In Korea, the gift tax rates are extremely high.it's taxes have the tax rate range of 10% to 50%.
It starts at 10%, which is relatively low. However, when the tax base (the given amounts) exceeds 3,000,000,000 KRW, a 50% tax rate is applied to the amounts over this threshold. Yes, half of the amounts are taxed. If you give 10,000,000,000 KRW to your children in Korea, 500,000,000 KRW should be paid as tax, and the actual amount your children can receive is 500,000 KRW.
1.Gifts given within the basic deduction limit are not subject to taxes
Fortunately, there are basic deductions, and within these amounts, no taxes need to be paid.
The basic deductions vary depending on the person giving the money:
Doner : Spouse: 20,000,000 KRW
Doner : Parent, Grandparent: 50,000,000 KRW
Doner : Sons and Daughters: 50,000,000 KRW
Doner : Siblings and other relatives: 10,000,000 KRW
The basic deduction renews every 10 years. For example, if you gave 50,000,000 KRW to your son on 2011.1.1 without taxes through the basic deduction, you can use the basic deduction again on 2021.1.1.
By utilizing this basic deduction, you can give money without incurring taxes. However, it's essential to note that the basic deduction cannot be used separately for parents and grandparents.
Keep in mind that the giving money limit is 50,000,000 KRW every 10 years, which some people may find low
2.Give within the specified range eligible for a 10% tax rate
In Korea, income tax rates range from 6% to 45%, and corporate tax rates vary between 10% and 25%. When an individual's income exceeds 100,000,000 KRW, the average tax rates can surpass 35%, making the 10% tax rate seem comparatively low.
Gift tax rates are set at 10% for giving amounts below 100,000,000 KRW. Therefore, with the basic deduction of 50,000,000 KRW, when you give your children 150,000,000 KRW (approximately 115,000 US$), the taxes amount to only 10,000,000 KRW (7600 US$).
3.Your son and daughter may too young to pay the taxes
If the donee (the child) is too young to pay the gift taxes, the donor (the parent) may choose to cover the taxes on behalf of their son or daughter. However, it's important to note that the taxes paid by the parent on behalf of the child are also considered a gift. Consequently, these amounts should be factored into the donee's (son or daughter's) gift tax calculation.
Therefore, let's calculate the taxes when parents give money to their children while also covering the taxes that should be paid by the children.
Example1) When parnet give 50,000,000 KRW
As mentioned earlier, there is a basic deduction of 50,000,000 KRW, which means when parents give money to their children, they can deduct this amount, and no taxes need to be paid on it. Additionally, it's important to note that this basic deduction renews every 10 years.
Example2) When parnet give 100,000,000 KRW
If the gift amount is 100,000,000 KRW, which exceeds the basic deduction of 50,000,000 KRW, taxes would apply. When the parent pays the taxes on behalf of their children, the total tax payable amounts to 5,537,09 9 KRW.
Example3) When parnet give 140,300,000 KRW
The amount of 140,300,000 KRW is like a magic number that allows for the lowest tax rate (10%) in Korea. This 10% tax rate is highly advantageous, and it applies to tax bases below 100,000,000 KRW. So, when parents give 140,300,000 KRW to their children, including covering their taxes, it's the optimal amount to benefit from the 10% tax rate. That's a clever strategy to make the most of the tax system.
G-tax has the expertise to help you file gift taxes smartly, ensuring you pay the least amount possible. With over hundreds of successful cases, we know how to make the tax process work in your favor!
Thank you for read my article! I hope it helps.
If you want to see more information about Korea tax and accounting, please follow us.
And if you need help for your tax filing or accountung or looking for CPA in Korea, don't hesitate to contact us
G-tax / Certified Tax Accountant / Steven Yang
+82 10 9599 7152
steven@g-tax.kr
www.g-tax.kr
you can contact me through the information in the name card.
Or Please fill in the below form
G-tax (Tax & Accounting service)
Thank you for contacting us! Please fill the questionnaire in. We will reach out to you as soon as possible.
docs.google.com
