(출처: Picpedia)
By Aubrey Kim, New York Correspondent
In 2025, South Korea’s inheritance tax system is set to undergo its most significant transformation in 75 years. The government has approved a sweeping reform that replaces the current “estate tax” model with an “inheritance acquisition tax,” shifting the tax burden from the estate as a whole to the actual amount received by each heir. If the bill passes the National Assembly, the new system will take effect in 2028. This article explores the core elements, rationale, expected impacts, controversies, and future outlook of the reform.
From Estate Tax to Inheritance Acquisition Tax: A Fundamental Shift
The current estate tax structure calculates the tax based on the total value of assets left by the deceased, applying a progressive tax rate on the entire estate, regardless of how it is distributed. Heirs collectively bear the tax burden. Under the new model, each heir will pay taxes based solely on the value of their individual inheritance. For example, if a spouse receives 10 billion won and two children receive 5 billion won each from a 20 billion won estate, they will be taxed separately, and different deductions and tax brackets will apply to each.
Expanded Deductions to Benefit Middle-Class Families
The reform drastically expands personal deductions. It eliminates the existing basic (200 million won) and general (500 million won) deductions, replacing them with a new system: 1 billion won for spouses and 500 million won per child. A new minimum personal deduction of 1 billion won will apply to all. In practice, this means that under the new law, a family inheriting a 20 billion won estate — with the spouse receiving 10 billion won and each child receiving 5 billion won — could end up paying zero inheritance tax, as the entire inheritance falls within the newly expanded deductions.
Rationale Behind the Reform: Easing the Burden for Ordinary Families
The need for reform arises from soaring real estate prices and an aging population, which have significantly increased inheritance tax burdens for middle-income families. In today’s market, owning a single apartment in Seoul can push a household above the inheritance tax threshold. The government argues that taxing only what each heir receives is a fairer and more accurate reflection of their ability to pay.
Aligning with Global Tax Trends
South Korea is one of only four OECD countries — alongside the U.S., U.K., and Denmark — that still use the estate tax model. Most countries have already adopted an inheritance acquisition tax. The proposed reform aligns South Korea’s tax system with international standards and aims to enhance tax fairness.
Key Impacts: More Heirs, Less Tax
Under the new system, the more heirs there are, the less each inherits — and thus the lower their tax liability. This structure benefits families with multiple children and could encourage higher birth rates. The reform also protects middle-class homeowners from steep tax bills, particularly with the introduction of the 1 billion won minimum deduction. Additionally, estate planning and inheritance strategies will become more nuanced, as tax planning must now be customized for each heir.
Controversy: “Tax Justice” or “Tax Breaks for the Rich”?
The proposed reform has sparked fierce debate. Supporters argue it upholds the principle of ability-to-pay taxation and improves fairness. Critics claim it amounts to a tax break for the wealthy. Concerns have been raised that high-net-worth individuals will benefit disproportionately, especially if the proposed reduction in the top inheritance tax rate — from 50% to 40% — is passed. Some estimates suggest this could reduce tax liabilities for ultra-wealthy heirs by 20-fold.
Legislative Uncertainty: A Political Flashpoint
Although the cabinet has approved the reform, its fate in the National Assembly remains uncertain. The opposition Democratic Party holds a majority and has voiced strong resistance, calling the measure a “tax cut for the rich.” There is also speculation that a future change in administration could reverse the reform. Many observers doubt the bill will be fully debated before the next presidential election.
Preparing for Change: Strategy and System Overhaul
The government aims to pass the bill within 2025 and prepare the necessary administrative systems for full implementation by 2028. In the meantime, tax experts advise families to revise their estate planning, including lifetime gifts, wills, and inheritance allocations, to align with the new tax rules. The anticipated 2 trillion won annual drop in tax revenue also calls for supplemental fiscal measures and consistency across related policies, such as family business succession and major shareholder tax premiums.
“Tax What You Receive” Requires Broad Social Consensus
This inheritance tax overhaul goes beyond technical tax reform. It touches on fundamental questions of wealth distribution, intergenerational equity, and the nation’s values on taxation. While the principle of “paying tax based on what you receive” garners strong support, it also requires careful implementation, public consensus, and political will. As South Korea faces rising inequality and demographic shifts, this reform may serve as a critical test of the country’s ability to navigate complex fiscal challenges while maintaining social cohesion.
Copyright © The Value Chain Times. All rights reserved. Unauthorized reproduction, redistribution, and use for AI training are strictly prohibited.
[The Value Chain Times = Aubrey Kim, New York Correspondent]
(출처: Picpedia)
By Aubrey Kim, New York Correspondent
In 2025, South Korea’s inheritance tax system is set to undergo its most significant transformation in 75 years. The government has approved a sweeping reform that replaces the current “estate tax” model with an “inheritance acquisition tax,” shifting the tax burden from the estate as a whole to the actual amount received by each heir. If the bill passes the National Assembly, the new system will take effect in 2028. This article explores the core elements, rationale, expected impacts, controversies, and future outlook of the reform.
From Estate Tax to Inheritance Acquisition Tax: A Fundamental Shift
The current estate tax structure calculates the tax based on the total value of assets left by the deceased, applying a progressive tax rate on the entire estate, regardless of how it is distributed. Heirs collectively bear the tax burden. Under the new model, each heir will pay taxes based solely on the value of their individual inheritance. For example, if a spouse receives 10 billion won and two children receive 5 billion won each from a 20 billion won estate, they will be taxed separately, and different deductions and tax brackets will apply to each.
Expanded Deductions to Benefit Middle-Class Families
The reform drastically expands personal deductions. It eliminates the existing basic (200 million won) and general (500 million won) deductions, replacing them with a new system: 1 billion won for spouses and 500 million won per child. A new minimum personal deduction of 1 billion won will apply to all. In practice, this means that under the new law, a family inheriting a 20 billion won estate — with the spouse receiving 10 billion won and each child receiving 5 billion won — could end up paying zero inheritance tax, as the entire inheritance falls within the newly expanded deductions.
Rationale Behind the Reform: Easing the Burden for Ordinary Families
The need for reform arises from soaring real estate prices and an aging population, which have significantly increased inheritance tax burdens for middle-income families. In today’s market, owning a single apartment in Seoul can push a household above the inheritance tax threshold. The government argues that taxing only what each heir receives is a fairer and more accurate reflection of their ability to pay.
Aligning with Global Tax Trends
South Korea is one of only four OECD countries — alongside the U.S., U.K., and Denmark — that still use the estate tax model. Most countries have already adopted an inheritance acquisition tax. The proposed reform aligns South Korea’s tax system with international standards and aims to enhance tax fairness.
Key Impacts: More Heirs, Less Tax
Under the new system, the more heirs there are, the less each inherits — and thus the lower their tax liability. This structure benefits families with multiple children and could encourage higher birth rates. The reform also protects middle-class homeowners from steep tax bills, particularly with the introduction of the 1 billion won minimum deduction. Additionally, estate planning and inheritance strategies will become more nuanced, as tax planning must now be customized for each heir.
Controversy: “Tax Justice” or “Tax Breaks for the Rich”?
The proposed reform has sparked fierce debate. Supporters argue it upholds the principle of ability-to-pay taxation and improves fairness. Critics claim it amounts to a tax break for the wealthy. Concerns have been raised that high-net-worth individuals will benefit disproportionately, especially if the proposed reduction in the top inheritance tax rate — from 50% to 40% — is passed. Some estimates suggest this could reduce tax liabilities for ultra-wealthy heirs by 20-fold.
Legislative Uncertainty: A Political Flashpoint
Although the cabinet has approved the reform, its fate in the National Assembly remains uncertain. The opposition Democratic Party holds a majority and has voiced strong resistance, calling the measure a “tax cut for the rich.” There is also speculation that a future change in administration could reverse the reform. Many observers doubt the bill will be fully debated before the next presidential election.
Preparing for Change: Strategy and System Overhaul
The government aims to pass the bill within 2025 and prepare the necessary administrative systems for full implementation by 2028. In the meantime, tax experts advise families to revise their estate planning, including lifetime gifts, wills, and inheritance allocations, to align with the new tax rules. The anticipated 2 trillion won annual drop in tax revenue also calls for supplemental fiscal measures and consistency across related policies, such as family business succession and major shareholder tax premiums.
“Tax What You Receive” Requires Broad Social Consensus
This inheritance tax overhaul goes beyond technical tax reform. It touches on fundamental questions of wealth distribution, intergenerational equity, and the nation’s values on taxation. While the principle of “paying tax based on what you receive” garners strong support, it also requires careful implementation, public consensus, and political will. As South Korea faces rising inequality and demographic shifts, this reform may serve as a critical test of the country’s ability to navigate complex fiscal challenges while maintaining social cohesion.
Copyright © The Value Chain Times. All rights reserved. Unauthorized reproduction, redistribution, and use for AI training are strictly prohibited.
[The Value Chain Times = Aubrey Kim, New York Correspondent]