Korean Government Is Pushing for a Comprehensive Inheritance Reforms - Will They Pass or Fail?

• In the past several days, the South Korean Presidential Office has announced that it is pushing for a comprehensive inheritance tax reforms.

• Although the Presidential Office mentioned it is pushing to reduce highest inheritance tax rates from 60% to 30%, the more likely scenario is to reduce this rate to about 50%.

• The lump sum personal deduction of 500 million won or inheritance tax which has been maintained for nearly 27 years could be doubled to about 1 billion won or more.

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Korean Government Is Pushing for a Comprehensive Inheritance Reforms

In the past several days, the South Korean Presidential Office has announced that it is pushing for a comprehensive inheritance tax reforms. For many years, South Korea had had one of the highest rates for inheritance taxes among OECD countries. The highest inheritance tax rate in Korea is nearly 60% which is very high. The Presidential Office wants to promote a comprehensive tax reform policies (including inheritance tax amounts, rates, and deductions).

In the revised tax law revision bill, which is expected to be announced next month, the maximum inheritance tax rate is expected to be around 30%, which is closer to the average rate of 26.1% among OECD countries and much lower than the 60% level for the highest inheritance tax rate bracket in Korea right now. The inheritance tax lump sum deduction standard which is currently 500 million won is also expected to be raised.

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Conclusion First

We believe that there could be some changes to the inheritance taxes in Korea in the next 6-12 months. One of them could be lowering the highest tax rate for inheritance taxes from current 60% to about 50%.Although the Presidential Office is pushing to reduce this rate further to about 30%, this is unlikely to be successful due to strong opposition from many members in the National Assembly. However, a compromise to about 50% (highest inheritance tax rate) could be feasible.