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  • Interpretation
  • No.375
  • Date
  • 1995/03/17
  • Issue
    • May the tax exemption provided for in Article 31 of the Agricultural Development Act apply to the situation where there is only one heir eligible to inherit the agricultural land?
  • Holding
    •        The first part of Article 31 of the Agricultural Development Act provides that, “Where the agricultural land in a family farm is inherited in whole or succeeded by one heir who is capable of farming on his own and who continues agricultural production on such land, the inheritance tax and gift tax shall be exempted.” This provision aims to encourage the inheritance or succession of the agricultural land by one heir when there are two or more heirs eligible to inherit the agricultural land and to prevent the overdivision of such land, thus hindering the agricultural development. However, in the case where there is only one heir, there is no concern about co-ownership of the agricultural land as a result of dividing or transferring the estate, thus it is unnecessary to provide tax exemption as encouragement. The first part of Article 21 of the Enforcement Rules of the said Act, which provides that, “The circumstance of inheritance or succession by one heir as specified in Article 31 of the Act shall be construed as the situation where there are two or more heirs in accordance with Article 1138 of the Civil Code, and they all agree to the inheritance or succession by one heir among themselves,” is in line with the aforesaid aim, within the scope of delegation of authority under the Act, necessary for promoting the public interest, and is not contradictory to the Constitution.
  • Reasoning
    •        The legislative purposes of the Agricultural Development Act, as provided for in Article 1 thereof, are to expedite agricultural development, promote agricultural production and distribution, and increase the income of and raise the living standards of farmers. To accomplish these purposes, policies are formed actively to encourage engagement in enlarging the scale of agricultural production as well as passively to prohibit the agricultural land from being overdivided or co-owned after transfer. All such policies are important measures for promoting agricultural development. Therefore, Article 26 of Paragraph 1 of the Act provides that: “The agricultural authority shall encourage and assist family farms to expand the scale of operation, or engage in large-scale agricultural production through joint operation, entrusted operation, cooperative farming or other methods of operation. Funds shall be allocated for furnishing loans or subsidies in such respect.” Further, the first part of Article 30 of the Act provides that “No piece of agricultural land can be divided or co-owned after transfer.” Article 31 of the Act also provides that where the agricultural land in a family farm is in whole inherited or succeeded by one heir who is capable of farming on his own and who continues agricultural production on such land, the inheritance tax and the gift tax shall be exempted. In addition, the agricultural land tax shall be exempted for ten years commencing from the year of inheritance or succession. In the event any money is needed to compensate other heirs, the agricultural authority shall assist in arranging a loan with a term of fifteen years. Moreover, Article 17, Paragraph 1, Subparagraph 5, of the Estate And Gift Taxes Act, prior to its revision, provided that, “Where the heirs or devisees continue to operate agricultural production on the agricultural land within the estate, half of the value of such land shall be exempt from the inheritance tax and thus shall be deducted from the total value of the estate. However, if such land is in whole inherited by one heir who is capable of farming on his own and who continues agricultural production on such land, the total value of such land shall be deducted.” This provision regarding the exemption of the inheritance tax by deducting half or the total value of the land from the total value of the estate is stipulated in response to the policy of expediting agricultural development. In view of the aforesaid provisions, it is clear that such tax incentives are offered with an aim to encourage agreement to the inheritance or succession of the agricultural land by one heir when there are two or more heirs eligible to inherit the agricultural land, and to prevent the overdivision of agricultural land, thus hindering the agricultural development. In the case where there is only one heir, no issue of co-ownership of the agricultural land as a result of dividing or transferring the estate exists, and therefore the tax exemption shall not apply. The first part of Article 21 of the Enforcement Rules of the Act, which provides that the circumstance of inheritance or succession by one heir as specified in Article 31 of the Act shall be construed as the situation where there are two or more heirs in accordance with Article 1138 of the Civil Code, and they all agree to the inheritance or succession by one heir among themselves, is in accordance with the legislative intent and the meaning of the statutory provision. It is within the scope of the delegation of authority under the Act, necessary for promoting the public interest, and is not contradictory to the Constitution. 
      
    • *Translated by Wellington L. Koo, and Formosa Transnational Attorney at Law.
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