Proceeds from Offshore Insurance Policies Cannot Be Exempted From Estate Tax

The Ministry of Finance announced an interpretative ruling on June 28, 2006 indicating that the proceeds paid by (unrecognized) offshore insurance firms can not be exempted from estate tax. This ruling has caused a great number of litigations between the policy holders and insurance brokers in Taiwan. According to Article 112 of the Insurance Act as well as the current Estate and Gift Tax Act, the proceeds paid to the designated beneficiary at the time of the death of the insured under life insurance policy will be excluded from the gross estate (as a result, there will be no estate tax on the proceeds). Yet, is the foregoing article applicable to the offshore insurance policies? The ruling from the Financial Supervisory Commission (FSC) explained that the offshore insurance is not a subject matter governed by Insurance Act and has not been approved by the FSC. Therefore, the treatment provided by the Insurance Act will not extend to offshore insurance policies.