Tag: Korean Inheritance Tax

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(Last update on November 1, 2022) Under the Korean inheritance law, the inheritance comes to fruition immediately when a person is deceased. The Korean inheritance law, the Part V of the Civil Act, provides who shall become the inheritor and beneficiary of the property of a deceased person, i.e. estate.

The inheritor and beneficiary, however, shall not always take everything from the estate. There are separate rules and restrictions on the distribution of the estate in South Korea.

In this article, we will explain to you the basic rules and practices of inheritance in Korea.

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When receiving gifts of money or other property, the party should check any tax issues involved.  When the gifts cross the national borders or involve foreign parties, it becomes more complicated.  It could entail an additional filing with a government of a foreign country where the foreign party resides.  Today, we are going to introduce what report and tax liability the parties should take care of and under what condition, when a U.S. resident receives a U.S located house as a gift from his Korean resident parent.

Report to the Bank of Korea

According to Article 7-46 and 7-44 of Foreign Exchange Transaction Regulation(FETR), when a resident of Korea gifts a real property, which is even located abroad, to any non-resident, the Korean resident(devisor) should report the transaction in advance to the Bank of Korea.

The nationality of the parties doesn’t matter here. Only the place of residence does matter.  The Korean Tax authority (National Tax Service) has an internal rule to apply to decide who is a resident and who is not.

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Korean LawyerRecently our office has represented US clients whose German father had passed away in South Korea without any will.  At the time of passing, the deceased was domiciled in Korea and remarried to a Korean wife.  The Korean wife contacted the US family out of blue to discuss how to distribute the estate in Korea.  The US clients were the children from the deceased’s previous marriage in the US.  They contacted our office for the legal advice and representation.

One of the issues was which country’s inheritance law shall be applicable, i.e. the Korean inheritance law or the German inheritance law.  This was because the deceased had a foreign nationality, while his estate and residence at the time of passing were all in Korea.  Practically, when the Korean law is applied, the US children shall be entitled to the larger shares than those granted under the German law.

In Korea, Article 49 of the Korean Act on Private International Law(“APIL”) is the starting point to determine which country’s law shall be the governing law in case of an international inheritance case.  It provides that (more…)