The Kaohsiung National Taxation Bureau of the Ministry of Finance stated that changing the proposer of an insurance policy without compensation is equivalent to donating benefits to others, which involves inheritance tax issues.

(Photo by reporter Zheng Qifang)

[Reporter Zheng Qifang/Taipei Report] Commercial insurance is one of the favorite investment and financial management tools for Chinese people. The Kaohsiung National Taxation Bureau of the Ministry of Finance stated that the proposer signs an insurance contract and pays the premium, and enjoys the benefits of the insurance contract. If the policy changes to the proposer without compensation , which is equivalent to donating benefits to others. If the value of the policy exceeds the gift exemption amount, the gift tax must be declared and paid; if the change occurs within 2 years before the death of the original proposer, it must be incorporated into the total amount of the estate to levy inheritance tax.

The National Taxation Bureau of Kaohsiung stated that Article 15 of the "Inheritance Tax Law" stipulates that the property donated by the decedent to the spouse, heir and his spouse "within 2 years before his death" should be included in the total amount of the estate for taxation.

Therefore, if the decedent donates the above-mentioned policy within 2 years before his death, it should be included in the total estate tax when he declares the estate tax. The gift tax he has paid together with interest can be deducted from the estate tax amount, but the deductible It shall not exceed the increased tax payable after the gift of property and the total amount of inheritance.

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For example, Mr. A, the decedent, died in October 2022. During his lifetime, he took himself as the proposer, and took out 4 insurance policies with his children and grandchildren as the insured and beneficiaries. However, in February 2022, the proposer was changed to 4 For children and grandchildren, the policy value reserves totaled 3.4 million yuan at the time of change, which has exceeded the gift tax exemption amount of 2.44 million yuan for the year, and they should declare and pay gift tax.

However, Mr. Jia did not declare the gift tax before his death. When the Kaohsiung National Taxation Bureau reviewed the estate tax, it was found that the four insurance policies belonged to property gifted within 2 years before his death.

In addition, for the gift tax part, according to Article 7 of the "Law of Inheritance Tax", the donee is changed to be the taxpayer, and the gift tax paid by him can be deducted from Mr. Jia's estate tax.

Officials from the Internal Revenue Service pointed out that the above-mentioned insurance policy is a life insurance contract. According to the provisions of the "Inheritance Tax Law", for a life insurance contract with a designated beneficiary, the death benefit is not included in the total estate tax; and Mr. Jia changed the proposer of the policy 2 years before his death. Being levied inheritance tax can be said to be "self-defeating".

Therefore, the National Taxation Bureau reminds that if you change the proposer midway, you should pay attention to the relevant tax laws and regulations. If you have any doubts about the application of laws and regulations, you can call the free service number "0800-000-321" for consultation.

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