22 March 2021
The Supreme Administrative Court rendered the 109-Pan-463 Decision of September 7, 2020 (hereinafter, the “Decision”), holding that when the existence of any outstanding debt of an inheritee before his/her death is unknown, although the taxpayer is objectively required to assume the burden of proof, still since the inheritor may not know the reasons and the process concerning the raising of the debt, substantiation with preponderance of probability is sufficient.
According to the facts underlying this Decision, Individual A, the Appellant’s father, was deceased, and the extension application of Appellant and the other inheritors was granted, and they filed the inheritance tax within the required period with a deductible for outstanding debt in the amount of NT$36,048,040. After the Appellee’s preliminary investigation, this deductible was denied on the ground that the Appellant had failed to provide supporting documents for the debt of NT$30 million between the Appellant and the other inheritors. Dissatisfied with the amount of the deductible for outstanding debt, the Appellant filed an administrative appeal, but the amount was not changed. After the administrative appeal was rejected by a decision of the Ministry of Finance, the Appellant brought an administrative action with the Taichung High Administrative Court (hereinafter, the “Original Trial Court”), seeking a decision to set aside the decision on the administrative appeal, the decision on the recheck and the original disposition. The Original Trial Court handed down a decision to set aside the decision on the administrative appeal, the decision on the recheck and the original disposition with respect to the portion concerning the denial of the NT$6,689,000 outstanding debt included in the Appellant’s filing of the inheritance tax on Inheritee A with the remaining claims of the Appellant rejected. Still dissatisfied, the Appellant appealed against the unfavorable portions in the original decision.
According to the Decision, the existence of an outstanding debt deductible before the death of the inheritee, as practical views suggest, is a matter favorable to the inheritance taxpayer. If the actual existence of such outstanding tax is still unknown according to the ex officio investigation of evidence by the administrative trial court, although the taxpayer is objectively supposed to assume the burden of proof, still the inheritor may not necessarily have a clear idea about the reasons and process involving the debt raised by the inheritee. Therefore, the degree of substantiation required by the administrative court to establish the existence of the debt does not have to be absolute truth beyond reasonable doubt, and substantiation by preponderance of probability is sufficient. However, if the original decision fails to explain the reasons for not accepting favorable evidence asserted by a party or to adopt it as a ground for a finding favorable to the party even though the evidence is accepted, the decision is flawed for insufficiency of grounds. And if this affects the conclusions of the decision, the decision is in violation of laws and regulations.
It was further indicated in this Decision that the contending issue in this matter is whether the NT$30 million, whose recognition was rejected by the Appellee, was an outstanding debt owed before the death. According to the promissory note and mortgage right produced by the Appellant as the primary evidence to support the above outstanding debt of NT$30 million owed to the Appellant by the inheritee and the following facts: “The Appellant had sold his Property X to Inheritee A, who did not pay a price for the property,” and “the Appellant’s Property Y was auctioned by the court since he was the joint guarantor of the debt of his brother B, and their father A was willing to guarantee the debt owed to the Appellant by B.” Although the fact asserted by the Appellant concerning Property Y was accepted in the original decision, which was favorable to the Appellant with respect to the portion of NT$6,689,000, still other aspects unfavorable to the Appellant include the portion of the Inheritee’s outstanding debt of NT$30 million incurred before his death which exceeds the outstanding debt of NT$6,689,000, whose recognition was approved in the original decision. The original trial court did not merely examine the facts concerning Property X. However, the arguments concerning the portions unfavorable to the Appellant in the original decision only cover the fact concerning Property X. Based on the foregoing explanation, the original decision is unlawful for insufficiency of grounds. In this case, the portion of the inheritee’s outstanding debt of NT$30 million incurred by the inheritee before his death that exceeds NT$6,689,000 should have been considered. Since the original decision is unlawful for the above reason, which affected the conclusions in the decision, it was reversed and remanded.
For further information, please contact:
Tiffany Hsiao, Lee Tsai & Partners
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