7 hours Ago By Korea Bizwire
South Korean lawmakers from both ruling and opposition parties have agreed to eliminate inheritance taxes between spouses. (Image courtesy of Yonhap) SEJONG, March 12 (Korea Bizwire) — While South Korean lawmakers from both ruling and opposition parties have agreed to eliminate inheritance taxes between spouses, a new analysis reveals that the tax benefits would primarily affect those with assets exceeding 7 billion won. According to an analysis by real estate tax calculation service Sellymmon, commissioned by Yonhap News Agency, for a person with assets worth 2 billion won who dies leaving a spouse and two children, the total inheritance tax would remain unchanged at 190 million won, even under the proposed law change.
Under current inheritance tax law, estates receive a basic deduction of 200 million won and personal deductions of 50 million won per child. If these combined deductions total less than 500 million won, a flat 500 million won deduction is applied instead. Additionally, surviving spouses receive a special deduction ranging from 500 million to 3 billion won, depending on their inherited portion.
Following the legal inheritance ratio (where spouses receive 1.5 times the share of each child), for a 2 billion won estate, the current system results in a 130 million won tax upon the first death, followed by an additional 60 million won when the surviving spouse passes and transfers the remaining assets to the children. The analysis found that meaningful tax savings would only begin to appear for estates valued above 7 billion won.
For estates up to 7 billion won, there would be no change in the tax burden since the spouse’s inherited portion would still fall within the current 3 billion won deduction limit. For an estate worth 7.5 billion won, the total tax burden would decrease by 110 million won under the proposed changes, from 2.
47 billion won to 2.36 billion won. The benefits grow substantially with larger estates: a 10 billion won estate would see a reduction from 4.
22 billion won to 3.58 billion won, while a 15 billion won estate would benefit from a reduction from 7.79 billion won to 6.
08 billion won. The proposed elimination of spousal inheritance tax is being considered because lawmakers view taxation between spouses as double taxation, arguing that wealth transfers between spouses represent a horizontal transfer within the same generation rather than the vertical transfer of wealth between generations that inheritance taxes are designed to address. Families with smaller estates could potentially see modest benefits by adjusting inheritance ratios to maximize spousal deductions.
For instance, leaving 50% to a spouse and dividing the remainder between children could result in small tax savings of around 10 million won for a 2 billion won estate, though the effect would still be minimal compared to the benefits for larger estates. The findings suggest that while the proposed tax change is presented as a broad reform of inheritance tax law, its primary beneficiaries would be the country’s wealthiest families, with limited impact on middle-class households. M.
H. Lee ([email protected]).
