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We provide an update to our previous alert (here) on the regulatory landscape concerning Controlled Foreign Corporations (CFCs) and the implications for offshore trusts and corporate structures. This update follows the pivotal changes introduced by the rulings on 4 January 2024 and 10 July 2024 (respectively, "Jan 4 Ruling" and "July 10 Ruling").
We have actively engaged with the Taiwan's National Tax Bureau (NTB) since the release of the two rulings to clarify their specifics and with an aim to persuade the NTB that the proper use of offshore trusts serves a legitimate role in legacy planning for Taiwanese high-net worth families. Compliance with law is important but there are needs for flexibility and confidentiality that are not tax motivated, and should be respected and protected against overbroad disclosure rules. The use of an offshore trust provides a powerful solution and addresses a need that is currently unmet for the families and should not be regarded simply as a tax avoidance tool. We believe the NTB is sympathetic to our argument, and appears to have the patience and wisdom to work with industry players that are law compliant and adding value to the Taiwan market. Though this is only the beginning of our dialogue, we are hopeful that it is a positive first step and a good development for all parties (the NTB included), and many of our offshore clients can use the legal development to their advantage to have a deeper, more sustainable and compliant relationship with their Taiwan clients.
Some specific clarifications also emerge from our dialogue with the NTB:
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