Although the government did not include "easing inheritance and gift tax" in next year's tax reform plan, debate is expected to kick into high gear next month. The National Assembly will revise the government plan to finalize the 2026 tax system, and both the ruling and opposition parties, though differing in degree, agree that the tax burden should be lowered. The government also appears more open to revising inheritance and gift taxes than it was in July, when it unveiled the tax reform plan.
According to the National Assembly and tax authorities on the 7th, easing inheritance and gift taxes is expected to come to the table at the Strategy and Finance Committee's tax subcommittee, which will open starting on the 12th. A tax subcommittee official said, "At year-end, we bring the tax laws together and review what to revise," adding, "Inheritance and gift taxes are one of them." The Ministry of Economy and Finance (MOEF) is also naming inheritance and gift taxes as a central agenda item at this tax subcommittee.
Every July to August, the Ministry of Economy and Finance (MOEF) announces how it will change the next year's tax code, but this year's reform plan did not include content related to inheritance and gift taxes. That is because inheritance and gift taxes were not mentioned in President Lee Jae-myung's campaign pledges. Typically, a new administration's first tax reform plan is composed mainly of items included in its pledge book. This is why the latest plan centered on raising the income deduction cap in proportion to the number of children and expanding the tax exemption for child care allowances.
But there was a change in September. On Sept. 11, at a press conference marking the 100th day of his inauguration, President Lee answered a question about plans to revise inheritance and gift taxes by saying, "I think it is necessary to raise the deduction limit for the inheritance tax." The current inheritance tax deduction limit is up to 1 billion won, consisting of a 500 million won basic deduction plus a 500 million won spousal deduction. Therefore, if the inheritance is from a spouse, there is no tax on up to 1 billion won.
At the event, President Lee proposed raising the inheritance tax deduction limit from the current 1 billion won to 1.8 billion won. The point was that, since the deduction limit was set in 1997, it needs to be adjusted to reflect economic conditions. In relation to this, last year, then–Democratic Party of Korea lawmaker Lim Kwang-hyun introduced a bill to raise the basic deduction from 500 million won to 800 million won and the spousal deduction from 500 million won to 1 billion won. The bill reached a plenary session late last year but did not pass.
A ruling party lawmaker said, "The intergenerational transfer of wealth can become a dirt spoon–gold spoon debate and should be scrutinized strictly, but spouses are not an issue of hereditary succession," adding, "There is a consensus at the party level to view the inheritance tax more flexibly."
Because the tax subcommittee reviews both the government plan and bills proposed by lawmakers to reach a conclusion, it plans to coordinate multiple bills, including Lim's. From the ruling party, lawmakers Park Hong-geun and Ahn Do-geol proposed amendments to expand the scope of deductions and deduction amounts when inheriting a cohabited dwelling. The two lawmakers' bills are the same in that they add spouses to the targets eligible for the cohabited dwelling inheritance deduction, but the deduction limits differ. The current cap is 600 million won; Park proposes raising it to 900 million won, and Ahn proposes 800 million won.
The opposition put forward a more aggressive amendment. Choi Eun-seok of the People Power Party introduced a bill to lower the top rate on inheritance and gift taxes from 50% to 30% and to exempt from taxation assets inherited from a spouse.
The inheritance acquisition tax that the government submitted to the National Assembly in May is also on the agenda. Inheritance acquisition tax is a method of taxation based on the assets inherited by each heir, which differs from an estate tax that is levied on the total inherited estate. Korea currently follows the estate tax method.
An opposition official on the tax subcommittee said, "The People Power Party also agrees to move the inheritance and gift tax law in a more relaxed direction than now," adding, "There are differences over specific figures, but since the two parties are headed in similar directions, it appears the system will be eased compared with the current one."
Meanwhile, the National Assembly Budget Office analyzed that if the inheritance tax basic deduction limit is raised from 500 million won to 800 million won, tax revenue would decrease by 3.3083 trillion won over the next five years. The estimate assumes that the average number of inheritance tax cases and those eligible for the basic deduction remain at their levels of the past five years.