Cross-border inheritance involving Korean assets—whether the decedent or the heir is a non-resident—often leads to unexpected Korean inheritance tax obligations. Without proper planning, foreign heirs may face administrative delays, tax audits, and significant penalties.
As Korean attorneys who regularly advise foreign families on cross-border estate matters, we have seen many cases where a lack of understanding of Korea’s inheritance tax rules resulted in avoidable risks and financial losses.
In this article, we explain who is liable to pay Korean inheritance tax, which assets are subject to tax, how the tax is calculated, and how to plan for payment—including options such as in-kind contribution or installment plans. Whether you are a foreign heir, a family representative, or a professional advisor assisting with Korean estate matters, this guide will help you navigate Korea’s inheritance tax system with confidence and clarity.
Who Must Pay the Inheritance Tax in Korea?
Under Korean inheritance tax law, the obligation to pay inheritance tax arises not only for heirs who inherit property through statutory succession, but also for beneficiaries who acquire property through a will or a death-triggered gift agreement.
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Heirs (상속인): Those who acquire property by reason of the decedent’s death
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Beneficiaries (수유자): Those who receive property under a will or similar arrangement, including death-triggered gifts and trust arrangements
The heirs and their respective shares are determined by the law governing succession, which is typically the law of the decedent’s nationality. However, if that national law refers back to Korean law (renvoi), or if the will designates Korean law as governing, Korean inheritance law could be applicable.
Importantly, Korean inheritance tax law treats the beneficiaries of a living trust—such as a U.S.-style revocable trust or inter vivos trust—as beneficiaries (수유자) for tax purposes. If such a trust becomes irrevocable upon death and confers a beneficial interest in Korean assets, the designated successor beneficiaries will be subject to inheritance tax in Korea.
Read more: Choice of Laws Is Critical When It Comes to an International Inheritance
What Assets Are Subject to Korean Inheritance Tax?
In Korea, whether inheritance tax applies—and which assets are taxed—depends on two key factors:
- The residency of the deceased at the time of death, and
- The location of the inherited assets.
If the deceased was classified as a Korean resident, then inheritance tax applies to all assets worldwide, regardless of where the heirs live.
By contrast, if the deceased was a non-resident, only assets located in Korea are subject to Korean inheritance tax.
According to the Inheritance and Gift Tax Act, the “resident” is someone who either:
- Has a registereed domicile in Korea, or
- Has had a place of residence in Korea for 183 days or more prior to death.
Whether someone has a “domicile” in Korea is further assessed under the Income Tax Act Enforcement Decree, based on factors like family ties, economic interests, and the frequency or length of stays.
Anyone who does not meet the above criteria is regarded as a non-resident.
Read more: Korean Inheritance Tax Liability of Foreign Heirs: A Supreme Court Ruling
How Can Foreign Heirs Locate Inherited Property in Korea?
Foreign heirs—especially those who have never lived in Korea—often face a fundamental question: “How do I even know what property I’ve inherited in Korea?”
Fortunately, Korea provides a formal system through which heirs can request an official search of the decedent’s estate. This process is available even to foreign nationals residing abroad.
What Can Be Identified?
By filing an estate inquiry request, the heir can obtain information regarding:
- Real estate owned by the decedent (including location, land/building details, and ownership status)
- Bank accounts and financial assets (including securities and savings)
- Outstanding debts with financial institutions, including mortgages and personal loans
This information helps heirs understand the total composition of the estate, which is essential for inheritance tax reporting, estate division, and even deciding whether to accept or renounce the inheritance.
Under Korean inheritance tax law, each heir is individually responsible for paying the tax. However, the law also recognizes joint and several liability among heirs.
Two Layers of Tax Responsibility
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Individual Obligation
Each heir shall report and pay inheritance tax based on their respective share of the estate. If the heirs have agreed to an unequal division, then each heir’s tax liability is adjusted accordingly. -
Joint and Several Liability
If one or more heirs fail to pay their share, the remaining heirs is held responsible for unpaid taxes on behalf of other heirs—but only up to the value of the property they have actually received.
designation of a Representative Heir
In most cases, the co-heirs will appoint a designated representative heir to handle the filing and payment process. This representative will carry out:
- Preparing and submitting the inheritance tax filing on behalf of all heirs,
- Communicating with the Korean tax authority (NTS),
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Making payment using inherited assets or other arrangements.
After payment, the representative heir may seek internal reimbursement from the other heirs in proportion to their shares.
If there is disagreement or lack of cooperation among heirs, each heir may file and pay taxes separately. The tax authority accepts individual filings and will not impose non-filing penalties on heirs who did not file, so long as at least one heir has filed properly.
Deadline for Filing and Payment
If the decedent was a Korean resident, the deadline is 6 months from the end of the month of death.
If either the decedent or any of the heirs is a non-resident, the deadline is 9 months from the end of the month of death.
Note: Previously, the NTS interpreted “non-resident heir” as applying only when all heirs were non-residents. However, this has been revised. Now, even if only one of the heirs is a non-resident, the extended 9-month period applies.
In case that the final day of the filing period falls on a Saturday, Sunday, or public holiday, the deadline is automatically extended to the next business day.
Penalties for Non-Compliance
Failing to file or pay inheritance tax on time in Korea can result in significant financial consequences. Korean tax law imposes two main types of penalties on non-compliant heirs:
- Non-Filing Penalty (Failure to File)
If an heir fails to file an inheritance tax return or underreports the value of inherited property, a penalty of 20% of the unreported or underreported tax amount will be imposed. If fraud or concealment is involved, the penalty could increases to 40%. - Late Payment Penalty (Failure to Pay on Time)
Daily interest accrues at a rate of 0.022% on the unpaid tax amount. The late payment penalty is capped at 10 years due to the statute of limitations under Korean tax law.
Benefit for Timely Filers
If the inheritance tax return is filed on time, a 3% filing credit is granted. This credit applies to the net tax payable (after deductions and credits), effectively reducing the final tax bill.
TIP: Filing even with partial information is better than missing the deadline. Penalties rise significantly in cases of intentional non-compliance. This is especially important when there are disputes among co-heirs. Regardless of disagreements, it is strongly advisable to file the inheritance tax return on time, even if the amounts need to be amended later.
How is the Korean Inheritance Tax Calculated?
Korean Inheritance Tax Calculation Flow
|
Step |
Description |
Explanation |
|
1 |
Identify Total Inherited Property Value |
Gross estate (domestic & possibly foreign) |
|
2 |
Subtract Debts and Funeral Expenses |
Net estate |
|
3 |
Add Lifetime Gift Value |
Gifts given by the decedent to heirs within 10 years (or to others within 5 years) |
|
4 |
Subtract Inheritance Deductions |
Basic deduction, spouse deduction, deduction for co-residing housing, etc. (if applicable) |
|
5 |
Subtract Appraisal Fees |
Necessary costs for property valuation |
|
→ Resulting amount: Taxable Base for Inheritance Tax |
||
|
6 |
Apply Progressive Tax Rates (10% ~ 50%) |
Based on taxable base brackets, with applicable progressive deductions |
|
7 |
Deduct Tax Credits |
Filing tax credit, foreign tax credit, etc. (if applicable) |
|
8 |
Final Inheritance Tax Payable |
Total Inherited Property Value
The total inherited property value includes not only the assets held by the decedent at the time of death, but also any amounts that may be classified as “deemed inherited property.” This refers to cases where the decedent disposed of assets, withdrew funds, or incurred debt shortly before death, and the use of those funds cannot be objectively verified.
In practice, if transactions involving KRW 200 million or more are identified within one year prior to death, or KRW 500 million or more within two years, the Korean National Tax Service (NTS) will typically request a detailed explanation and supporting documentation from the heirs regarding how those funds were used.
If the heirs are unable to provide objective evidence for the use of those funds, the unaccounted amounts could be added back to the taxable estate as a “deemed inherited property”.
Lifetime Gifts
Under Korean inheritance law, the taxable estate includes any property gifted by the decedent to heirs within 10 years prior to death, or to third parties within 5 years prior to death. These gifts are presumed to have been made in anticipation of death and are therefore added back to the estate for inheritance tax calculation.
Important Differences When the Decedent Was a Non-Resident
When the deceased was a non-resident of Korea, several important limitations apply to deductions and allowable subtractions:
- Public charges are deductible only if directly related to Korean property.
- Funeral expenses are not deductible.
- Debts are deductible only if they are secured by a mortgage on property located in Korea.
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Inheritance deductions are strictly limited to the basic deduction of KRW 200 million and any appraisal fees.
Other common deductions—such as those for a surviving spouse or financial asset exemptions—do not apply.
Tax Rates
| Taxable Base | Rate | Progressive Deduction |
| Up to KRW 100M | 10% | 0 |
| KRW 100M–500M | 20% | KRW 10M |
| KRW 500M–1B | 30% | KRW 60M |
| KRW 1B–3B | 40% | KRW 160M |
| Over KRW 3B | 50% | KRW 460M |
How is the Value of Inherited Property Assessed?
Under Korean inheritance tax law, inherited property is valued at fair market value as of the date of death. The goal is to reflect the realistic economic value of the asset at the time of inheritance, not necessarily its book or acquisition value.
General Valuation Rules
- If the property has been recently sold or transacted, the actual transaction price is typically used.
- If no transaction exists, the value may be determined by one or multiple professional appraisals.
- For real estate with no available transaction or appraisal, the fallback is the government-posted public value.
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For unlisted corporate shares, the valuation is based on a weighted average of net income value (×3) and net asset value (×2) per share.
Caution When Using Public Value for Real Estate
While it is legal to use public value when filing inheritance tax, this approach requires caution.
If the reported value is found to significantly underestimate the actual market value, the Korean tax authority may disregard it and conduct its own appraisal, often resulting in substantially higher tax assessments.
According to current tax regulations (for filings due after January 1, 2025), the National Tax Service (NTS) may initiate its own valuation if:
- The reported value is more than KRW 500 million lower than the estimated value; or
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The difference ratio between reported and estimated value exceeds 10%.
When this threshold is crossed, the NTS can challenge the return and impose tax based on its own, usually higher, valuation. This can significantly increase the inheritance tax due.
Desktop Appraisal as a Strategic Tool
To avoid surprises and build a sound reporting strategy, we strongly recommend obtaining desktop appraisals from two separate appraisal firms.
A desktop appraisal is a market valuation based on official records and comparable sales data, but without a site visit. It’s fast, cost-effective, and sufficient for planning purposes.
In cooperation with our partnered accounting firm, we can often obtain these appraisals free of charge. Based on the desktop appraisal, we can:
- Roughly estimate your inheritance tax exposure;
- Evaluate whether using the public value might trigger a tax audit; and
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Decide whether to proceed with a formal appraisal (which entails fees but strengthens defensibility).
Note:
1) Desktop appraisals typically fall within 5–10% of formal appraisal values, but this is not guaranteed.
2) If you choose to file based on a market appraisal and the government-posted value exceeds KRW 1 billion, Korea tax law requires that two independent appraisal firms be used. The Korean inheritance tax return must be filed based on the average of the two valuations.
Payment Options: Installments & In-Kind
Inheritance tax in Korea must, in principle, be paid in full by the filing deadline. However, when the tax amount is substantial—as is often the case with inherited real estate—Korean tax law offers two alternative payment methods to ease the financial burden:
Installment Plan (연부연납)
The Korean tax authority may approve payment in installments for up to 10 years, provided the following conditions are met:
- The inheritance tax payable exceeds KRW 20 million, and
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The taxpayer provides a payment guarantee, such as tax payment guarantee insurance or Real estate collateral (including a fractional share in co-owned property)
Each installment must be at least KRW 10 million, and interest may apply.
In-Kind Payment (물납)
Inheritance tax can also be paid using inherited property itself—typically real estate—instead of cash. This is called “in-kind payment.”
However, there are several important caveats:
- The full appraised value of the property is used to offset tax. No refund is given if the property’s value exceeds the tax owed.
- The property must first be registered in the heir’s name (ownership transfer must be completed before applying).
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In-kind payment is usually filed together with the initial tax return, but it can also be requested afterward.
Example:
Suppose an heir inherits three properties, each worth KRW 1 billion, and the total inheritance tax owed is KRW 800 million.
If the heir chooses to pay the tax by transferring one entire property, the full KRW 1 billion value of that property will be used—even though the tax due is only KRW 800 million. The excess KRW 200 million will not be refunded.
To avoid losing that difference, the heir may consider splitting the property into parts, and then using only the portion needed to match the tax amount. For example, instead of transferring the entire property, the heir could first subdivide the ownership into an 80:20 split, and then use the 80% share to pay the KRW 800 million tax, while keeping the remaining 20%.
Strategic Consideration
In practice, many foreign heirs use a combination of installment and in-kind payment to manage cash flow and preserve remaining assets.
Working with a Korean tax advisor and legal counsel is strongly recommended to structure payment in a way that maximizes flexibility and minimizes long-term financial risk.
Final Thoughts
Navigating Korean inheritance tax as a foreign heir—or as the estate representative of a non-resident decedent—can be surprisingly complex. From identifying the taxable property and calculating the correct tax amount, to selecting the appropriate payment method and avoiding penalties, each step requires careful legal and tax analysis.
We, as Korean lawyers, work closely with Korean CPAs and licensed appraisers to assist international clients in managing their Korean inheritance tax obligations from start to finish. We regularly help families with:
- Locating inherited assets in Korea
- Securing desktop or formal appraisals
- Calculating expected inheritance tax liabilities
- Structuring installment plans or in-kind payment strategies
- Communicating with the Korean tax authorities on your behalf
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Minimizing penalties through timely, compliant filings and strategic planning
If you are dealing with an inheritance involving Korean assets, we’re here to help. Contact our Korean tax lawyer to receive a personalized assessment and practical guidance.
Frequently Asked Questions (FAQ)
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Because of the generality of this update, the information provided herein, which may or may not reflect the most current legal development, may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.