The South Korean government plans to amend the Inheritance Tax and Gift Tax Act starting in January. The amendment will increase the deduction limit per child from 50 million won to 500 million won and expand the taxable base subject to the minimum tax rate of 10% from 100 million won to 200 million won. Additionally, the government intends to reduce the maximum inheritance tax rate from 50% to 40% and abolish the current system that values inherited shares of major corporate shareholders at 1.2 times the actual stock valuation for tax purposes.
The Ministry of Economy and Finance announced on July 25 these details as part of the 2024 Tax Reform Bill. The bill includes amendments to the Inheritance Tax and Gift Tax Act, raising the deduction limit for businesses increasing dividends from 60 billion won to 120 billion won, and changes to the Restriction of Special Taxation Act, offering a 5% corporate tax cut on dividend increases exceeding 5%. In total, the bill comprises 198 provisions and is expected to reduce tax revenue by 4.35 trillion won compared to current tax laws. This reduction is 9.2 times greater than the previous year’s tax reform, which amounted to 471.9 billion won.
However, it remains uncertain whether the bill will pass through the National Assembly. The major opposition party, the Democratic Party, considers the tax rate reductions and the removal of the major shareholder surcharge as benefiting the wealthy.
The bill does not include the repeal or relaxation of the Comprehensive Real Estate Tax, a pledge by the Yoon Suk-yeol administration, likely due to the government’s concern over the recent surge in housing prices in the metropolitan area. Jeong Jung-hoon, deputy minister of tax and customs, said in a press briefing that “a comprehensive assessment is needed in light of the current market situation.” Additionally, the government has deferred plans to tax inherited assets based on each heir’s share and type of inherited property, instead of taxing the total estate left by the deceased, pending further discussion.
