Those who open a trust in Taiwan are essentially establishing a relationship between a settlor and a trustee, to the advantages of a named beneficiary. A trust structure can be used for asset protection, succession, or to hold real estate, among others.
Our team that can help you with company formation in Taiwan can also assist you if you want to open a trust in Taiwan, have questions about the management of a trust or about trustees. Read below to find out more about the Taiwan Trust Act and other important aspects.
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Trust set up in Taiwan
A trust in Taiwan is set up in written form. This is a mandatory requirement, and it means that the agreement between the settlor and the trustee is drawn up in the form of a trust deed. Our experts insetting up companies in Taiwan list the main parties to a trust below:
- The settlor: the one that will open a trust in Taiwan and will place assets in this trust;
- The trustee: the one to manage the assets, as per the settlor’s indications;
- The beneficiary: the one who will ultimately receive the assets placed in the trust;
- The agent: another party appointed by the trustee to act on their behalf (only applicable in some cases).
In addition to naming the parties to the trust, the deed will include important information about the management of the assets and how the parties can act jointly (with statutory authority) for the management of the trust assets. Examples of statutory rights and obligations that must be included in the deed, according to law, and which cannot be changed, include the following:
- The settlor’s or the beneficiary’s right to claim damages in the case of trust mismanagement by the trustees;
- Joint and several liability for trustees who have appointed an agent unauthorized by the trust deed;
- The right to apply to court to settling trust management issues (when these cannot be undertaken by the settlor, trustee, or beneficiaries);
- The right to change the way in which the trust is managed (a joint right belonging to the settlor, the beneficiaries and the trustees).
Individuals who decide to open a trust in Taiwan can make the trust revocable or irrevocable. Our team that can help you open a company in Taiwan can also advise on trust structuring.
Our lawyers in Taiwan can give you detailed information on the Trust Law and how it can apply to beneficiaries.
Trust taxation in Taiwan
An important issue to consider for those who open a trust in Taiwan is the manner in which it will be taxed. In general, a trust is subject to estate tax and, in some cases the gift tax. The due tax is generally paid before the transfer of the trust assets to the beneficiaries. The moment when the tax is evaluated is usually on the date of the event that triggers the distribution.
Our team lists the values of the most important types of taxes on trusts:
- 10% gift tax when the value of the gift is below TWD 25,000,000 (approximately 844,000 USD);
- 10% estate tax when the value of the estate does not exceed TWD 50,000,000 (about 1,687,500)
- 15% and 20% gift tax and estate tax when the values of the gift/estate exceed larger values;
- The annual gift tax exemption applies at a value of TWD 2.44 million per donor. An exemption amount also applies to the estate tax, according to the heir’s relationship with the deceased.
According to the provisions of the Income Tax Act, income from trust assets is not only subject to gift tax or estate tax. In some cases, the taxation can be consolidated with the beneficiary’s personal income tax. In this case, it is taxed in the beneficiary’s name.
We remind those interested that the Taiwanese individual income tax rate is progressive, with rates of 5%, 12%, 20%, 30% and 40%. The lowest rate of 5% applies to a taxable income value of up to TWD 590,000 (about 19,918 USD). Our accountants can give you more details.
Contact us for more information on how to open a trust in Taiwan or how to set up a company in Taiwan.