Inheritance tax to be implemented next year… Tax per person for inheritance of 3 billion won by three children increased from 270 million won to 180 million won
The deduction system is also expected to be significantly revised… abolishment of lump-sum deduction and reorganization of personal deduction
The government has officially announced plans to revise the tax law to change the current inheritance tax system from an ‘inheritance tax’ to an ‘inheritance acquisition tax.’
Inheritance tax is levied on the entire property being passed down, whereas inheritance tax is levied on the property being inherited, so if there are multiple heirs, the inheritance tax burden is expected to be reduced.
According to the Ministry of Strategy and Finance on the 16th, Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok said in a recent press conference, “Considering tax fairness, maintaining consistency in the taxation system, and international trends, we are pushing forward with changing the inheritance tax method from the current estate tax to an estate acquisition tax,” and “We will submit the estate acquisition tax bill to the National Assembly in the first half of next year at the earliest.”
The government has been steadily reviewing the transition to an inheritance tax since 2022. There was an outlook that the inheritance tax could be included in the tax law revision bill announced at the end of July, but it only included parameter adjustments to expand the child deduction amount from 50 million won to 500 million won and lower the top tax rate from 50% to 40%.
The current inheritance tax system in our country is an estate tax. The estate tax is levied based on the testator (deceased person).
The inheritance tax is levied based on the heir’s inheritance. For example, if you leave 1 billion won of assets worth 3 billion won to each of your three children, the inheritance tax is levied based on 3 billion won (excluding deductions), and the inheritance tax is levied based on 1 billion won.
Among the member countries of the Organization for Economic Cooperation and Development (OECD), four countries, including Korea, the United States, the United Kingdom, and Denmark, have adopted the inheritance tax system. 19 countries, including Japan, are applying the inheritance tax system.
Inheritance tax is applied at a progressive rate according to the taxable standard. The current inheritance tax rates are 10% for up to 100 million won, 20% for over 100 million won and up to 500 million won, 30% for over 500 million won and up to 1 billion won, 40% for over 1 billion won and up to 3 billion won, and 50% for over 3 billion won.
The simulation results show that under the current estate tax system, if a person inherits 3 billion won worth of assets and 1 billion won each to three children, the total tax will be approximately 810 million won, and the tax burden per person will be approximately 270 million won. This is the result of applying the lump-sum deduction, progressive deduction, voluntary reporting deduction, and 40% tax rate.
However, if converted to inheritance tax and estimated (basic deduction and progressive deduction applied), the total tax amount is reduced to about 540 million won, and the tax burden per person is reduced to 180 million won. As the tax rate is lowered to 30%, the total tax burden is reduced to 270 million won, and the tax burden per person is reduced to about 90 million won.
However, if the inheritance tax is introduced, the deduction system is expected to be significantly reorganized accordingly.
Vice Prime Minister Choi Sang-mok said, “The current deduction system, which deducts the deduction amount for each heir from the entire inheritance of the deceased, needs to be changed to a deduction system that deducts the deduction amount for each heir from the inheritance in line with the purpose of the inheritance tax.”
He continued, “The ‘lump-sum deduction’ currently being applied for tax convenience needs to be abolished when the inheritance tax is converted,” adding, “However, the amount of deduction for each heir, such as spouse or children, needs to be set separately by taking into account the current inheritance tax deduction amount, etc.”
He added, “In the first half of next year, we plan to proceed with a process of collecting diverse opinions from all walks of life based on the government’s detailed reorganization plan to form a national consensus.”
(Sejong=News 1)
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2024-09-18 04:27:30