

• Determine the aggregate value of gifts made in the year.
• Deduct exemptions and allowances.
• Apply the 10% tax rate to the resulting net amount.

Understanding these thresholds, deductions, and rates is essential for structuring cross-border estate plans and minimising tax exposure.

Double Taxation Treaties

Taiwan has established Double Taxation Agreements (DTAs) with 33 jurisdictions, including Australia, Canada, France, Germany, India, Japan, Singapore, Switzerland, the United Kingdom, and Vietnam. These agreements aim to prevent double taxation for individuals who are tax residents in both Taiwan and a treaty partner. DTAs can impact international estate planning by providing:

• Tax credits: Allowing individuals to offset taxes paid in one jurisdiction against their tax liability in the other jurisdiction.
• Reduced withholding tax rates: Lowering the tax rates on certain types of income, such as dividends and interest, earned by residents of one treaty partner from sources in the other partner.
• Exemptions: Providing exemptions from taxation in one jurisdiction for certain types of income or assets.

Tax Planning Strategies for Non-Residents

Non-resident individuals with assets in Taiwan can consider various tax planning strategies to minimise their tax burdens. These strategies may include:

• Gifting assets: Making lifetime gifts to beneficiaries to reduce the size of the taxable estate. Taiwan’s annual gift tax exemption allows for tax-free transfers up to a certain amount.
• Establishing trusts: Creating trusts to hold assets and potentially reduce estate tax liability. However, it’s important to note that testamentary trusts in Taiwan are subject to estate tax upon the settlor’s death.
• Utilising life insurance: Using life insurance policies to provide liquidity for estate tax payments or to transfer wealth to beneficiaries outside of the estate.
• Structuring investments: Holding assets through foreign entities, such as holding companies, to potentially minimise Taiwan tax liabilities.

It’s crucial for non-residents to seek professional legal and tax advice to develop a tailored estate plan that aligns with their specific circumstances and objectives.

Asset Protection Strategies in Taiwan

Use of Holding Companies

Holding companies serve as a valuable asset-protection tool in Taiwan by structuring ownership through a separate legal entity. This arrangement shields personal assets from liabilities arising out of business operations or other ventures. For example, if a business faces financial difficulties or legal claims, creditors generally have limited recourse against shareholders’ personal assets when those assets are held in a holding company.
Key benefits include:

• Separation of personal and business liabilities
• Protection of shareholder wealth
• Centralised management of diverse assets

Marital Property Considerations

Marriage significantly impacts property ownership and inheritance under Taiwanese law. By default, the statutory property regime treats assets acquired before marriage as separate, while property obtained during marriage is jointly owned. However, couples may customise their financial arrangements through a prenuptial or postnuptial agreement. Common regimes are:

• Community-of-Property: All assets—regardless of when acquired—are owned jointly
• Separation-of-Property: Each spouse retains sole ownership and control over individually acquired assets

Selecting the appropriate regime is crucial for estate planning, as it determines how assets will be divided upon divorce or death.

Creditor Protection Mechanisms

Taiwanese law offers several mechanisms to preserve assets from creditor claims, ensuring wealth is passed to intended beneficiaries. A primary method is the creation of a trust. By transferring legal title of assets into a trust, the settlor empowers a trustee to manage and administer the property for designated beneficiaries. This structure effectively insulates trust assets from creditors’ claims against both the settlor and the beneficiaries.

Special Considerations for International Clients

Residency and Domicile Issues

Taiwan’s Estate and Gift Tax Act bases liability on an individual’s residency and domicile status:

• Worldwide assets taxed if the decedent or donor is a Taiwanese citizen with continuous residence in Taiwan.
• Taiwan-situs assets only are taxed if the individual is a foreigner or a Taiwanese citizen residing abroad continuously.

Continuous residence is defined by either:

• Having a domicile in Taiwan within two years before death or gift transfer.
• Residing in Taiwan for 365 days or more during that two-year period (excluding certain foreign government employees).

For income tax purposes, an individual is a Taiwan tax resident if they:

• Are domiciled in Taiwan and reside there at all times, or
• Are non-domiciled but spend 183 days or more in a calendar year in Taiwan.

Currency Controls and Asset Transfers

Taiwan’s Central Bank imposes foreign exchange limits to regulate cross-border transfers:

• Business entities: Up to USD 50 million per year.
• Individuals: Up to USD 5 million per year (excluding trading or service revenue).

Exceeding these thresholds requires prior approval from the Central Bank, which can affect the timing and structuring of international inheritances or gifts.

Cultural Factors in Taiwanese Estate Planning

Cultural norms in Taiwan can influence estate outcomes:

• Taboo on discussing death often leads to intestacy, leaving estates to default statutory distribution.
• Complex will formalities deter many from drafting valid testamentary documents.

Given these sensitivities, it is crucial to engage in open, respectful conversations and seek professional guidance to ensure your estate plan reflects both legal requirements and family values.

Conclusion

Successfully managing international estate planning involving Taiwan demands a thorough grasp of its unique civil law system, tax regulations, and cultural considerations. Properly addressing aspects like will formalities, inheritance laws, trust structures, and asset protection strategies is vital for ensuring your assets are distributed effectively according to your wishes.

Given the complexities inherent in cross-border estates, obtaining advice from experienced international estate planning lawyers is crucial. PBL Law Group offers specialised guidance to help you navigate Taiwanese law and develop a comprehensive estate plan tailored to your specific needs and global circumstances. Contact us today for expert assistance.

Frequently Asked Questions