The Korean government is set to reform its inheritance tax system to alleviate the tax burden on heirs, thus aligning with the global trend.
Korea is one of only four countries (US, UK, Denmark, Korea) among the 38 OECD member nations that has an estate-based tax policy imposing taxes on the total wealth of the deceased, while others have a recipient-based tax policy where the taxes are levied on the amount inherited by each beneficiary.
Furthermore, the current Korea’s inheritance tax rate is 50 percent (can go up to 60 percent for those inheriting shares in large corporations) which is the second highest among the OECD member nations after Japan’s 55 percent.
The reform aims to rectify disparities in the current system where recipients often face disproportionately high tax liabilities relative to the assets they inherit. It is expected to reduce tax burdens by up to 60 percent, especially for families with multiple children, through increased deductions for spouses and children.
The spouse will be given a generous 100 percent tax deduction, if the inherited assets are valued at 1 billion won (approx. 700,000 USD) or less, compared to the current 500 million won (approx. 350,000 USD) regardless of the total amount of inherited wealth.
For children, the deductible amount will increase 10-fold, from 50 million won (approx. 35,000 USD) to 500 million won (approx. 350,000 USD).
Under the revised policy, the surviving family of a spouse and two children will pay no inheritance tax, if the value of wealth transferred from the deceased is between 1 billion won (approx. 700,000 USD) and 2 billion won (approx. 1,400,000 USD).
The government plans for the reform to be implemented by 2028, however it remains to be seen whether it will really happen as against the reform is the opposition party which has raised concerns regarding the potential reduction in tax revenue.
Want to learn more about the inheritance tax reform in Korea or about inheritance tax in your country? With over 20 years of international experience, we will navigate you through the tax maze and provide you with the tailored services to cater exactly for your needs. Contact us via phone +44 203 974 1244 or via email at office@bensonformations.com. We look forward to hear from you.
