Tag: Korean Inheritance Tax

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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.

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Under Korean inheritance law, inheritance takes effect immediately when a person passes away.  The Korean inheritance law, Part V of the Civil Act, provides who becomes the heir and beneficiary of the deceased person’s property, also known as the estate.

However, heirs and beneficiaries do not always receive the entire estate.  There are specific rules and restrictions on how the estate is distributed under Korean inheritance law, making the process more complex.

In this article, our Korean inheritance lawyer will guide you through the basic rules and practices of inheritance in Korea.  Whether you are navigating Korean inheritance law as a foreigner or need help from a Korean inheritance lawyer, understanding the basics is crucial for securing your rights.

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Shareholder agreements are essential tools for defining the rights and obligations of shareholders when multiple parties collaborate on a business or project.  These agreements are commonly used in joint ventures and M&A transactions and are increasingly seen in investment contracts between financial investors and Korean startups.  

In the entertainment industry, where collaboration between large labels and creative talents often forms the foundation of new ventures, shareholder agreements play a significant role in corporate governance.  A recent dispute over ADOR, the label behind the K-Pop girl group New Jeans, highlights the legal implications of shareholder agreements, particularly voting rights agreements, in Korean joint ventures.

In the ADOR case, the Seoul Central District Court upheld the validity of the director appointment and voting restriction clauses outlined in the shareholder agreement and subsequently issued an injunction preventing the majority shareholder from the exercise of voting rights in an attempt to oust ADOR’s CEO.  

This ruling serves as a key example of how shareholder agreements and voting agreements function in joint venture management disputes. It offers valuable insights not only for the entertainment industry but also for foreign companies engaged in joint ventures in Korea across various sectors. (more…)

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Korean Inheritance tax can be a complex issue, particularly for those living abroad. An important ruling by the Korean Supreme Court (Supreme Court, 1994. 11. 11. 94nu5359 Decision) sheds light on whether inheritors residing outside South Korea must pay inheritance tax in Korea when they just inherited foreign assets from a non-resident deceased. This post aims to clarify the key points of the ruling and its implications for foreign heirs.

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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…)