Death tax set for overhaul, shifting focus to individual inheritances

A bank employee sorts 50,000 won ($34) bills at Hana Bank headquarters in Jung District, central Seoul on May 8, 2023. [YONHAP]

 
Korea will overhaul its death tax system, shifting from taxing the total estate left by the deceased to taxing the amount each beneficiary receives.
 
The revision proposal, announced by the Ministry of Economy and Finance on Wednesday, marks the first such reform since the law’s enactment in 1950.
 
 
However, the government’s latest announcement did not include other proposed changes, such as lowering the maximum tax rates, which were put forward in July last year.  
 
The transition from the current estate tax system to an inheritance tax system, combined with an increased cap on the maximum deductible amount announced last year, is expected to reduce death tax revenue by more than 2 trillion won ($1.4 billion), according to the ministry’s estimate.
 
Under the estate tax system, with a basic deduction cap of 500 million won, three heirs inheriting 500 million won each would be taxed based on the combined estate of 1.5 billion won, resulting in each heir paying 80 million won in taxes.
 
The new inheritance tax system will tax each recipient individually based on their respective inheritance. As long as each heir’s inheritance falls below the maximum deductible amount of 500 million won, no tax will be due.  

BY SHIN HA-NEE [[email protected]]