| Summary: | 碩士 === 國立中正大學 === 會計與資訊科技學系碩士在職專班 === 105 === An applicant for life insurance names himself/herself as the insured and designates the beneficiary. At the time of the death of the applicant, the death benefit paid by the insurance company to the beneficiary designated by the applicant (the inherited party) will be excluded from the gross estate which should be subject to estate tax, according to Subparagraph 9, Article 16 of the Estate and Gift Tax Act. The purpose of this Act is to help reduce risk through diversification, minimize loss, and avoid the insured’s family from financial difficulties because of losing their source of finance if the insured dies due to an unpredictable or unavoidable sickness/accident. However, to keep abreast with the times, the types of life insurance tend to be diversified and tax avoidance becomes more sophisticated. Therefore, in practice, the inherited party may buy life insurance before death and transform his/her property subject to tax into tax-free insurance death benefits to avoid estate tax. Based on the substantive taxation principle, the taxing authority includes such death benefits as the gross estate, which shall be subject to estate tax, resulting in many controversies between the taxing authority and taxpayers.
After conducting an inductive analysis on judgments of administrative courts and individual patterns of written decisions on administrative appeals filed by the Ministry of Finance, this study found that the situations which the taxing authority identifies as tax avoidance when the inherited party buys life insurance before death can be divided into two categories: one is comprehensive, determined based on the health conditions of the inherited party during the insurance term before death, the time of buying the insurance, and the insurance amount. The other is determined based on whether the life insurance is investment-oriented or savings-oriented. However, since the principle of taxation under the law is the basic principle of taxation, there should be restrictions when it comes to actually applying the substantive taxation principle in practice, so that the basic principle of taxation under the law will not be violated. This study concludes that there should be an objective identification standard; in other words, only when the life insurance is bought under the following conditions can the taxing authority decide that the inherited party has bought life insurance before death to avoid paying tax, and that the subsequent estate tax should be paid according to the substantive taxation principle: when buying the life insurance, the inherited party is already suffering from a serious illness that will directly cause death. In other words, the inherited party already knows the potential estate tax debts while buying the insurance, and yet he/she chooses to pay for an insurance policy to transform the cash subject to tax into tax-free insurance death benefit. The benefits will then be subject to the substantive taxation principle.
Furthermore, it is difficult to reach a consistent standard for determining the time of severe illness, which easily becomes a subjective identification. In addition, non-traditional life insurance policies, such as investment-oriented and savings-oriented insurance policies, contain investment income and accrued savings interest. There is a heated debate over whether it is in accordance with the purpose of legislation if the entire amount of death benefits is exempt from estate tax. In addition, life insurance has become a tool for tax avoidance. This study further suggests that Subparagraph 9, Article 16 of the Estate and Gift Tax Act, which stipulates that insurance death benefits are excluded from the gross estate should be amended so that the insurance death benefits only appertain to a lump‐sum tax exemption.
Keywords：principle of taxation under the law, substantive taxation principle .
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