S.Korea advised to slash corporate inheritance tax to 30%

South Korean entrepreneurs are imposed heavy inheritance taxes of up to 60% to hand down wealth to their children, the highest level among Organization for Economic Cooperation and Development (OECD) countries, a business lobby group said on Thursday.

Descendants of bequeathed stakes in Korean businesses must pay half the received value as a tax, the second highest rate after Japan’s 55%, according to the Korea Economic Research Institute (KERI) under the Federation of Korean Industries.

In case their parent is the No. 1 or No. 2 shareholder in the company, the inheritance tax goes up to 60%, the highest among the OECD members.

In proportion to the gross domestic product, inheritance taxes in South Korea accounted for 0.7% in 2021, the world’s highest ratio, along with France and Germany.

The KERI said the high inheritance tax could be viewed as punitive charges and stands in the way of Korean entrepreneurs handing down businesses to their children.

The research house recommended South Korea’s inheritance tax rate should be lowered to 30%, slightly above the average rate of OECD countries, and abolish the extra charges on those taking over a company from its top or second-largest shareholder.

Write to Sung-Soo Bae at baebae@hankyung.com

Yeonhee Kim edited this article.