Korea seeks inheritance tax reform aimed at wealth redistribution

Vice Prime Minister Choi Sang-mok holds a monthly briefing at the Sejong Government Complex on the 9th. [Photo by Yonhap]

The South Korean government is pushing forward with amendments to the inheritance tax law to introduce a recipient-based inheritance tax in the first half of 2025.

Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok said at a press briefing on Monday that the government plans to submit the bill on the recipient-based inheritance tax to the National Assembly as early as the first half of 2025. The proposed system would tax each beneficiary‘s share of an estate, as opposed to the current model where the entire estate is taxed before being divided among the heirs.

The government initially excluded the change to a recipient-based inheritance tax from its short-term agenda for 2024. But the timetable was accelerated as criticism of the excessive burden of the current inheritance tax gets louder., with both the presidential office and the ruling party recently stressing the need for the new tax system.

Choi emphasized the need to establish tax calculation methods and deductions tailored to Korea’s circumstances, suggesting the elimination of blanket deductions and the introduction of separate deductions for spouses and children. “Blanket deductions are currently applied for administrative convenience based on the deceased, but no country applies such deductions under the inheritance tax system,” Choi said.

The government plans to develop detailed reform measures this year, based on research and expert opinions, and seek feedback from various sectors in 2025. The aim is to submit the bill to the National Assembly in the first half of the year.

The National Tax Service (NTS) supports recipient-based inheritance tax, highlighting its potential positive effects, including promoting wealth redistribution. According to an NTS assessment obtained by Representative Park Soo-young of the People‘s Power Party, the recipient-based tax reduces the burden as the number of heirs increases, thus promoting wealth redistribution and better responding to low birth rates. Under a progressive tax rate, a more equal division of an estate among heirs will result in a lower tax burden, which encourages the division of estates, according to the NTS. This is the first official endorsement of the proposed tax system by the tax authority.