Individual income tax and asset allocation are increasingly diversified as the local economic develops. In addition, the Ministry of Finance plans to change the current tax system from “jus sanguinis”, where tax is levied on income derived from sources in the Republic of China, to “jus soli”, where tax is levied on income generated by citizens of the Republic of China. Therefore, how to decrease tax expenses will be one of the most important considerations when managing asset portfolio for high net worth individuals (HNWIs).
This research elaborates the differences between the local tax system and the tax systems of other countries. Based on different customer segments, customer ages, levels of risk acceptance and types of assets holding, this research also discusses how to pursue principal-protecting and tax-saving advantages by using the concept of asset allocation and tools of tax planning.
This research classifies HNWIs into three categories, namely retirees, tech-based professionals and entrepreneurs, and then identifies investment products to meet different financial demands of each segment. According to the findings, the major asset types, which HNWIs held, are cash, real estates and stocks. Customers with higher cash position could decrease their tax obligations by lowering their cash to purchase insurance policies, real estates or foreign investments to. Meanwhile, customers with higher stock position could reduce their tax expenses via trust of marketable securities, corporation of personal assets and offshore companies. Abandonment of legal tax-saving tactics is considered as a negative driver for accumulation of asset and wealth. Tax paying is national obligation; however, tax saving is also national right. Discreet financial planning enables a steady increase in asset values within a limited risk exposure. Hence, HNWIs will be able to save tax expenses and increase return on total assets, and furthermore completely transfer their assets to the next generation.