The year-end bonus paid by the company after the death of the heir should be declared as inheritance tax

The year-end bonus paid by the company after the death of the deceased is a right with property value left by the deceased at the time of death and should be included in the total amount of the deceased's estate for inheritance tax but exempt from income tax.

The Kaohsiung National Taxation Bureau of the Ministry of Finance stated that a citizen called to inquire that his father had passed away at the end of 2012, and this year (2014) he received a salary income withholding voucher for 2012 issued by his employer. After inquiring with the company, he learned that the company gave his father a year-end bonus for 2012, and 5% tax had been withheld. Does he need to report the inheritance tax on this year-end bonus?

The bureau explained that the year-end bonus paid by the company after the death of the deceased is a right with property value and is subject to estate tax under Article 1 of the Estate and Gift Tax Act. It is the deceased's estate rather than salary income and the heirs should pay the estate tax. For salary income withholding vouchers issued by the company by mistake, the public can, after filing the estate tax return, take the estate tax exemption (or payment) certificate issued by the tax authority and ask the company to cancel its registration and refund the over-withheld tax. The company can then apply to the tax authority under its jurisdiction for a refund or to retain the tax that should have been withheld in the same year in accordance with Article 96 of the Implementation Rules of the Income Tax Act. If the fiscal year has ended, the refund procedures should be completed with the relevant tax collection agency.

The bureau gave an example: The deceased A passed away on November 25, 2012. The employed company paid A a year-end bonus of NT$100,000 (the same below) for 2012 on January 15, 2013, withheld NT$5,000 in taxes, and paid a net income of NT$95,000. On January 31, 2014, the withholding voucher was opened and reported. Therefore, heir B should include NT$100,000 in A's estate and file the estate tax, and ask the employed company to refund the over-withheld tax of NT$5,000. The employed company should also apply to the tax collection agency under its jurisdiction for a refund of NT$5,000 in taxes.

The bureau reminds that if you still have questions about the relevant regulations, you can call the toll-free service number 0800-000-321 during working hours for inquiries, or go to the bureau's website (https://www.ntbk.gov.tw) and use the National Tax Smart Customer Service "National Tax Assistant" for online inquiries.

Provided by: Nanzi Taxation Office
Contact Person: Mr. Hong Ruihua Contact Number: (07) 3522491 ext. 5030
Written by: Shi Xiuyuan Contact number: (07) 3522491 ext. 5071