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An unprecedented transfer of private wealth is colliding with tighter regulation and rising complexity

CHINA

INDIA

KOREA

TAIWAN

Private wealth, estate planning in China: An evolving landscape

China¡¯s reform and opening-up policy, inaugurated in 1978, unleashed one of the most consequential episodes of private wealth creation in modern economic history. Within a single generation, entrepreneurial pioneers built privately held enterprises of extraordinary scale and complexity.

Today, that founding generation is advancing in age and the question of orderly succession has moved from the periphery of family conversation to the centre of legal and financial planning.

Simultaneously, the maturation of China¡¯s domestic tax regime, combined with accession to the Common Reporting Standard (CRS) framework, has imposed on high-net-worth individuals (HNWIs) and their advisers an imperative of proactive, compliance-oriented restructuring.

These twin forces ¨C generational transition and regulatory evolution ¨C are reshaping the private wealth planning landscape in ways that carry significant implications for the international legal community.

This article examines the principal trends and challenges confronting private wealth and estate planning practice in the Chinese mainland, with particular regard to the structural complexity arising from the dual onshore-offshore nature of Chinese high-net-worth portfolios, the growing utility of key planning instruments, and the indispensable function of specialist legal counsel.

China private sector succession crisis

The scale of the succession challenge confronting China¡¯s private sector is considerable. According to the All-China Federation of Industry and Commerce, privately owned enterprises contribute more than 60% of GDP, generate more than 80% of urban employment, and account for about 70% of technological innovation output.

A substantial proportion of these enterprises were founded by individuals now in their 60s or 70s, many of whom have not yet implemented any formal succession framework. The consequences are already becoming apparent.

High-profile succession disputes illustrate the fragility of business empires constructed without adequate legal architecture.

The dissolution of partnerships on a founder¡¯s death, paralysis of corporate governance in the absence of testamentary instruction and destruction of family cohesion through contested inheritance proceedings are not hypothetical risks; they are documented outcomes with which private client practitioners are increasingly familiar.

What distinguishes this moment is the convergence of urgency and opportunity. The founding generation, confronted with its own mortality and the visible struggles of peers who failed to plan, is more receptive to professional advice than at any prior time. The critical variable remains whether clients and their advisers act with sufficient foresight and technical rigour.

China CRS tax compliance crackdown

The accelerating development of China¡¯s tax enforcement and international compliance framework constitutes the second structural force reshaping private wealth planning.

China formally implemented the CRS framework ¨C with financial institutions in participating jurisdictions commencing automatic exchange of account information with tax authorities ¨C from 2018 onwards.

Tax residents maintaining financial accounts, beneficial interests in trusts or corporate interests across offshore jurisdictions ¨C including the Cayman Islands, British Virgin Islands, Hong Kong, Singapore and Switzerland ¨C are now, in principle, identifiable by the State Taxation Administration.

Concurrently, comprehensive amendments to the Individual Income Tax Law, effective since 2019, have expanded the scope of taxable income and tightened anti-avoidance provisions.

Proposals for a dedicated inheritance and gift tax, while not yet enacted, remain under active legislative discussion, persuading prudent advisers to proceed assuming such legislation may materialise within the medium term.

For clients who constructed offshore structures in earlier decades, frequently without adequate tax advice, the compliance exposure is material. Rectification is achievable for those willing to engage proactively. But it demands technical expertise across domestic and international tax law, careful sequencing of restructuring steps, and a willingness to confront uncomfortable realities regarding the historical treatment of assets.

Bifurcated onshore offshore estate planning

Perhaps the most structurally distinctive feature of Chinese high-net-worth estate planning ¨C and the one most frequently underestimated by advisers approaching this market for the first time ¨C is the inherently bifurcated nature of the asset base.

Typical ultra-high-net-worth Chinese clients do not hold wealth within a single, coherent legal system. Rather, the estate is distributed across onshore Chinese assets and a constellation of offshore holdings accumulated through decades of outbound capital deployment.

The onshore profile characteristically includes equity interests in domestically registered operating companies, real property across multiple cities, securities accounts with Chinese brokerages and wealth management products within the mainland banking system.

These assets are governed by Chinese civil law ¨C consolidated within the Civil Code that entered into force on 1 January 2021 ¨C and are subject to Chinese inheritance rules, matrimonial property provisions, and an increasingly assertive tax enforcement apparatus.

The offshore dimension presents an altogether different legal landscape. Hong Kong-listed equities, Singapore-domiciled family trusts, Cayman Islands holding companies, British Virgin Islands special purpose vehicles and international insurance policies collectively constitute a parallel estate that may rival or exceed the onshore portfolio in value.

Each instrument is governed by a distinct legal system and subject to its own succession and tax treatment on the death of the principal. The challenge for estate planning is not simply to address each component in isolation, but construct a planning framework that operates coherently across both spheres simultaneously.

Succession instructions valid under Chinese law may conflict with, or fail to reach, assets held within offshore trust structures. Offshore corporate arrangements that were commercially rational at establishment may generate unintended Chinese tax exposure under the CRS.

Matrimonial property regimes applicable onshore do not replicate automatically with respect to offshore holdings, creating asymmetric outcomes in the event of divorce or death.

This complexity is further compounded by China¡¯s regulatory framework governing outbound investment and foreign exchange. Restrictions on capital outflows, beneficial ownership reporting requirements, and the potential application of controlled foreign corporation rules all introduce compliance considerations that must be integrated into any comprehensive estate plan.

Advisers who treat the onshore and offshore dimensions as separate exercises without regard to their interaction risk producing plans that are internally inconsistent and ultimately unworkable.

Wills, insurance trusts and family offices

Against this backdrop, a suite of planning instruments is gaining meaningful traction:

1. 1. Wills, modernised under the Civil Code, remain the foundational instrument, yet their utilisation is surprisingly limited given portfolio complexity.
   2. Life insurance, particularly high-value policies through Hong Kong-licensed insurers, serves as a significant estate liquidity and wealth transfer tool.
   3. Family trusts, both onshore under the Trust Law of 2001 and offshore under common law frameworks, are increasingly deployed to achieve orderly generational transfer, asset protection and governance continuity.

Each of these instruments carries distinct technical demands and interacts with the others in ways requiring careful co-ordination.

At the institutional level, family offices are also entering a phase of visible, if nascent, development.

Increasingly domiciled in Hong Kong, Singapore, or within the Chinese mainland, these entities consolidate investment management, compliance oversight and succession governance under a unified framework ¨C reflecting recognition that the complexity of ultra-high-net-worth affairs has outgrown the capacity of any single adviser to manage in isolation.

China private wealth planning crucial

Together, these latest developments create an environment of exceptional complexity in which the consequences of inadequate planning are severe.

Effective private wealth practice in China demands a rare combination of competencies: the command of domestic civil and tax law; the fluency in offshore trust and corporate law; understanding of the international tax treaty network; a sensitivity to family dynamics; and the professional authority to deliver advice that long-term client interests require.

The capacity to co-ordinate across fiduciaries, insurers, family office executives and foreign counsel is equally essential.

China¡¯s private wealth planning market is at a genuine inflection point. The convergence of generational transition, regulatory tightening and dual-asset structural complexity creates both unprecedented challenge and unprecedented opportunity.

For the international legal community, this evolution warrants close attention, given that cross-border dimensions of Chinese wealth planning increasingly implicate legal systems and practitioners well beyond China¡¯s borders.

The central lesson, for clients and counsel alike, is that the time for deliberate, expert-led planning is now.

Han Kun Law Offices
9/F, Office Tower C1, Oriental Plaza,
1 East Chang An Ave
Dongcheng District
Beijing 100738, PRC
Tel: +86 10 8525 5500
Email: beijing@hankunlaw.com

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India witnesses significant transformation in estate planning

Private wealth management in India is witnessing gradual but significant transformation. Indian business families conventionally have organised ownership, guided decision making and reinforced continuity across generations by placing reliance on informal, family driven structures that are traditionally rooted in shared responsibility and collective values.

That said, as wealth becomes more complex and diversified, extending across multiple jurisdictions, asset classes and generations, such informal structures are being put under heightened scrutiny. The lack of succession frameworks and defined governance standards has resulted in amplified risk of ambiguity and conflict, driving the shift towards more structured and institutionalised models for managing and preserving family wealth in the long run.

This shift is reinforced by broader wealth trends across India. The country¡¯s ultra-high-net-worth individual population, typically defined as individuals with net assets exceeding USD30 million, is projected to grow from about 19,900 presently to 25,200 by 2031, representing an increase of about 27%.

India wealth shift drives family offices

India today also hosts about 85,000 high-net-worth individuals, placing it fourth among the leading wealth markets globally. These statistics reflect not only an increase in the number of wealthy individuals, but also strengthening of capital concentration within Indian family-owned businesses.

However, this evolution also underscores a deeper challenge. Informal governance structures, which performed smoothly in earlier generations of Indian family businesses, are now more prone to ambiguity, lack of alignment and conflict.

The increasing gap between the growing intricacy of wealth and an absence of structured governance has resulted in real risk for Indian business families, particularly where ownership and control are layered across multiple legal entities without clearly defined inter se (between themselves) arrangements. When authority, decision making and succession are left undefined, it often leads to disputes, particularly among multi-generational and geographically dispersed families.

Indian business families are now acknowledging that preservation of wealth and legacy cannot depend on ad hoc arrangements or individual discretion. They recognise that an institutionalised framework is essential for providing centralised oversight, formalised decision making, and generational continuity irrespective of leadership transitions or evolving family dynamics.

It is in response to this need that family offices have emerged as a natural progression in the institutionalisation of Indian wealth. The number of family offices in India has increased from about 45 in 2018 to nearly 300 by 2024, reflecting a structural shift in how wealth is organised and governed. This growth is further driven by an anticipated intergenerational wealth transfer exceeding USD1.5 trillion in the next decade, bringing issues of succession to the forefront.

Family offices boost succession governance

Family offices are evolving in both scope and sophistication. They are no longer restricted to investment management, but increasingly serve as integrated platforms for governance, succession planning, and legacy preservation. However, while family offices provide structure to the management of wealth, they do not address the underlying question of continuity.

A family office is essentially an operational platform, and its effectiveness depends on the governance frameworks that corroborate it, including alignment with regulatory frameworks governing investments, foreign exchange and corporate control.

This disconnect between structure and continuity brings succession planning tools into sharper focus. The long-term effectiveness of a family office depends not only on the platform itself, but more so on the legal instruments that shape how ownership, control and decision making evolve over time.

At present, instead of undertaking a one-time estate planning exercise, families are progressively deploying more robust governance frameworks to supplement their overall succession planning. Notably, leading family offices are often anchored with well-crafted governance frameworks that offer a secure foundation, and are well positioned to adapt to evolving family dynamics, regulatory considerations and market conditions.

Trust structures strengthen India succession planning

Trust structures play a foundational role in most succession strategies. While they offer flexibility in asset protection, tax efficiency and structured distribution of wealth, their relevance extends beyond mere asset holding. Discretionary trusts, in particular, allow for readiness against changing family needs while preserving the integrity of the underlying assets.

For many Indian families, however, the establishment of a trust is only the starting point. The more complicated task lies in ensuring that such structures are supported by clearly defined principles and co-ordinated decision making, in order for such structures to function as part of a cohesive system rather than as standalone legal arrangements.

Such challenges call for a more thoughtful and structured approach to managing and governing family wealth over time. At its core, it involves defining the roles of trustees and family members, establishing shared expectations around decision making, and developing processes that harmonise continuity with operational flexibility among generations.

Instruments such as family constitutions and governance charters are progressively gaining importance in this regard. They act as a reference point for transition in leadership, dispute resolution, and the involvement of future generations, providing greater clarity to the exercise of authority within the family business.

While such instruments are non-binding in isolation, they play a pivotal role in influencing how governance is actually exercised within the family. More importantly, when such instruments are supplemented with legally binding instruments such as trust deeds, shareholder agreements, or corporate documents, they can influence outcomes in a tangible manner, bridging the gap between intent and execution within the family business.

Family charters guide next generation

Alongside these instruments, family charters are also utilised to address certain issues that may not be apparent immediately but carry the potential to become sources of conflict with time. In multi-generational family structures where multiple branches exist, disagreements on operational involvement, expectations and economic interests are inevitable.

A well drafted charter provides clarity on such matters by setting out methodologies for participation in management, allocation of economic benefits, liquidity and exit mechanisms, and avenues for members to pursue independent ventures, if required. By addressing these issues beforehand, family charters help in reducing uncertainty and enable a more structured and balanced transition of management, supporting both the continuity of the business and cohesion within the family.

One critical yet frequently overlooked function of a family office is its role in preparing the next generation to assume meaningful roles within the family business. Indian families are now diverging from lineage-based participation towards a merit-oriented approach that places emphasis on capability, experience and readiness.

Furthering this approach, a family office can provide a controlled and supportive platform for early exposure, enabling younger members to engage with investment processes, interact with professional advisers, and develop a practical understanding of wealth management.

Complementing this, family councils serve an important role of being the parallel forum, providing a structured platform for mentorship, alignment and open dialogue, and allowing varying perspectives to be expressed without disrupting formal decision making. While reinforcing continuity and cohesion within the family, these mechanisms cumulatively cultivate a more capable and aligned next generation.

India family offices need governance

India today is undergoing a clear shift in how wealth is managed, with a growing preference for institutionalised structures. While family offices provide the necessary structure to manage an increasingly complex and diversified pool of wealth, their effectiveness depends on the robust governance mechanisms that reinforce them.

Succession planning instruments such as trusts, family constitutions, charters and councils go beyond their natural role of being only legal or advisory instruments and become foundational elements that define how authority is exercised, how decisions are taken, and how continuity is preserved across generations.

In the Indian context, where wealth is intertwined with family identity and legacy, this integration assumes even greater significance. The growing scale and cross-border and multi-generational character of wealth being created today, leaves limited scope for ambiguity in governance or succession. Arrangements that were once sustained through shared values and informal understanding must now be reinforced through clearly articulated structures that can withstand the complexities of modern wealth.

In this rapidly evolving environment, long-term sustainability of family wealth is less reliant on its creation and more on the discipline through which transition is managed and governance is exercised. While family offices provide structural organisation, it is the strategic integration of succession planning tools and governance mechanisms that brings clarity to decision making, coherence to ownership, and intergenerational continuity.

This alignment is no longer optional, but essential for Indian business families navigating increasing complexity and scale. It is the convergence between institutional structure and structured governance that ultimately enables wealth to move beyond its creators, preserving both its value and the legacy it represents across generations.

Shardul Amarchand
Mangaldas & Co
Amarchand Towers, 216 Okhla Industrial Estate,
Phase III New Delhi – 110 020, India
Tel: +91 11 4159 0700
Email: connect@amsshardul.com

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What Korea¡¯s celebrity tax cases reveal about one-person corporations

Recent tax investigations involving several high-profile South Korean celebrities have drawn significant public attention to the use of one-person corporations as tax planning vehicles. According to the Korean National Tax Service (NTS), these celebrities established corporations primarily to reduce their personal income tax burden, while the corporations themselves allegedly lacked the personnel, facilities and operational substance necessary to conduct the business activities stated in their articles of incorporation and corporate registrations.

The NTS reportedly concluded that these entities were merely nominal corporations without genuine business operations. On that basis, the NTS denied the separate tax status of the corporations and treated the income earned by the entities as the personal income of the individual shareholders, many of whom owned 100% of the shares.

The authorities even suggested that such arrangements could potentially constitute tax evasion involving fraudulent or deceptive conduct, thereby exposing taxpayers not only to additional tax assessments but also to possible criminal liability.

This issue extends far beyond the entertainment industry. The use of corporations for tax reduction purposes has become increasingly common among high-income self-employed individuals, freelancers, medical professionals, lawyers, consultants and other service providers in South Korea.

Understanding why incorporations may offer substantial tax advantages, how the NTS challenges abusive structures, and what practical requirements must be satisfied for a corporation to be respected as a separate taxpayer is therefore highly relevant for South Korean high-net-worth individuals and estate planning professionals.

Progressive personal tax favours incorporation

South Korea¡¯s personal income tax regime is highly progressive. Including local income tax, the marginal personal income tax rate ranges from 6.6% to as high as 49.5%. Income exceeding KRW150 million (USD101,000) is taxed at 41.4%; income exceeding KRW300 million is at 44%; income exceeding KRW500 million is at 46.2%; and income exceeding KRW1 billion is at 49.5%.

By contrast, South Korean corporate income tax rates are substantially lower. Including local surtaxes, effective corporate tax rates generally range from 11% to 27.5%, with the top rate generally applying only when taxable income exceeds KRW300 billion.

The gap between the top personal income tax rate and the corporate income tax rate can therefore exceed 30 percentage points. Although the South Korean government has recently tightened the rules for certain closely held corporations deriving substantial passive income ¨C including by denying the preferential 11% tax bracket from 2025 onwards to certain family-owned entities earning significant rental, dividend, or interest income ¨C incorporation still offers considerable tax advantages in many cases.

This disparity explains why many high-income individuals consider incorporation as part of legitimate tax planning. Through a corporation, income may be retained at the corporate level, rather than immediately taxed to the individual at the highest marginal rates. Funds can later be distributed as dividends or compensation during periods when the individual¡¯s personal income is lower, such as retirement years.

South Korea¡¯s dividend tax credit mechanism also partially alleviates economic double taxation between corporate income tax and shareholder-level dividend taxation.

From an estate planning perspective, the corporate structure may facilitate succession planning, centralised asset management and phased intergenerational transfers through equity ownership arrangements. Accordingly, establishing a closely held corporation is not inherently abusive and is frequently used as a legitimate planning tool by South Korean high-net-worth individuals.

Sham companies trigger tax scrutiny

The legal difficulty arises when a corporation exists only on paper and functions merely as a vehicle for tax avoidance, without meaningful operational substance.

South Korean tax law adopts a strong substance-over-form doctrine as its general anti-avoidance rule (GAAR). Article 14(1) of the Framework Act on National Taxes provides that where the nominal owner of income, profits, property, acts or transactions differs from the person to whom such items actually belong, the tax laws shall apply to the person who is the substantive owner.

Under this principle, tax authorities may disregard the corporate form where the corporation lacks genuine economic substance. In practice, the NTS may deny the independent existence of a corporation where the entity was established primarily for tax avoidance purposes, lacks independent operations, commingles corporate and personal finances, or merely serves as a conduit for the shareholder.

In recent celebrity investigations, the NTS appears to have relied heavily on this reasoning. The authorities reportedly concluded that the corporations lacked the personnel and facilities necessary to conduct the registered business activities, and that actual business operations could not be verified. Consequently, the income generated under the corporate name was recharacterised as personal income subject to much higher individual income tax.

The controversy has intensified because the NTS also referenced the possibility of criminal tax evasion charges. Under South Korean criminal tax law, simple underreporting or non-filing is generally insufficient to establish criminal tax evasion. Instead, the authorities must demonstrate affirmative deceptive conduct that makes the assessment or collection of tax impossible or substantially difficult.

The key issue is therefore whether conducting business and filing tax returns through a corporation lacking economic substance constitutes the type of fraudulent or deceptive act required under criminal tax statutes.

Relevant factors may include executing contracts under the name of a sham corporation, issuing invoices through an entity lacking operational reality, artificially diverting income to the corporation, or concealing the true recipient of business income.

At the same time, criminal statutes must be interpreted strictly. Whether a particular corporate arrangement rises to the level of criminal tax evasion will depend heavily on the specific facts and the taxpayer¡¯s intent.

Operational substance protects corporate planning

For taxpayers seeking to utilise corporations as part of legitimate tax and estate planning, maintaining sufficient operational substance is critical.

First, the corporation should possess the personnel, office space, equipment and operational capacity necessary to conduct its stated business activities. A corporation that merely maintains a registered address without actual business operations faces substantial risk of being disregarded.

Second, the corporation must actually conduct business activities in its own name. This includes entering into contracts, providing services, receiving payments and maintaining ordinary commercial records. Supporting documentation such as contracts, invoices, payroll records and accounting books is particularly important.

Third, strict separation between corporate and personal finances is essential. The corporation should maintain separate bank accounts and accounting systems, and corporate funds should not be used for personal expenditures without proper accounting treatment. Commingling of funds is one of the most damaging facts in substance-over-form disputes.

Fourth, the corporation should demonstrate independent governance procedures rather than functioning solely as the alter ego of the shareholder. Maintaining shareholder resolutions, board minutes, and internal approvals may help establish that the corporation operates as an independent legal entity.

Substance determines corporate tax outcomes

The line between legitimate tax planning and impermissible tax avoidance ultimately depends on whether the corporation possesses real economic substance.

Given South Korea¡¯s steeply progressive personal income tax rates, the use of corporations as part of tax and estate planning strategies can be commercially reasonable and legally permissible.

However, where a corporation exists merely as a formal shell without genuine business operations, the tax authorities may disregard the entity, attribute the corporation¡¯s income directly to the individual shareholder, and impose substantial additional income taxes. In more aggressive cases, taxpayers may even face allegations of criminal tax evasion.

The recent celebrity investigations demonstrate that incorporation is not a one-size-fits-all solution for reducing taxes. At the same time, these cases should not be understood as signalling hostility towards legitimate corporate structuring itself.

The key issue is whether the corporate entity is supported by sufficient operational and economic substance to withstand scrutiny under South Korea¡¯s substance-over-form principles.

Ultimately, whether a particular structure will be respected for tax purposes depends on a careful analysis of corporate governance, operational substance, income attribution and supporting documentation. With proper planning and implementation, corporate structures can continue to serve as effective and legitimate tools for high-net-worth individuals seeking long-term tax efficiency and estate planning objectives in South Korea.

Lee & Ko
Hanjin Building, 63 Namdaemun-ro
Jung-gu, Seoul 04532, Korea
Tel. +82 2 772 4000
Email: mail@leeko.com

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Navigating generational succession in Taiwan estate planning

Taiwan is at a pivotal moment in its private wealth history. The generation that built its world-renowned semiconductor, electronics and manufacturing industries is transitioning assets to globally minded successors, triggering one of the largest intergenerational wealth transfers in the island¡¯s modern history.

This shift is unfolding against a backdrop of evolving domestic laws, stricter international transparency standards, and increasingly complex cross-border asset structures.

For private clients, family offices and their advisers, understanding Taiwan’s jurisdiction-specific legal landscape has never been more important.

Taiwan civil code forced heirship

Taiwan¡¯s succession law is governed by the Civil Code, which establishes a system of statutory heirship built around mandatory reserved portions ¨C fixed minimum inheritance shares that cannot be defeated by a will, lifetime gift or third-party trust. This forced heirship regime represents the foundational constraint around which all Taiwan succession planning must be architected.

The Civil Code prioritises heirs in the following order: lineal descendants; parents; siblings; and grandparents. The surviving spouse holds a concurrent right alongside whichever class of heirs is entitled. Critically, Taiwan offers no equivalent to surviving spouse exemption familiar in US or UK planning. Spouses inherit alongside other heirs in proportions prescribed by statute.

Reserved portion entitlements are fixed by reference to the statutory share: lineal descendants, parents and the surviving spouse each receive one-half of their statutory share; siblings and grandparents receive one-third.

Where a will or lifetime gift infringes these entitlements, affected heirs may bring a claw-back claim, a right that extends to lifetime gifts reducing the estate below the protected threshold.

On the formalities of will making, Taiwan recognises five forms, of which the notarial will ¨C executed before a notary in the presence of two witnesses ¨C is strongly recommended for substantial estates. Holographic wills are low cost but frequently contested. For families with assets in multiple jurisdictions, parallel wills governed by relevant lex situs (local laws) are required, demanding careful co-ordination among advisers across jurisdictions.

Taiwan trust act taxes offshore instruments

Taiwan enacted its Trust Act in 1996, establishing a civil law trust framework in which the trustee holds legal title transferred by the settlor, and administers trust property for beneficiaries in accordance with the trust deed.

The Trust Enterprise Act governs the licensing of professional trustees. In practice, most high-net-worth families use trust departments of local banks, which provide regulatory oversight but sometimes lack the bespoke flexibility of offshore alternatives.

Principal trust types used in private wealth practice are testamentary trusts ¨C operative on death, used to hold assets for minor or disabled heirs distributed over time ¨C and inter vivos third-party trusts, where the settlor transfers assets for the benefit of children or grandchildren. The latter triggers gift tax at establishment, but future appreciation then accrues outside the taxable estate, creating a meaningful long-term planning advantage.

Many Taiwan-connected families have also established offshore trust structures, most commonly in the Cayman Islands, BVI, Bermuda, Hong Kong or Singapore, typically to hold international portfolios, real estate or offshore holding company interests.

The Taiwan tax treatment of such structures remains complex: distribution to Taiwan resident beneficiaries may be characterised as taxable income or non-taxable return of capital, and the alternative minimum tax regime may bring offshore trust income within the Taiwan tax base (including the Taiwan-controlled foreign company [CFC] rules in effect since 2023). This uncertainty requires careful navigation when advising on cross-border structures.

Taiwan estate gift tax rates

Taiwan¡¯s Estate and Gift Tax Act taxes worldwide assets of Taiwan-domiciled individuals, subject to foreign tax credit relief. The current rate structure is progressive: 10% on taxable estates up to TWD56.21 million (USD1.78 million); 15% from TWD56.21-112.42 million; and 20% above TWD112.42 million, with the basic exemption of TWD13.33 million.

Key deductions include TWD5.53 million for a surviving spouse, TWD560,000 per lineal descendant, TWD1.38 million per surviving parent, and a fixed TWD1.38 million funeral expense.

Gift tax mirrors the estate tax rate structure and applies to lifetime gratuitous transfers by Taiwan-domiciled individuals. The annual gift tax exclusion of TWD2.44 million per donor allows for systematic gifting programmes that ¨C implemented consistently over many years ¨C can materially reduce ultimate estate tax exposure.

A critical constraint is the claw-back rule; under which assets gifted to specified close relatives within two years before death are included back into the taxable estate, with credit for gift tax already paid underscoring the imperative of early, sustained planning rather than last-minute transfers.

Alternative Minimum Tax (AMT) imposes a 20% flat rate on basic income exceeding TWD7.5 million, with foreign-source income above TWD1 million included in the calculation. This provision has materially affected Taiwan residents holding offshore structures, as foreign trust and offshore company earnings may now attract AMT liability even absent conventional Taiwan withholding tax. Annual AMT modelling is essential for clients with significant international holdings.

Taiwan family business succession planning

Taiwan¡¯s corporate landscape is dominated by family-controlled enterprises, and the legal and governance challenges of generational transition represent some of the most complex private wealth mandates in practice. These enterprises are typically held through cascading structures involving Taiwan companies limited by shares, offshore holding companies in the Cayman Islands or BVI, and in some cases listed entities on the Taiwan Stock Exchange or Taipei Exchange.

The transfer of unlisted company shares within a family carries both gift or estate tax implications, with shares generally valued using the net asset value (book value) method prescribed by the tax authorities and potential AMT exposure on capital gains. Gains on listed shares remain income tax exempt, creating meaningful incentive considerations for families weighing an IPO as part of a succession strategy.

Beyond legal documentation, sophisticated families are investing in family governance infrastructure, namely, formal family councils, constitutions, or charters that articulate shared values, decision-making processes and rules governing family member participation in the enterprise.

While not legally binding under Taiwan law, these instruments provide relational scaffolding that prevents disputes and enables durable multi-generational transition.

Taiwan CRS trusts succession planning

Taiwan¡¯s international tax environment has evolved considerably, with the adoption of base erosion and profit shifting (BEPS) principles, expansion of its tax treaty network to about 35 jurisdictions, and implementation of the global Common Reporting Standard (CRS), which has fundamentally altered the informational asymmetry that previously made offshore structures attractive.

Taiwan-resident account holders at foreign financial institutions in CRS-participating jurisdictions now face the real prospect of their account data being reported back to Taiwan¡¯s tax authorities.

To manage the intersection of Civil Code constraints, Company Act flexibility and evolving tax realities, sophisticated families are deploying two modern vehicles in combination.

First, closed-end companies, formed to hold family enterprises and businesses under the Taiwan Company Act, may issue shares with special voting rights (including golden shares and veto powers) and restrict share transfers to non-family members, ensuring unified control preserved across generations.

Second, domestic trusts under the Trust Act allow assets to be legally separated from the settlor¡¯s personal estate: centralising voting rights in the hands of a trustee, protecting assets from creditors and marital disputes of successor generations, and enabling structured, conditional distribution over time.

While Taiwan does not fully recognise perpetual trusts, carefully drafted trust arrangements can achieve durable governance objectives within the statutory framework.

Shareholder agreements with well crafted buy-sell provisions remain one of the most effective dispute prevention tools available. These may pre-agree the terms shares may be transferred, encumbered or redeemed in the event of death, incapacity, divorce or departure, preventing forced sales or the entry of unwanted third parties into closely held family shareholdings.

Taiwan succession planning amid transparency

Taiwan¡¯s intergenerational wealth transfer moment is not a future event ¨C it is happening now. Families, advisers and financial institutions that navigate it successfully are those that approach it with the full weight of legal, tax and governance sophistication it demands.

Three imperatives stand out. First, the Civil Code¡¯s reserved portion rules are non-negotiable constraints that must be mapped and accommodated from the outset of any succession plan, not treated as residual considerations.

Second, the combined effect of the AMT regime (including the CFC rules) and CRS reporting has fundamentally changed the risk-benefit calculus of offshore structures; legacy arrangements require urgent review and new structures must be designed for a transparent world.

Third, legal documentation alone is insufficient. The most enduring succession plans integrate wills, trust deeds, shareholder agreements and corporate restructuring with family governance frameworks that address the human dimensions of wealth transfer as seriously as the technical ones.

Taiwan¡¯s legal system provides a workable and increasingly sophisticated toolkit for private wealth planning. The challenge, and opportunity, lies in deploying it with the foresight, precision and care that the stakes demand.

LEE AND LI ATTORNEYS-AT-LAW
8F, No 555, Sec 4, Zhongxiao E Rd
Taipei 110055, Taiwan, ROC
Tel: +886 2 2763 8000
Email: attorneys@leeandli.com

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