On Wednesday, South Korea's Ministry of Finance announced plans for a comprehensive reform of inheritance tax regulations, aiming to make the tax system more equitable and encourage the transfer of wealth to younger generations. This reform represents the first step to address long-standing issues with inheritance tax burdens. Although this revision does not seek to lower the existing inheritance tax rate (one of the highest globally), the core objective of the reform is to shift from the current estate tax system to an inheritance tax system based on the beneficiaries.
Under the new proposal, taxes will be levied based on the amount of wealth each beneficiary inherits rather than on the donor's total wealth, helping to spread the responsibility among beneficiaries and providing each beneficiary with individual tax deductions. This reform is expected to make the entire inheritance process fairer and prevent wealth concentration in the hands of a few.
South Korea is one of four members of the Organisation for Economic Co-operation and Development (OECD) that impose an inheritance tax, with the other three being the United States, the United Kingdom, and Denmark. Unlike these countries, most OECD member states use an inheritance tax system. In a 2021 report, the OECD suggested that an inheritance tax system based on beneficiaries might be fairer than an estate tax, as it encourages wealth distribution and reduces wealth concentration.
