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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 – 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 – executed before a notary in the presence of two witnesses – 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 – operative on death, used to hold assets for minor or disabled heirs distributed over time – 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 – implemented consistently over many years – 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 – 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