When passing on assets such as cash and real estate to parents, spouses, and children, it will be a big concern about who is eligible for gift tax exemption and how much gift tax must be paid. Today, we will learn about the gift tax exemption and how to calculate the gift tax.
What is gift tax?
Gift tax is a tax levied on the recipient of property when property is received free of charge from a family member or other person. A person who receives property for free from another person or family member must report the property. The place to report is the person who received the property, the ‘donee’, and pays the gift tax by reporting it at the tax office or Hometex that has jurisdiction over the person’s address. 증여세 면제 대상
If the recipient is a for-profit corporation aiming for profit, the gift tax is not required to be paid separately because the gifted property of the for-profit corporation is included in corporate tax.
How to report and pay gift tax at Home Tex: Go to the ‘National Tax Service Home Tex’ website > Report/Pay > Gift tax 좋은뉴스
Person obliged to pay gift tax
Depending on whether the person who received the property (donee) is a resident with an address as of the date of gifting or a non-resident without an address, the taxable person who must pay the gift tax and the person who must pay it are different.
According to the Inheritance Tax and Gift Tax Act, a resident refers to a person who has an address or a place of residence for 183 days or more, and a non-resident refers to a person who is not a resident.
If the recipient is a resident, the recipient must pay gift tax on all property in Korea. If the person to whom the property is gifted is non-resident, two situations may arise. Since the person who received the first property as a gift is a non-resident, all gifted property in Korea subject to taxation is subject to tax payment. Second, the donor must pay gift tax on all foreign property received from the donor as the person to whom the property is gifted is a non-resident.
Date of donation of donated property
The date of gifting of gifted property differs depending on various criteria.
In the case of property requiring registration and registration: the date of receipt of the application for registration and registration related to the transfer of ownership
In the case of a building in the name of the person to whom the property has been donated for the purpose of gifting and acquisition of lot-to-lot rights: the earlier of the issuance date of the building use approval, the date of actual use, or the date of approval for temporary use
If the value of the property has increased with the help of others: The date on which the increase in the value of the property occurred
Stocks and investment shares: Stock delivery date that can be objectively confirmed, if the stock delivery date is not clear, the date of transfer of the name of the register, etc. at the time of the transfer. You cannot become a shareholder of the company if you do not transfer the name through the procedure
Bearer bonds: the date on which the acquisition of interest payment, etc. can be objectively confirmed, and if it is difficult to verify the fact of acquisition, the date on which interest payment and repayment of bonds are requested is the date of acquisition
Property other than the above property: Date of delivery and date of actual use
Gift tax exemption
1. Return of donated property
If the gifted property is returned within the reporting period, gift tax is exempted for the gift and return portion, and gift tax is incurred if reported after the reporting period has passed.
2. Non-taxable gift property
Property gifted by the state and local governments
Property donated by a political party under the Political Parties Act
relief goods now
treatment fee
dependent living expenses
educational expenses
student loans and scholarships
Souvenirs, money for congratulations, money for congratulations, money for condolences, etc.
In case goods brought in from abroad with a customs value of KRW 1 million or less at the time are donated to others
Disabled persons registered under the Welfare of Persons with Disabilities Act or disabled persons registered under the National Merit-related Act as insurance beneficiaries Annual insurance amount less than KRW 40 million
3. Donated property such as public service corporations
Property donated by a corporation that is conducting business for public interest to promote culture and social welfare is subject to tax exemption, but is subject to donation if used as a means of tax evasion.
4. Family and in-laws, etc.
In the case of a gift from the spouse, lineal ascendant, lineal descendant, or other 6th or 4th degree of the donated person, a certain amount of the donated property can be deducted. To put it simply, you can add up and deduct the gifted property for 10 years. The amount of the deduction is:
Spouse (spouse in a marital relationship, excluding de facto marriage): KRW 600 million
Lineal ascendant (including stepfather and stepmother): 50 million won (deduction of gift up to 20 million won from direct ascendant for minors)
Lineal descendants: 5,000
Other relatives (blood relatives within the 6th degree or relatives within the 4th degree): 10 million won
Parents can gift 50 million won to their children without gift tax for 10 years, and if they donate twice within 20 years, they can donate up to 100 million won without gift tax.
gift tax rate
Gift tax rates start at 10% and go up to 50%. As the tax rate varies depending on the amount of gifted property, you can receive progressive deduction together. For example, if you received a gift of 900 million won, the gift tax calculation is (900 million won x 0.3) -60 million won (progressive deduction) = 200 million 1 Ten million won. For reference, if you report voluntarily, you can receive a 3% reduction in gift tax calculation.
Gift tax Tax standard tax rate Progressive deduction
Less than KRW 100 million 10% –
Over KRW 100 million to less than KRW 500 million 20% KRW 10 million
Over KRW 500 million to less than KRW 1 billion 30% KRW 60 million
100 million won ~ 3 billion won 40% 160 million won
Over KRW 3 billion 50% KRW 460 million
Lastly, since many gifts are made to the family, please check the gift tax exemption listed above and receive a deduction. In addition, the gift tax reporting period must be reported within three months from the month in which the gift was received. Failure to report the gifted property or reporting less than the actual amount may result in penalty tax or ineligibility for tax credit.