[Actually] If you inherit property, half of it will be taken as tax?

It is known that the inheritance tax of the Samsung Group owner family on the inheritance from the late Chairman Lee Kun-hee reaches 12 trillion won.

It has been pointed out that the inheritance tax rate in Korea is excessive.

The government recently announced that it will begin reforming the inheritance tax taxation system.

In this atmosphere, there are reports that the inheritance tax rate in Korea is up to 50% of the inherited property.

In fact, the inheritance tax rate controversy is not a topic of discussion today.

It is also true that some economic groups have cited the figure of 50% and have frequently expressed the need to reduce the inheritance tax.

I fact-checked whether I really have to pay up to 50% in tax when inheriting property.

Samsung owner family

Is the inheritance tax rate really high in Korea?

First, let's compare the size of the inheritance tax in Korea with that of other countries.

Data from the US think tank Tax Foundation were used.

This is the highest tax rate for direct inheritance.

It is also a material frequently used in various media.

South Korea is the second-highest taxpayer in passing property to sons and daughters after Japan.

The average of OECD countries is around 15%, compared to 50% in Korea.

It is nominally a 'fact' that you can pay half of your inheritance in taxes.

However, as mentioned earlier, this is the 'maximum tax rate'.

The percentage applied depends on the amount of the inheritance.

In May, the Legislative Investigation Office of the National Assembly did a good job organizing the inheritance tax rate in <The Current State and Tasks of the Inheritance Tax System in Korea>.

In other words, the inheritance tax rate is divided into 5 stages as shown in the table, and the higher the amount, the higher the tax rate is applied.

This is the so-called 'progressive tax rate'.

At the end of 1999, the highest tax rate range was lowered from over 5 billion won to over 3 billion won, and the law was amended to raise the top tax rate from 45% to 50%, and this law has been maintained until now.

How is inheritance tax determined?

However, this is a 'nominal tax rate'.

To put it simply, it is just an apparent tax rate, and the actual tax rate applied is different.

This has also been reported a lot in the media.

There are a lot of things that cut this and that.

According to the <Inheritance Tax and Gift Tax Act>, there are about 7 representative examples of deductions.

Article 18 (Basic Deduction)

Article 19 (Spouse Inheritance Deduction)

Article 20 (Other personal deductions)

Article 21 (Bulk deduction)

Article 22 (Inheritance deduction for financial property)

Article 23 (Deduction for accident loss)

Article 23 Article 2 (Inheritance deduction for living together)

Then, let's take a look at how the National Tax Service determines inheritance tax in detail.

In fact, the process of calculating inheritance tax is so complicated that it is difficult to generalize it, but I will try to express it as simply as possible.

From now on, you can deduct from this 'taxable amount' as specified in the inheritance law.

This 'tax standard' becomes the 'parameter' to which the inheritance tax rate is applied.

In other words, based on the 'tax standard' minus everything subtracted, 10%, 30%, or 50%, commonly referred to as inheritance tax, is applied.

This process determines the inheritance tax to be paid.

How much is the inheritance tax rate?

If so, how much would you usually pay?

We need actual statistics on how much inheritance tax the inheritor has paid.

I looked up the status of inheritance tax on the National Tax Statistics Portal.

There were statistics based on the amount reported for inheritance tax.

It shows how much inheritance tax is actually determined by the size of the estate.

Then the final inheritance tax rate can be calculated.

Analyzed last year.

Let me explain it a little bit easier.

Let's take the case of inheriting property between 2 billion won and 3 billion won.

There are a total of 1,735 such people.

And when we add up the amount inherited by 1,735 people, we get 3.74 trillion won, meaning that the amount of tax to be paid voluntarily is 416 billion won.

A simple calculation of this as the actual inheritance tax rate yields 11.1%.

The table above shows that way.

If you inherit less than 2 billion won, you will receive a single-digit inheritance tax rate.

If it is less than 5 billion won, the inheritance tax rate is 10%.

Of course, the more wealth you inherit, the higher your tax rate will be, since progressive rates apply.

Inheritance of more than 50 billion won was found to be taxed at a rate of over 40%.

In the end, the conclusion is:

In the process of calculating inheritance tax, there are parts that are added in the middle, and there are additional tax credits. I don't write the insignificant parts, so the calculation doesn't go down exactly. Please understand.

Anyway, based on the 'Inheritance Tax Report Status' of the National Tax Statistics Portal, the actual inheritance tax rate in Korea last year was about 18.9% on average. If you apply a discount if you meet various requirements according to the law, you can see that the inheritance tax rate does not exceed 20% 'on average' even if the progressive tax rate is applied.

However, it is also true that the proportion increases considerably when the large inheritance is taken apart. In the case of a wealthy owner of tens of billions of won or a large shareholder of a large corporation, more than 40% of the inherited property must be paid in tax.

The SBS faction team will conclude that "if you inherit property, you pay half of it in taxes" as 'half fact'.

However, the value debate remains. Based on the above statistics, one may argue that "the inheritance tax rate should be increased by reducing deductions further", while another may say that "the inheritance tax of large corporations is excessive and should be reduced." Someone can say, "The highest inheritance tax rate of 50% is just an example of a wealthy person with tens of billions of won, but it should not be used as if it applies to everyone." exists, and this can reduce the effectiveness of a market economy.”

Either way, both have a statistical basis.

The reform of the inheritance tax system will also be a matter to be resolved through discussion.

It is exhausting to create logic by extracting only the desired statistics.

It is difficult to make a simple comparison because the taxation system differs from country to country.

What do your viewers think?

You can request a fact check verification by typing SBS facts on the Internet.

If you request it, we will fact-check it to the best of our ability.

<References>

Inheritance and Gift

Tax

Act

National Tax Statistics Portal (https://tasis.nts.go.kr)

Alan Cole, <Estate and Inheritance Taxes around the World>

Tax Foundation (https://taxfoundation.org)

National Assembly Legislative

Research

Office, Lee Se-jin and Kim Jun-heon <Status and Tasks of Korea's Inheritance Tax System>, Issues and Issues No. 1841,

National Assembly Legislative Investigation Agency,

May 2021

, Lee Se-jin and Kim Jun-heon <Taxes and Implications Related to Inheritance in OECD Member States>, Foreign Legislative and Policy Analysis No. 06 , October 2021