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  • Interpretation
  • No.705【The Standard of Assessment in Tax Declarations for the Amount to be deducted for the Donation of Land】
  • Date
  • 2012/11/21
  • Issue
    •        Is the order requiring that the amount to be deducted for the donation of land in tax declarations be assessed on the basis of the standards prescribed by the Ministry of Finance unconstitutional?
  • Holding
    •        The Ministry of Finance proclaimed Tai Cai Shui Zi No. 0920452464 Order, Tai Cai Shui Zi No. 0930451432 Order, Tai Cai Shui Zi No. 09404500070 Order, Tai Cai Shui Zi No. 09504507680 Order, Tai Cai Shui Zi No. 09604504850 Order, and Tai Cai Shui Zi No. 09704510530 Order on June 3, 1993, May 21, 1994, February 18, 1995, February 15, 1996, February 7, 1997, and January 30, 1998 respectively. These Orders are to the effect that the calculation of the amount to be deducted for donation shall be assessed in accordance with the standard determined by the Ministry of Finance, and that regarding the amount to be deducted for land not reserved for public facilities yet with special conditions attached, an application may be filed with the Ministry of Finance for assessment on a special case basis, or at sixteen percent of the government-declared value of the land. These Orders violate the principle of taxation by law of Article 19 of the Constitution and shall not be applied from the date of proclamation of this Interpretation.
  • Reasoning
    •        Article 19 of the Constitution specifies that people shall have the duty of paying taxes in accordance with law, which means when the State imposes a tax on, or provides preferential tax deductions or exemptions for, its people, it shall clearly specify, in the law or regulations clearly authorized by a given law, the conditions of tax, inter alia, the taxpaying entity, the object taxed, the connection between the taxpayer and the object taxed, the tax base, the tax rate, and how and when the tax is to be paid. The tax collecting authority may promulgate any other required regulations only for detailed or technical secondary matters necessary for the enforcement of the law (see J. Y. Interpretation Nos. 650 and 657).
      
    •        Article 17, Paragraph 1, Subparagraph 2, Item 2-1 of the Income Tax Law provides as below regarding the amount to be deducted for donation: “[f]or the taxpayer, his (her) spouse and dependent(s), contributions and donations made to educational, cultural, public welfare or charitable organizations or associations in a total amount not in excess of 20 percent of the total amount of the gross consolidated income are deductible. However, there is no limit to the amount of donations or contributions made for the support of national defense or entertainment for the troops or contributions to the government”. If the objects donated are tangible properties, such as land, the Income Tax Law does not explicitly specify what the standard for calculating and listing the amount to be deducted is, nor does it specifically or clearly authorize the competent authority to prescribe such a standard. The Ministry of Finance 1993.6.3 Tai Cai Shui Zi No. 0920452464 Order provides: “3. if an individual donates a piece of purchased land without submitting any actual evidence of the cost of procurement, or if the donated land was acquired through a gift, the tax collection authority may conduct the calculation of the amount to be deducted of the donation in accordance with the standard determined by this Ministry. The standard is to be drafted with reference to the transaction situation of the land market in the year of donation by the National Tax Administration of each district and filed with this Ministry for approval.” The 1994.5.21 Tai Cai Shui Zi No. 0930451432 Order provides: “if an individual donates a piece of land acquired in heritage…… the calculation of the amount of the gross consolidated income to be deducted is to be assessed on the basis of the standard set forth in the third point of the 1993.6.3 Tai Cai Shui Zi No. 0920452464 Order of this Ministry.” The 1995.2.18 Tai Cai Shui Zi No. 09404500070 Order and the 1996.2.15 Tai Cai Shui Zi No. 09504507680 Order both provide that: “if an individual donates a piece of purchased land without submitting any actual evidence of the cost of procurement, or if the donated land was acquired through a gift or in heritage—except for land not reserved for public facilities yet with special conditions attached, and where the tax collection authority has conducted research and made concrete proposals for approval by this Ministry—the amount of the gross consolidated income to be deducted is to be calculated at 16 percent of the government-declared value of the donated land.” The itemized interpretations of the 1997.2.7 Tai Cai Shui Zi No. 09604504850 Order and the 1998.1.30 Tai Cai Shui Zi No. 09704510530 Order are to the same effect. The above six Orders (hereinafter referred to as “the Orders at issue”) regulate how to calculate the amount to be deducted of a piece of land donated by an individual. The above 1993 and 1994 Orders only generally regulate that the tax collection authority shall assess the amount to be deducted according to the standards determined by the Ministry of Finance, and the 1995 Order further determines the standards to be applied, while the 1996, 1997, and 1998 Orders adopt the same standards as those of the 1995 Order. 
      
    •        Article 13 of the Income Tax Law states: “Consolidated income tax of an individual shall be levied on the amount of his net consolidated income which shall be the gross consolidated income minus the amount of tax-exempt income, and various deductions.” The interpretative rules and the standards of discretion issued by a superior authority to its lower units or its subordinate officers, for the purpose of unifying the interpretation of laws and regulations, the findings of facts, and the exercise of the power of discretion, are, by their nature, administrative rules (with reference to Article 159 of the Administrative Procedure Law) which may only regulate the detailed or technical secondary matters required for the enforcement of the law when necessary. The Orders at issue, which are aimed at a piece of donated land which was purchased without submitting any actual evidence of the cost of procurement or which was acquired through a gift or in heritage, are supplementary regulations issued for the purpose of determining the amount of the gross consolidated income to be deducted according to the aforementioned provision of Article 17, Paragraph 1, Subparagraph 1, Item 2-1 of the Income Tax Law. However, the interpretations which state that the calculation of the amount of the donation to be deducted is to be assessed on the basis of standards determined by the Ministry of Finance, and that, for land not reserved for public facilities yet with special conditions attached, a particular proposal can be submitted to the Ministry of Finance for approval, or the amount may be calculated at 16 percent of the government-declared value of the donated land, all involve the calculation of standards of the tax base and the amount to be deducted. As such, these regulations are not merely detailed or technical matters for the enforcement of the aforementioned Income Tax Law but are material and significant matters involving both the amount of tax payable by the people and their property rights. Such matters shall be specified by a law or regulations having the clear authorization of a given law. Therefore, the above sections of the interpretation of the Orders at issue do not comply with the principle of taxation by law of Article 19 of the Constitution, and shall not be applied from the date of proclamation of this Interpretation.
      
    • ______________________
      
    • * Translated by Dr. Ching-Yuan HUANG and Dr. Hsin-Yang WU of Tsar & Tsai Law Firm
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