Few taxes attract as much misinformation as Korea's inheritance tax. You've probably heard that “the child deduction rose to ₩500M” or “the top rate fell to 40%.”
Let's correct that first. Those are proposals that have not passed the National Assembly. The 2024 reform bill (₩500M child deduction, 40% top rate) was rejected that December and hasn't been enacted since. Filing today follows the existing law.
1. Do you owe anything. Most estates don't. A household with a surviving spouse often reaches about ₩1 billion tax-free — a ₩500M lump-sum deduction plus a minimum ₩500M spousal deduction. Without a spouse, ₩500M is the line.
2. What people get wrong. “20% of financial assets” is only half the rule — the statute sets four bands: the full amount up to ₩20M, then the greater of 20% or ₩20M, capped at ₩200M.
3. What to do. The “₩500M child deduction” and “40% top rate” you saw in the news are proposals that have not passed — filing today follows the existing law. If a story differs from this page, it is probably reporting a bill.
What follows covers the rules actually in force.
1. Most families pay nothing
| Lump-sum deduction | ₩500M |
| Spousal deduction (minimum) | ₩500M |
| Combined | Roughly ₩1B tax-free |
Without a surviving spouse, ₩500M is the threshold. Financial-asset and co-residence deductions can raise it further.
2. Korea taxes the estate, not the heir
- Inheritance tax — computed on the entire estate first, then divided (estate tax model)
- Gift tax — computed per recipient
So having more heirs doesn't reduce the bill. The government's proposed shift to an heir-based model addresses this, but it remains pending.
3. Rate table
| Tax base | Rate · progressive deduction |
| Up to ₩100M | 10% · 0 |
| ₩100M – ₩500M | 20% · ₩10M |
| ₩500M – ₩1B | 30% · ₩60M |
| ₩1B – ₩3B | 40% · ₩160M |
| Over ₩3B | 50% · ₩460M |
4. The deductions that decide everything
| Lump-sum deduction | ₩500M — chosen when it exceeds basic plus personal deductions |
| Basic + personal | ₩200M basic + ₩50M per child |
| Spousal deduction | Based on what the spouse actually inherits, ₩500M minimum to ₩3B maximum |
| Financial asset deduction | 20% of net financial assets, up to ₩200M |
| Co-residence home deduction | Up to ₩600M (10+ years of shared residence) |
The child deduction is ₩50M, not ₩500M. The larger figure comes from the unpassed bill. Unless there are many children, the ₩500M lump-sum deduction is usually better — you take whichever is larger.
The spousal deduction is the most powerful lever, but loading assets onto a spouse creates a second inheritance later. Plan both events together.
5. Filing and payment
| Deadline | 6 months from month-end of death |
| Overseas residents | 9 months |
| Filing credit | 3% of computed tax for timely filing |
| Installments | Above ₩10M, split within two months |
| Annual installments | Above ₩20M, spread up to 10 years |
| Payment in kind | Property or securities, where conditions are met |
File even if no tax is due — the valuation becomes your acquisition cost when the property is later sold.
The financial-asset deduction is four bands, not “20%”
It is usually summarised as “20% of financial assets are deducted,” but art. 22 of the Inheritance and Gift Tax Act splits it into four bands. “20%” is right only part of the time.
Art. 22(1) — “where the value of net financial assets exceeds 20 million won: 20 per cent of that value, or 20 million won, whichever is greater”; “where it is 20 million won or less: the value itself”; and “where the amount exceeds 200 million won, 200 million won shall be deducted.”
| Net financial assets | Deduction | Why |
|---|---|---|
| ₩20M or less | the full amount | art. 22(1)2 |
| ₩20M to ₩100M | flat ₩20M | 20% is smaller than ₩20M here |
| ₩100M to ₩1B | 20% | where 20% finally wins |
| Above ₩1B | capped at ₩200M | art. 22(1), main text |
The boundaries are our arithmetic. For 20% to beat ₩20M you need more than ₩20M ÷ 0.2 = ₩100M; to reach the ₩200M cap you need ₩200M ÷ 0.2 = ₩1B. “A 20% deduction” is accurate only between ₩100M and ₩1B.
It is net financial assets — the provision reads “the value of financial assets prescribed by Presidential Decree less the financial debts prescribed by Presidential Decree.” ₩300M in deposits against a ₩200M loan is ₩100M net. And shares held by a largest shareholder and assets in another person's name not reported by the filing deadline are excluded (art. 22(2)).
Line the bands up one per row and it is clear where the 20% shorthand holds and where it fails.
The 3% filing credit is not 3% of the whole computed tax
Art. 69(1), verbatim: “an amount equivalent to 3 per cent of the computed inheritance tax less the following amounts shall be deducted.” The amounts to subtract first are (1) any tax whose collection has been deferred, and (2) amounts deducted or reduced from the computed tax under this or another Act.
So other credits and reliefs come off first, and 3% applies to what is left. Gift tax works the same way (art. 69(2)).
Ten-year installments — a small bill cannot be spread over ten years
Art. 71 confirms our “above ₩20M, up to 10 years.” But it carries a condition that was absent from the earlier version.
Art. 71(2), proviso — “provided that the annual installment period shall be set so that each installment exceeds 10 million won.”
You cannot simply stretch the term. Each instalment has to clear ₩10M, so the smaller the bill, the fewer instalments are available. A ₩30M liability, for instance, can only be split two or three ways (our arithmetic). “Above ₩20M means ten years” is not how it works.
| Case | Period | Provision |
|---|---|---|
| Ordinary inherited property | 10 years from approval | (2)1(b) |
| Family-business succession relief etc. | 20 years, or 10 years starting 10 years after approval | (2)1(a) |
| Ordinary gifted property | 5 years | (2)2(b) |
| Start-up funds under special taxation | 15 years | (2)2(a) |
Security is required — art. 71(1): “the taxpayer shall provide security.” Though where the security falls under National Tax Collection Act art. 18(1)1–4, “approval shall be deemed granted on the date of application.”
Here is what the schedule's progressive credit actually does, on one axis.
6. Traps
- Gifts within 10 years are added back to the estate (5 years for non-heirs). Early gifting isn't a clean escape.
- Large withdrawals before death can be presumed part of the estate if unexplained.
- Insurance proceeds and severance may count as estate assets.
- Debts and funeral costs are deductible — keep evidence.
- Renunciation or limited acceptance must be decided within three months of learning of the death — critical when debts exceed assets.
Property valuation is decisive. How real estate is valued changes the tax substantially — and that valuation becomes the acquisition cost for future capital gains tax.
7. Preparing ahead
- Start with an inventory — property, financial assets, insurance and debts, totalled up
- Compare it against the 1 billion won line (where there is a surviving spouse)
- If it is over, plan lifetime gifts — the ten-year cycle is the lever (gift tax allowances)
- Check whether the co-residence and financial-asset deductions can be met in advance
- Secure the cash to pay with — an estate that is all property leaves nothing to settle the bill
- At scale, take advice — the difference runs to hundreds of millions of won
The first things families ask
When do the ₩500M child deduction and 40% rate take effect?
They aren't confirmed. The bill remains pending with no set timeline. When news says “reform,” check whether it passed.
Do more heirs mean less tax?
Not under the current estate-tax model.
My parents own only one home — is tax due?
With a surviving spouse, roughly ₩1B is untaxed, and co-residence deductions can raise that. But valuation, not published price, is the basis.
Is gifting better than inheriting?
Sometimes — but gifts within 10 years are added back, so timing matters. If an inheritance leaves you a property you may later sell, capital gains tax is the next thing to read.
Business succession relief is being rebuilt — the 2026 bill
The largest single change in the 3 August 2026 bill is to business succession relief. This article covers ordinary inheritance, but if a business is being passed down, the direction matters enough to set out here.
The stated purpose: “redesign the regime as a whole so that it matches the intent of supporting genuine family-business succession,” plus a new relief for third-party succession.
| Item | Current | Under the bill |
|---|---|---|
| Years the deceased ran the business | 10+ | 30+ |
| Post-succession monitoring | 5 years | 10 years |
| Deduction cap | ₩30bn / ₩40bn / ₩60bn at 10 / 20 / 30 years | years managed × ₩2bn (max ₩100bn) |
| Eligible industries | Set by decree | Trimmed to 727, raised into statute |
| Approval | (none) | Review and approval by a public-private committee |
The 30 years is the big one. Today the deceased need only have run the business for 10 years; the bill asks for 30. There is a bridge, though — at 20 to 30 years, the shortfall (30 minus the years actually managed) is added to the heir's monitoring period instead of disqualifying the claim.
“Family business” gets a definition for the first time — an enterprise holding specialist technology or managerial know-how, with that know-how defined as patents, industrial technology, skilled techniques and trade secrets or the like. Franchises, and businesses whose main income is rental, are excluded.
The release names industries dropping out: supermarkets, bus and taxi operations, car parks, warehousing, hospitals and pharmacies. Conversely, businesses designated as “century small businesses” or “prestigious long-lived enterprises” are treated as meeting the industry test automatically.
How the deduction is computed also changes
Today, if the main business qualifies, all business assets are covered even where a secondary business does not qualify. The bill apportions by revenue and covers only the qualifying share. Land narrows too — from 3–7 times the building footprint to 2–3 times — with a new per-area cap of ₩10 million per square metre.
Support arrives for succession outside the family
A new relief covers selling the business to a third party. The seller gets a 20% capital gains tax reduction (capped at years managed × ₩50 million a year), where the business is in an eligible industry, an SME or mid-sized firm with revenue under ₩500 billion, managed for 20+ years, with a largest shareholder aged 60 or over.
Again: this is a government bill. It goes to the National Assembly before 3 September and takes effect only if passed. The “current” column above is what applies today. The full picture is in our guide to the 2026 tax reform bill.
Sources and where to check
- National Tax Service — Inheritance deductions (checked August 2026). The deduction figures, previously taken from a professional-body publication, now come from the agency itself. Source for “the greater of the basic deduction of 200 million won plus other personal deductions, and 500 million won (the lump-sum deduction),” the spouse deduction’s “500 million won where the amount actually inherited is nil or under 500 million,” with a cap set at the lesser of two amounts (the second being 3 billion won), the 600 million won cap on the co-resident home deduction, and the financial-asset deduction bands (full amount up to 20 million; 20 million for 20 million–100 million; 20% for 100 million–1 billion; 200 million above 1 billion). It is also the source for the rule that claiming the spouse deduction on the amount actually inherited requires division by the date six months after the inheritance tax filing deadline.
- Same publication — the 2024 reform bill was voted down (December 2024). It failed in the National Assembly on 10 December 2024, and it contained the 40% top rate and the child deduction rising from 50M to 500M won.
- Supreme Court of Korea — the qualified-acceptance window. The three months under Civil Act Article 1019(1) run from the day you learn the succession began, not from the date of death.
- Korean Law Information Center — statute — Inheritance and Gift Tax Act art. 22 (financial-asset deduction), art. 69 (filing credit) and art. 71 (annual installments). Source for the definition of net financial assets, the “20% or ₩20M, whichever is greater” rule with its ₩200M cap and exclusions, the base on which the 3% credit is computed, and the ₩20M threshold, security requirement, four periods and “each installment above ₩10M” condition. Three long-unconfirmed items are now closed, and “a 20% deduction” turns out to hold only within one band.
Written as of July 2026. Current deduction amounts, the December 2024 defeat and the three-month starting point come from the sources above. The financial-asset deduction, the 3% filing credit and the ten-year installment option were checked directly against Inheritance and Gift Tax Act arts. 22, 69 and 71 this time — which surfaced both that “20%” holds only between ₩100M and ₩1B and that each instalment must exceed ₩10M. By contrast, the progressive-deduction column of the rate table remains unconfirmed — the rate table is published as an image even on the law portal. Outcomes vary widely with asset composition and family structure. Consult a tax professional when an inheritance arises. See also the tax calendar and amended returns. To work the deductions through to the tax due in the order the statute sets, there is the inheritance tax calculator.
