South Korea proposes inheritance tax reform

South Korea is proposing significant changes to its inheritance tax system for the first time since 2000. The government aims to boost the domestic stock market and address the country’s record-low birth rate. The finance ministry plans to remove the highest tax rate of 50%, which is currently applied to inheritances of over 3 billion won ($2.17 million). Instead, a 40% rate will be levied on inheritances exceeding 1 billion won. Finance Minister Choi Sang-mok said, “There have been many requests pointing out inheritance taxes as a significant obstacle to corporate succession. The government also intends to raise the top of the lowest tax bracket from 100 million won to 200 million won. Taxes in this bracket are 10%.

Inheritance tax system changes

South Korea’s current top tax rate is among the world’s highest, above 45% in France and 40% in the U.S. and UK, but lower than Japan’s 55%. The proposal includes tax exemptions on corporate income to encourage firms to increase capital returns and lower taxes on dividend income. The government will also raise tax benefits for investment income earned through savings accounts to attract more retail investors and relax reporting rules to facilitate foreign investment in Korean bonds. To address the nation’s low fertility rate, couples married between 2024 and 2026 will receive a one-time tax cut of 500,000 won per person. The government will also boost household tax cuts to help with childcare costs and exempt taxes on childbirth bonuses paid by employers. The finance ministry will submit the proposal to the national assembly, currently controlled by the opposition, by September 2.