OVERVIEW
Overview
Inheritance tax must be filed within six months of the end of the month in which the inheritance began. That may appear generous, but it is by no means a long period in which to identify and value an entire estate. Property given by the deceased to an heir within ten years before death is aggregated with the estate, and deposits withdrawn or debts incurred shortly before death are presumed to have been inherited unless their use can be shown.
VALUE Tax & Accounting first establishes the scope of the estate through financial transaction searches and records of property and shareholdings, and then reviews the history of prior gifts and whether any presumed estate arises. Because the spousal deduction varies considerably with the amount actually allocated and the statutory ceiling, we calculate the tax at the stage the division is being agreed. Deductions that carry continuing obligations, such as the family business or farming inheritance deductions, are adopted only after the future burden has been explained.
KEY ISSUES
Key tax issues in inheritance tax
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01
Establishing the scope of the estate
Property, deposits, insurance proceeds, retirement benefits and unlisted shares must all be identified. The one-stop inheritance service and financial transaction searches are used first to filter out omissions.
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02
Aggregation of prior gifts
Property given to an heir within ten years before death, and to a person other than an heir within five years, is aggregated with the estate. Gift tax already paid is credited, but the aggregation can move the estate into a higher rate band.
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03
Presumed estate
Where deposits were withdrawn or property disposed of during a specified period before death and the use of the proceeds is unclear, the amount is presumed to have been inherited. Evidence of expenditure such as medical and nursing costs should be collected.
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04
The spousal deduction and the division agreement
The deduction is applied by reference to the amount the spouse actually inherits, subject to a statutory ceiling. The division must be agreed and registered within the filing deadline for the deduction to be available.
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05
The family business deduction and continuing obligations
Meeting the requirements allows a substantial deduction, but obligations to maintain the business and employment then apply for a set period. A breach means the tax deducted is recovered.
HOW WE HELP
How VALUE Tax & Accounting responds
Searching for assets and fixing the scope
We gather financial transaction searches, registry and local tax records and corporate shareholding records to build the estate schedule, and set out debts, public charges and funeral expenses.
Structuring deductions and supporting the division
We calculate the tax under each method of division, including the spousal and co-residence deductions, and provide a comparison so the heirs can decide.
Filing, payment and subsequent management
We file within the deadline, review whether payment in annual instalments or in kind is required, and set out the timetable for deductions that carry continuing obligations.
FAQ
Inheritance tax FAQ
Q When must inheritance tax be filed? expand_more
Within six months of the end of the month in which the inheritance began. The deadline is longer where all the heirs reside outside Korea. Missing it forfeits the filing credit and attracts penalty tax.
Q Are gifts made ten years ago aggregated? expand_more
Property given to an heir within ten years, and to a person other than an heir within five years, is aggregated. Gift tax already paid is credited, but the aggregation can move the estate into a higher rate band.
Q If the estate is small, is filing still necessary? expand_more
Even where the deductions leave no tax to pay, filing is generally advisable. The value reported becomes the acquisition value when the property is later sold, so not filing can be disadvantageous for capital gains tax.
Q Does the tax fall if the spouse takes more? expand_more
The spousal deduction is based on the amount actually inherited but is subject to a statutory ceiling, so it does not reduce the tax without limit. Inheritance tax arises again on the spouse's death, so both inheritances should be considered together.
Q What if there is no cash to pay the tax? expand_more
Where the requirements are met, payment in annual instalments or payment in kind with property or securities may be applied for. The application must be made within the filing deadline, so it requires advance preparation.