Inheritance Tax Relief Discussions on the Table... Will There Be a One-Point Revision to Expand the Deduction for a Single Home?

[Financial News] As the Regular Session of the National Assembly begins its full-scale review of tax laws, discussions on easing the inheritance tax are expected to be placed on the table. While a comprehensive overhaul such as switching to an inheritance acquisition tax or adjusting tax rates seems unlikely, partial revisions to make deduction systems like the general deduction or spousal deduction more realistic are gaining traction. However, controversy over tax cuts for high-income earners remains a variable.
According to the National Assembly of the Republic of Korea and the government on the 9th, the Tax Subcommittee under the Strategy and Finance Committee is expected to bring up the inheritance tax amendment this week. Although the inheritance tax revision was not included in the government's tax reform plan announced last July, the discussion was reignited after President Lee Jae-myung mentioned the need to raise the deduction limit at a press conference marking his first 100 days in office.
With rising real estate prices, more single-home owners are now subject to the inheritance tax. As more spouses are forced to sell their primary residence to pay the tax, a sentiment has spread in political circles that this is not simply an issue of tax cuts for the wealthy.
Given that the review of tax laws is entering its final stages during the Regular Session of the National Assembly, discussions on inheritance tax relief are likely to focus on adjusting deductions rather than a broad overhaul. Both ruling and opposition parties agree on the need to update deduction limits in line with soaring real estate prices. The People Power Party supports expanding deductions, and there are expectations that if the Democratic Party of Korea (DPK) finalizes its internal stance, the amendment could pass without difficulty.
Previously, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol stated at last month's Parliamentary Inspection of the Administration that he is aware of the issue of tax burdens being concentrated on high-value homes. However, Koo emphasized, "It is necessary to be cautious about imposing excessive taxes on those who have lived in a single home for 20 to 30 years," and added that further research would be conducted, taking public consensus into account.
The current inheritance tax deduction system has remained largely unchanged for nearly 30 years since 1997. There has been ongoing criticism that it fails to reflect the reality of prices and asset values, which have more than doubled. According to the National Tax Statistics Yearbook, the proportion of estates subject to inheritance tax increased from about 1% of all decedents in 1997 to 5.9% last year, and reached as high as 15.5% in Seoul.
Recently, Democratic Party of Korea (DPK) lawmaker Jeong Il-young proposed an amendment to raise the general deduction from 500 million won to 700 million won and the minimum spousal deduction from 500 million won to 1 billion won.
This is in line with President Lee Jae-myung's campaign pledge to set the general deduction at 800 million won and the spousal deduction at 1 billion won. Lim Gwang-hyun, Commissioner of the National Tax Service (NTS), also submitted a similar proposal during his time as a lawmaker.
Expanding the co-resident housing inheritance deduction is also a key issue under review. The aim is to update the current system, which allows up to 600 million won in deductions when a child who has lived with their parents for over 10 years inherits a single home.
Lawmaker Park Hong-keun has proposed including spouses as eligible for the deduction and raising the limit to 900 million won, while lawmaker Ahn Do-geol has submitted an amendment to set the limit at 800 million won and shorten the required cohabitation period to eight years.
The Ministry of Economy and Finance plans to complete follow-up work on the tax law revision within the Regular Session of the National Assembly, and the ruling party is also aiming for passage by the end of the year.
However, with tax revenue expected to decrease by more than 3 trillion won over five years, the government appears to have conducted extensive internal reviews. Maintaining an expansionary fiscal stance could pose a significant burden for fiscal authorities. Ultimately, fiscal concerns and controversy over tax cuts for high-income earners are expected to be key variables in future discussions. This week, the Tax Subcommittee is set to begin full-scale negotiations between the parties on the extent of the deduction increase and its implementation date.

spring@fnnews.com Lee Bo-mi Reporter