1.  The source of the sale price must be reviewed by the National Taxation Bureau

• In principle, the sale price may come from a gift made by another person. There is no specific restriction on who the donor may be; the donor may be the father, mother, paternal or maternal grandparents, relatives, spouse, boyfriend, girlfriend, and so on. The funds may come from a gift made in the current year or accumulated gifts made over multiple years. In general, donors will choose to keep the gift amount within the annual gift tax exemption of NT$2.44 million. If the amount exceeds the exemption, the donor only needs to file a gift tax return and pay the gift tax accordingly.
• Many buyers will apply for a bank loan to cover part of the sale price. However, even if the bank has approved and disbursed the loan, if the National Taxation Bureau determines that the buyer’s income from the previous year is insufficient to repay the monthly mortgage payments, it may still request additional proof of income from the buyer. Therefore, if the buyer has income that they do not wish to disclose, such as rental income, online sales income, or unreported salary, an appropriate sale plan should be prepared before signing the sale and purchase agreement, so as to avoid being placed in a difficult position.
• All sale price payments made by the buyer must not, for any reason, be borrowed from the seller.
• When the seller obtains a bank loan, the buyer must not be made a general guarantor or joint and several guarantor. The seller also must not use other real estate owned by the seller as collateral for a loan and then use the borrowed funds as the sale price.
  
  

2. A sale may qualify for the self-use residential land value increment tax rate, but a gift can only apply the non-self-use land value increment tax rate

• In general, when a house is transferred between relatives, the most common reason for choosing a “sale” instead of a “gift” is to apply the 10% preferential land value increment tax rate for self-use residential property. Many people mistakenly believe that because the current house tax and land value tax already apply the self-use residential tax rate, the land value increment tax at the time of sale can also apply the self-use residential rate. However, house tax and land value tax are holding taxes, while land value increment tax is a transfer tax. The applicable requirements are completely different.
• If real estate is transferred by “gift,” even if the current house tax and land value tax both apply the self-use residential rate, and even if the property is not rented out or used for business purposes, the preferential land value increment tax rate for self-use residential property still cannot apply. In such cases, it is often possible that the real estate has not been held for a very long period, resulting in only a small difference between the land value increment tax calculated under the self-use residential rate and the general rate. Alternatively, the seller may not meet the requirements for the once-in-a-lifetime or one-house-per-lifetime self-use residential land value increment tax rate at all, and therefore simply chooses to transfer the real estate by gift.
  
  

2. Gift

• Starting from January 1, 2022, the annual gift tax exemption per person was increased to NT$2.44 million. This means that from 2022 onward, regardless of how many people the donor gives gifts to within a year, from January 1 to December 31, as long as the total amount gifted during that year does not exceed NT$2.44 million, gift tax may be exempted. For this type of gift tax, the calculation is based on the publicly announced current land value and the assessed present value of the house.
• f the amount exceeds NT$2.44 million, the owner may also choose another method, which is to divide the real estate and gift it in different years. Since the house and land transactions income tax was implemented after 2016, house and land taxes are calculated together. The calculation formula is: [transaction price - (acquisition cost + related expenses) - total land value increment] × statutory tax rate. However, one point to note with this method is that the acquisition cost in the formula must be based on the publicly announced current land value and the assessed present value of the house at the time of the gift, and cannot be changed. Therefore, if the real estate is acquired through a gift, the acquisition cost will be lower, and when it is resold in the future, more house and land transactions income tax may need to be paid.
• In addition, if the real estate is gifted in divided portions, other costs must also be considered, such as land administration agent fees, land administration registration fees, and land value increment tax.

1. Tip：For land administration purposes, land and buildings are viewed separately.
   • Use a sale for the land: because land value increment tax applies regardless of whether the land is transferred by sale or by gift.
   • Use a gift for the house: because a sale involves income from real estate transactions, using a gift is simpler.
   • If the property is gifted to children, gift tax will be imposed, and when the children sell the property in the future, they may need to pay higher house and land transactions income tax. If the property is sold to the children, as long as there is clear proof of payment and the price is reasonable, it will not be taxed as a gift.

2. Gift transfer is not recommended unless necessary:
   • Nowadays, people often hear of transfer methods such as “annual gifts” or “gifts made over multiple years.” These methods use the annual gift tax exemption to transfer real estate in separate installments. Compared with gifting the entire property at once, this can help reduce gift tax.
   • Since the house and land transactions income tax was implemented on January 1, 2016, the gift tax saved now may not be enough to cover the house and land transactions income tax that must be paid in the future. If real estate is gifted to children, when the children sell the property in the future, their cost will be determined based on the publicly announced current land value and the assessed present value of the house at the time of the gift. As a result, the taxable income calculated by deducting costs and expenses from the sale price may be higher, leading to a higher house and land transactions income tax burden.
     
     

3. Inheritance, which saves the most taxes but involves the greatest uncertainty

• Since 2022, the estate tax exemption has been increased to NT$13.33 million. If deductions are also included, transferring property by inheritance usually provides the best tax-saving effect compared with a sale or gift made during lifetime.
• Even if a will designates that the real estate be left to a specific heir, other heirs may still claim that their compulsory portion has been infringed.

1. Tax savings under the house and land transactions income tax for inherited real estate are subject to conditions：
   • If the real estate was inherited on or before December 31, 2015, the old system applies uniformly. The income from property transactions for the house portion must be calculated in accordance with the regulations and included in the total consolidated income. The annual income tax return must be filed by the end of May of the year following the year in which the ownership transfer registration date falls.
   • If the heir inherited the real estate on or after January 1, 2016, whether the new system or the old system applies must be determined based on when the decedent acquired the real estate:
     • If the decedent acquired the real estate on or after January 1, 2016, the new system applies uniformly.
     • If the decedent acquired the real estate on or before December 31, 2015, the old system applies in principle. However, when the heir sells the property, if the property meets the prescribed conditions for self-use residential house and land, and if calculation shows that taxation under the new system is more favorable, the heir may also choose to file under the new system. Taxable income within NT$4 million is exempt from income tax, and the portion exceeding NT$4 million is taxed at a rate of 10%.

2. Do you need to pay taxes when transferring a house to a son or daughter?

• Land value increment tax:
  • Sale: The self-use residential land value increment tax rate may apply, either once in a lifetime or one house per lifetime.
  • Gift: Only the general land value increment tax rate may apply.
  • Inheritance: Exempt from land value increment tax.
• Gift tax:
  • Sale: No gift tax.
  • Gift: The portion exceeding the NT$2.44 million gift tax exemption is subject to 10% gift tax.
  • Inheritance: Exempt from land value increment tax.

• Deed tax
  • Sale: Deed tax is 6% of the current value of the house.
  • Gift: Deed tax is 6% of the current value of the house.
  • Inheritance: No deed tax.
    

4. Conclusion

• After reading LY Land Administration Agent Office’s detailed explanation above on transfer by sale and gift, it can be seen that how to save taxes when transferring real estate is indeed a major question.
• If you have related concerns, it is recommended to entrust a professional land administration agent to tailor the most suitable real estate transfer method for you, so as to avoid letting a large amount of hard-earned money slip away.