Understanding Inheritance Tax in Korea: Assets, Gifts, and Deemed Inheritance In Korea
In Korea, the inheritance tax system is designed to levy taxes on the transfer of assets upon the death of an individual. This tax applies to:
1. Original Inheritance Assets: At the time of death, the deceased's assets, including economic valuables and legal or factual rights with monetary value, are subject to inheritance tax. This encompasses both money and property.
2. Gifted Assets: To prevent tax evasion through early gifting, the Inheritance Tax Act includes assets gifted by the deceased to inheritors within 10 years of death, and to non-inheritors within 5 years of death, in the taxable estate.
3. Deemed Inheritance Assets: In certain cases, assets are considered part of the inheritance for tax purposes:
Transactions or withdrawals by the deceased exceeding KRW 200 million within a year before death and KRW 500 million within two years, where the purpose is not clear.
Debts incurred by the deceased exceeding KRW 200 million within a year and KRW 500 million within two years before death, without a clear purpose.
Life or damage insurance payments received due to the deceased’s death.
Trust property and benefits received from a trust established by the deceased.
Severance pay received due to the deceased’s death.
These rules reflect Korea's comprehensive approach to inheritance tax, ensuring that both direct and indirect transfers of wealth are taxed fairly.