Fri, Oct 12, 2018 - Page 3 News List

Farglory’s Chao Chen ordered to pay gift tax

By Jason Pan  /  Staff reporter

The Supreme Administrative Court yesterday ordered Chao Chen Shou (趙陳熟), wife of Farglory Group founder Chao Teng-hsiung (趙藤雄), to pay taxes of NT$55.1 million (US$1.77 million at the current exchange rate) on her “gift” of company shares to her sons.

The court rejected her appeal of an earlier conviction for not paying the gift tax on a 2007 transfer of company stock as a gift to her sons, Frank Chao (趙文嘉) and George Chao (趙信清), at an estimated value of NT$120 million.

It was the final ruling and cannot be appealed.

She at the time was on the board of directors for Farglory International Investment Co, a subsidiary of Farglory Group.

Lawyers representing the National Taxation Bureau took the case to court, saying that Chao Chen had contravened financial regulations to avoid paying taxes.

Court documents showed that Farglory International Investment in March 2007 voted to issue 5 million new shares to increase capital.

As a board member, Chao Chen was entitled to a share of the issuance, but she said that she gave up her ratio by transferring the right to purchase the shares to her sons, who completed the transaction on April 9, 2007.

At that time, Frank Chao was chairman of Farglory Land Development Co and George Chao was president of Farglory Life Insurance Co, both group subsidiaries.

An investigation by the bureau found that the transfer was a gift with financial benefit for her sons, and she therefore had to pay gift tax of NT$55.1 million.

Chao Chen said that she did not exercise her entitlement to the shares, which the company then passed on, so it should not be seen as a gift.

However, the court ruled that as Chao Chen and her husband had owned 99.9 percent of Farglory International Investment, they had the power to pass the right to purchase new shares to whomever they chose.

Court documents also showed that she had the right to buy the shares at NT$50 apiece, far below the market price of NT$215.64, therefore constituting a contravention of inside trading rules by confering substantial financial gain on her family members.

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