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ESTATE TAX ON PAYMENTS UNDER FOREIGN INSURANCE POLICIES
Item 9, Article 16 of the Estate and Gift Tax Act provides that the death benefits paid to the des-ignated beneficiary upon the death of the insured under a life insurance policy shall not be in-cluded in the calculation of the insured de-ceased's estate in calculating the estate tax pay-able. The Ministry of Finance issued a tax ruling dated 28 June 2006 stating that because the above provision was enacted in line with Article 112 of the Insurance Act, such exclusion applies only to the death benefits paid under those life insurance policies to which Article 112 of the Insurance Act applies. Accordingly, since Arti-cle 112 of the Insurance Act does not apply to any foreign life insurance policies not approved by the Financial Supervisory Commission, the exemption from estate tax under Item 9, Article 16 of the Estate and Gift Tax Act does not apply either.
However, Article 112 of the Insurance Act pro-vides that, "If it is stipulated in the life insurance policy that the insured amount is to be paid upon the death of the insured to the beneficiary named therein, such insured amount paid shall not be treated as a part of the insured deceased's estate." Further clarification is therefore necessary as to whether this provision is a specific exclusion of such death benefits from a deceased insured's estate, or re-affirmation of the principle that the payment made to a designated beneficiary under an insurance policy is not the property of the insured, and that the provision is included in the legislation as a pure reminder. If the latter view should prevail, there should be no difference between foreign policies and domestic policies in terms of the estate tax treatment.