March 13, 2025
SEOUL – South Korea is planning to overhaul its inheritance tax system in 2028, shifting from a tax on entire estates to a levy on each inheritor’s individual share.
The Ministry of Economy and Finance announced the plan on Wednesday, aiming to introduce the long-discussed “inheritance acquisition system.” This marks the first major revision to Korea’s inheritance tax system in 75 years.
Under the current system, taxes are levied on the total estate of the deceased before distribution. This model, often referred to as “estate tax,” is used by only four countries in the Organisation for Economic Cooperation and Development — Korea, the US, the UK and Denmark. The other 20 OECD countries impose taxes on the individual inheritances received by each beneficiary.
Under the new system, Korea will tax individual inheritances rather than the total estate.
Taxable property will be determined based on both the decedent’s estate and the beneficiary’s share. If either party is a Korean resident — defined as living in the country for at least 183 days in the past year — all inherited assets, domestic and overseas, will be taxed. If neither is a resident, only domestic assets will be subject to taxation.
Foreign nationals classified as “short-term residents” — those who have lived in Korea for five years or less in the past decade — will be taxed only on Korean assets.
The reform aims to improve fairness by addressing excessive levies under the progressive taxation system, which can occur when the entire estate is taxed before distribution.
This can be illustrated by comparing a household in which one child inherits an entire estate worth 1 billion won ($688.7 million) to another family in which five children share 5 billion won, each beneficiary receiving 1 billion won. Under the current system, the latter household faces about four times more in inheritance tax, creating an uneven tax burden.
This disparity stems from the progressive system, where tax rates increase as the taxable amount rises. In this system, inheritance rates start at 10 percent for estates below 100 million won and rise to 50 percent for those exceeding 3 billion won.
The government had previously proposed lowering the top rate to 40 percent and raising the minimum taxable threshold to 200 million won, but the amendment bill was rejected by the National Assembly in December.
To realign taxation to the individual beneficiary, the government will restructure personal deductions.
The reform will scrap the 500 million won blanket deduction for children, which had been applied when the total value of deductions, combining the basic 200 million won and other personal deductions, exceeded 500 million won. Instead, the basic deduction per child will rise to 500 million won from the current 50 million won.
For spouses, inheritances of up to 1 billion won will be fully exempt regardless of the legal inheritance share, up from the current minimum deduction of 500 million won. For inheritances exceeding 1 billion won, exemptions will be based on the legal inheritance share, with a maximum cap of 3 billion won.
The government is also introducing a 1 billion won minimum total deduction for overall personal deductions. If total deductions of all inheritors fall below this threshold, the shortfall will be allocated to the inheritance of children.
In cases where both the decedent and the beneficiary are non-Koreans, spouses will receive a 200 million won basic deduction, while other beneficiaries will get 100 million won.
The government plans to submit the related bill to the National Assembly in May, with the aim of implementing the new inheritance system in 2028.
The reform is expected to reduce annual inheritance tax revenue by about 2 trillion won, roughly a quarter of the 8.5 trillion won collected in 2023. The share of decedents whose estates are subject to the tax, which was 6.8 percent last year, is projected to more than halve.
The Finance Ministry also emphasized its commitment to further reforms.
“The government still considers last year’s inheritance tax reform measures — including lowering the top rate, eliminating surcharges, expanding business inheritance benefits and supporting value enhancement — as essential,” said Jeong Jeong-hoon, head of the ministry’s tax policy division. “We plan to move forward with these changes through a separate public consultation process.”