[Family Succession Accountant Column] Don’t forget to report overseas income earned by overseas trusts when encountering CFC tax law!

For high-net-worth individuals or family business members in Taiwan, international investment is a common practice to diversify risks, enhance financial soundness, and apply overseas income tax rates, reducing the overall tax burden. However, as wealth and family size expand, the choice of family inheritance structure becomes an important challenge. Through offshore trusts, family members can effectively manage and protect wealth, ensuring smooth inheritance to future generations. Facing the first CFC declaration in May 2024, the overseas trust tax of high-net-worth individuals needs to be carefully analyzed and let an accountant decipher it for you!

International investment is a common practice for high-net-worth individuals or family business members in Taiwan to diversify risks, increase financial stability, and apply overseas income tax rates to reduce the overall tax burden.
However, as wealth and family size expand, the choice of family inheritance structure becomes an important challenge.
Through offshore trusts, family members can effectively manage and protect wealth to ensure smooth inheritance to future generations.
Faced with the first CFC declaration in May 2024, the overseas trust tax for high-asset individuals requires precise analysis and let an accountant decipher it for you! Analysis of a certain case President Ba is the founder of a family company of a Chuanchuan Group. The group family company has not been publicly issued. He wants to ensure that the company Sustainable development avoids future management problems and legal disputes.
Therefore, on October 1, 2023, he entrusted 100% of his BVI Group Holdings to a trust to protect the family\’s operating rights and ownership and distribute family interests to family members according to his wishes.
Facing the first declaration of Taiwan CFC in 2023, President Ba is not sure who should handle it: himself, the trust company or family members. How to calculate the CFC income and how he needs to handle it to comply with tax law requirements. Deloitte Private Taiwan provides tax law easily GO! No gaps in your tax return! On January 4, 2024, the Ministry of Finance promulgated Tai Cai Shui Zi Interpretation Order No. 11204665340, which clarified that the actual beneficiary of the economic interests of overseas trust properties is the subject of taxation. The shareholding of the trust operator as the trustee will be regarded as a family trust. The direct shareholding of the person or beneficiary is subject to CFC reporting and taxation in May this year. The dividends are divided into two types according to the content of the trust contract. The beneficiary has determined and specifically regards the trustee\’s shareholding as the beneficiary\’s direct shareholding. The beneficiary of the shareholding dividends has not been determined. The trustee\’s shareholding is regarded as the direct shareholding of the trustor. President Ba has set the second-generation family members (eldest son and eldest daughter) as the principal and interest beneficiaries in the trust deed, which is considered to be \”interests\”. The beneficiary has determined and specifically regarded the trustee\’s shareholding as the direct shareholding of the beneficiary. The eldest son and eldest daughter are the actual beneficiaries of the trust property. The eldest son and eldest daughter are deemed to directly hold 60% and 40% of the equity of the BVI Group Holding Company respectively.
Although the beneficiary (eldest daughter) directly holds 40% but does not exceed 50%, but he and the beneficiary (eldest son) are related to each other within the second-degree relationship and the total shareholding is 100%. Both the eldest son and the eldest daughter are required to calculate the CFC profit income declaration tax for the current year in accordance with regulations. Income Tax.
Assume that the BVI Group Holding Company\’s current year profit calculated in accordance with CFC regulations is NT$90 million. The eldest son and eldest daughter should declare CFC profit income of NT$13.5 million and NT$9 million respectively. The calculation is as follows: eldest son = NT$90 million X shareholding ratio 60% There is a period of 3/12 = 13.5 million yuan. The eldest daughter = 90 million yuan X shareholding ratio 40% More attention needs to be paid to filing documents such as CFC financial statements and CFC profit income calculation sheets.

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