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  • Interpretation
  • No.622
  • Date
  • 2006/12/29
  • Issue
    • Is the Resolution of the Joint Meeting of the Supreme Administrative Court dated September 18, 2003, in violation of the Constitution?
  • Holding
    •        The principle of taxation by law as embodied in Article 19 of the Constitution is intended to point out that the people have the duty to pay tax pursuant to the prescriptions in respect of taxpaying bodies, tax denominations, tax rates, methods of tax payment, and time of tax payment as set forth by law.  The foregoing has been made clear by this Court in its previous interpretations.  Article 15-I of the Estate and Gift Taxes Act (as promulgated and implemented on February 6, 1973) provided that any property transferred by gift to the individuals described in said paragraph by the decedent three years before his/her death is regarded as the decedent’s estate, which shall be included in the gross estate and subject to estate tax under said Act.  The said article did not provide that the decedent’s heir, if any, should be the taxpayer who is subject to gift tax under the law.  In addressing the issue regarding the gifts made by the decedent prior to his or her death, the Resolution of the Joint Meeting of the Supreme Administrative Court dated September 18, 2003, stated that where the taxing authority did not issue a notice of gift taxation as of the date when the inheritance took place, the decedent’s heir should then be the taxpayer who is subject to gift tax.  In respect of the paragraph dealing with the imposition of gift tax, the said resolution has gone beyond the scope set forth by the said Article 15 of the Estate and Gift Taxes Act and imposed a duty of tax payment on the heir(s) that is not provided for by the law.  As such, it is inconsistent with the intent of Articles 15 and 19 of the Constitution and thus should no longer be cited from the date of this Interpretation.
  • Reasoning
    •        A resolution of the Supreme Administrative Court, if and when cited by a judge in rendering a judgment, should be regarded as equivalent to an order, thus becoming the subject of constitutional interpretation (see J.Y. Interpretations Nos. 374, 516 and 620).  In the final judgment based on which the petition for interpretation at issue has been filed, Ruling T.T. No. 1589 (Sup. Ad. Ct. 2003) cited the Resolution of the Joint Meeting of the Supreme Administrative Court dated September 18, 2003, as the ground for overruling the petitioner’s case.  Moreover, although Judgment P.T. No. 1544 (Sup. Ad. Ct. 2003) did not formally cite the aforesaid resolution, the rationale and wording employed in the reasoning of said judgment are identical with the contents of the resolution in referring to the decedent’s heir as the taxpayer who is subject to gift tax, as well as the notice of gift taxation.  Therefore, the judgment, in substance, was reached on the basis of the resolution.  And, since the petitioner has specifically contested the constitutionality of the aforesaid resolution and given reasons for such contestation, it may well be considered as the subject of the interpretation.  Therefore, pursuant to Article 5-I (ii) of the Constitutional Interpretation Procedure Act, the petition at issue should be heard (see J.Y. Interpretations Nos. 399 and 582).
      
    •        Article 19 of the Constitution provides that the people shall have the duty to pay tax in accordance with law, which should be so construed as to mean that the State shall, in imposing duty on the people to pay tax or granting tax abatements or exemptions to the people, prescribe by law such requisite elements of taxation as taxpaying bodies, taxable objects, tax bases, tax rates, methods of tax payment, time of tax payment and so forth.  Therefore, in respect of the requisite elements of taxation that should be prescribed by law, no different provisions can be made and no additional elements or restrictions can be imposed by means of any order, thus imposing any duty of tax payment on the people where the law does not so require.  Otherwise, the principle of taxation by law will be violated.  While delivering its opinions by way of resolutions, the Supreme Administrative Court must also follow the generally accepted methods of legal interpretation and interpret the laws in line with the legislative intent and applicable constitutional principles.  The principle of taxation by law as embodied by Article 19 of the Constitution certainly does not allow any such resolution that exceeds the authority of legal interpretation and increases or reduces any duty of tax payment as provided by law (see J.Y. Interpretation No. 620).
      
    •        Article 15-I of the Estate and Gift Taxes Act (as promulgated and implemented on February 6, 1973) provides, “Any property transferred by gift to the following individuals by the decedent three years (amended as two years on July 15, 1999) before his/her death is regarded as the decedent’s estate, which shall be included in the gross estate and subject to estate tax under this Act: (1) the surviving spouse of the decedent; (2) the heirs of the decedent prescribed under Articles 1138 and 1140 of the Civil Code; and (3) the spouses of the heirs named in the preceding item.”  The foregoing provision has regarded the property transferred by gift to the heirs specified therein as the decedent’s estate and included it in the gross estate.  The legislative intent thereof should be to prevent the decedent from dividing his or her property prior to his or her death for the purpose of evading estate tax.  Therefore, the law requires that the property transferred by gift to specific individuals by the decedent within a certain period prior to his or her death be regarded as the decedent’s estate and subject to estate tax.  The said article, however, does not require that the heir be regarded as the taxpayer who is subject to gift tax where the taxing authority did not issue a notice of gift taxation in respect of the gift made by the decedent prior to his or her death.
      
    •        The Tax Levy Act contains the general provisions regarding tax collection. Article 14 thereof provides, “Where a taxpayer dies leaving an estate, the taxes payable by him or her according to law shall be paid off by the executor, heir, legatee or administrator, as the case may be, based on the order of discharge of the duty of tax payment set forth by law before the decedent’s estate or legacy may be divided or delivered (Paragraph I).” “If the executor, heir, legatee or administrator, as the case may be, is in violation of the provisions of the preceding paragraph, he or she shall be obligated to pay off any unpaid taxes (Paragraph II).”  Pursuant to Paragraph I of said article, the decedent’s duty of tax payment already in existence prior to his or her death will not be discharged by his or her death, but the decedent’s executor, heir, legatee or administrator will have to pay off such taxes in his or her stead to the extent that the decedent left any estate.  Rather than succeeding the decedent as the taxpayer, the executor, heir, legatee or administrator, as the case may be, is merely obligated to pay off the taxes in the decedent’s place and perform the decedent’s duty of tax payment already in existence prior to his or her death.  Nevertheless, if the heir is in breach of his or her obligation mentioned above, the taxing authority may then regard the heir as the taxpayer and impose on him or her the duty to pay off the unpaid taxes that he or she should have paid in the decedent’s place according to Paragraph II of said article.  Therefore, in respect of the gift tax that was already payable by the decedent prior to his or her death but for which no notice of gift taxation was issued by the taxing authority, the general provisions of Article 14 of the Tax Levy Act should apply since the Estate and Gift Taxes Act does not provide that the heir shall be the taxpayer.  In other words, in respect of the decedent’s estate, the taxes payable by him or her according to law shall be paid off by the executor, heir, legatee or administrator, as the case may be, based on the order of discharge of the duty of paying gift taxes as set forth by law before the decedent’s estate or legacy may be divided or delivered.  Only in case of any violation of the foregoing obligation shall the executor, heir, legatee or administrator be obligated to pay off the gift tax that has not yet been paid.  In addition, a duty of tax payment is a duty to make monetary payment under public law.  Upon the issuance of a taxpaying disposition by the taxing authority, other than the circumstances described in Article 39-II of the Tax Levy Act under which the compulsory execution may be suspended according to law, the decedent’s estate may still be subject to compulsory execution under Article 15 of the Administrative Execution Act if the taxing authority removes the case for purpose of compulsory execution when the tax remains unpaid thirty (30) days after the expiry of the taxpaying period.  Furthermore, according to Article 7-I of the Estate and Gift Taxes Act, the taxpayer of gift tax shall be the donor of gift.  However, the donee shall be liable for payment of such tax if the donor*s whereabouts is unknown, or if the donor fails to pay gift tax within the time limit prescribed herein and does not have any property in the ROC for enforcement.  Therefore, if the decedent (donor) does not have any property for enforcement, the taxing authority may still regard the donee as the taxpayer and impose gift tax on him or her pursuant to the foregoing provisions.  As for the gift tax already paid pursuant to the foregoing provisions, as well as the estate tax payable by the heir according to Article 15 of the Estate and Gift Taxes Act, Article 11-II of said Act shall still apply.
      
    •        In respect of the issue as to how the gift tax should be imposed and paid for any property transferred by gift to specific individuals by the decedent three years before his/her death where the taxing authority did not issue a notice of gift taxation in respect of the gift made by the decedent prior to his or her death, the Resolution of the Joint Meeting of the Supreme Administrative Court dated September 18, 2003, stated, in part, that the decedent had the duty to pay the gift tax at the time when the gift was made three years before his/her death and thus the debt of gift tax came into existence; that such debt under the public law does not have any nature of personal exclusivity and hence is inheritable by the heir(s) of the decedent pursuant to Article 1148 of the Civil Code; and that the taxing authority should regard the heir(s) as the taxpayer(s) upon his/her death and assess the gift tax inherited by such heir(s) during the taxpaying period.  The aforesaid resolution also stated that Articles 11-II and 15 of the Estate and Gift Taxes Act had merely provided that the aforesaid property transferred by gift should be included in the decedent’s estate for the purpose of calculating the estate tax and specified the method as to how the gift tax may be deducted, but did not exempt the heir(s) from their debts of gift tax inherited from the decedent; and that the Directive No. TTST-811669393 issued by the Ministry of Finance on June 30, 1992, was not inconsistent with the foregoing provisions by stating that, where any gift made by the decedent three years before his/her death is included in the gross estate and subject to estate tax, if the taxing authority did not issue a notice of gift taxation as of the date when the inheritance took place, the decedent’s heir should be the taxpayer who is subject to gift tax before resorting to Articles 15 and 11-II of the Estate and Gift Taxes Act.  In addressing the issue regarding the gifts made by the decedent prior to his or her death, the said resolution stated that where the taxing authority did not issue a notice of gift taxation as of the date when the inheritance took place, the decedent’s heir should then be the taxpayer who is subject to gift tax.  In respect of the paragraph dealing with the imposition of gift tax, the said resolution has gone beyond the scope set forth by the said Article 15 of the Estate and Gift Taxes Act and imposed a duty of tax payment on the heir(s) that is not provided for by the law.  As such, it is inconsistent with the intent of Articles 15 and 19 of the Constitution and thus should no longer be cited from the date of this Interpretation.  The issue of whether the opinions adopted by the said resolution have caused the imposition of gift and estate taxes to be in violation of the principle of equality is now only moot.  Additionally, it should be noted that, depending on the circumstances, Article 14 of the Tax Levy Act, Article 7 of the Estate and Gift Taxes Act and Article 15 of the Administrative Execution Act, respectively, should apply to the imposition and implementation of the aforesaid gift tax.
      
    • *Translated by Vincent C. Kuan.
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