Seoul: The government on Wednesday revealed plans to revise the tax laws to transition from the long-standing estate tax system to an inheritance tax, aiming to alleviate tax burdens on beneficiaries, the finance ministry announced.
According to Yonhap News Agency, the Ministry of Economy and Finance intends to amend the inheritance tax and gift tax act, alongside the framework act on national taxes, to establish an inheritance tax system by 2028. Currently, South Korea enforces an estate tax on the net value of a deceased person's entire estate, unlike many advanced economies that impose an inheritance tax, taxing beneficiaries based on the assets they inherit.
Presently, the estate tax system employs a five-tier structure with a top rate of 50 percent for inherited assets exceeding 3 billion won (US$2.1 million), increasing to 60 percent for inheriting shares in large corporations. As an illustration, if a spouse and two children inherit assets valued at 3 billion won, each receiving 1 billion won, the current system levies a total tax of 440 million won.
The proposed system is designed to significantly lower the tax burden. Under this new scheme, each child would be liable for 90 million won in taxes, while the spouse would be exempt, as tax bases and deduction rates would be applied individually based on the inherited assets.
The Ministry has determined that the minimum personal deduction will be set at 1 billion won. Should the total personal deductions fall short of this threshold, the shortfall will be applied as an additional deduction for direct descendants and ascendants who are heirs.
The ministry intends to submit the revision bills to the National Assembly in May, following a mandatory 40-day advance notice period.