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Globalization has facilitated the free flow of capital internationally. However, it has created international issues such as money laundering, counter terrorism, and tax evasion since the 1990s, prompting governments worldwide to introduce preventive and control measures. The Money Laundering Control Act and the Foreign Account Tax Compliance Act (FATCA) laid the foundation for financial account information transparency. Following the successful implementation of FATCA in the United States, the Organization for Economic Co-operation and Development (OECD) announced the Common Reporting Standard (CRS) in 2014; said standard is to be complied by countries around the world.
In 2019, Taiwan became a member of CRS. This signified Taiwan’s automatic exchange of financial information with the rest of the world, revealing Taiwanese people’s assets overseas. Global tax information exchange and financial account transparency are inevitable trends, uncovering Taiwanese people’s assets overseas and changing how wealthy people distribute their assets across the globe.
This study investigated whether offshore funds sent back to Taiwan after the implementation of CRS were being taxed and where the funds subsequently went. Because the fund owners generally used these funds to purchase real estate, tax issues that arose were explored.
The implementation of CRS has resulted in wealthy people transferring their offshore funds back to Taiwan, creating the problem of wealth inheritance. This study analyzed common methods of wealth inheritance (i.e., as gifts, inheritance, trust, and/or insurance), where it found that insurance featured the most advantages. In the past, wealthy people generally focused on tax avoidance when transferring their assets. However, this method is becoming increasingly inapplicable following new tax law changes. Additionally, technological advances unveil people’s previously disclosed financial information, making tax avoidance increasingly difficult; even insurance-based tax avoidance has become less effective because of real levy enforced by the National Taxation Bureau. Therefore, carefully considering tax-related affairs for the future generation is imperative.
This study examined the following: (a) how CRS had led to the disclosure of wealthy people’s offshore funds and them transferring said funds back to Taiwan, creating the problems of taxation and wealth inheritance; (b) how wealthy people transferred their wealth. Because of research limitations as well as time and length constraints, many issues remained unaddressed. Nevertheless, this study offers the following results for future researchers:
1. How tax authority can enforce preferential taxation on offshore funds transferred back to Taiwan;
2. How tax authority can identify and enforce taxes to be paid for insurance premiums; and
3. Determine the legitimacy of “insured amount” and “policy value reserve” for various insurance products
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