How Much Gift Tax Do You Pay?

When parents gift assets to their children, they must pay a tax called gift tax, and Korea is one of the countries with the highest gift tax.
Let's look at how tax is levied on gifts.

① What is gift tax?
It is a tax levied when you receive assets from another person free of charge, and in most cases it applies when parents gift assets to their children.
The person receiving the assets must pay the gift tax.

② Gift tax deduction limits
(Adult) child/grandchild (per parent) : 50 million won (per 10 years)
(Minor) child/grandchild (per parent) : 20 million won (per 10 years)
Therefore, if each parent makes a gift, 100 million won for an adult and 40 million won for a minor is deducted.

③ Ways to save on gift tax
- When gifting 200 million won to an (adult) child
ㆍ200 million (gift amount) – 50 million (deduction) = 150 million (taxable amount)
ㆍ150 million (taxable amount) × 20% (tax rate) = 30 million (gift tax)
ㆍSince the taxable amount is over 100 million and up to 500 million, a progressive deduction applies
ㆍ30 million – 10 million (progressive deduction) = 20 million won (final gift tax)

- When each parent gifts 100 million won
ㆍ200 million (gift amount) – (50 million + 50 million) (deduction) = 100 million (taxable amount)
ㆍSince the taxable amount is 100 million or less, a progressive deduction applies
ㆍ100 million won) × 10% (tax rate) = 10 million won (final gift tax)

- Receiving a 50 million won deduction every 10 years
ㆍAfter 10 years, the gift deduction limit is restored
ㆍGift the 200 million won in three installments, every 10 years, over 30 years
ㆍGifting 50 million won every 10 years makes 150 million won tax-free
ㆍ10% applies only to the remaining 50 million won
ㆍThe final gift tax is 5 million won

④ Gift tax filing period
Filing must be done within 3 months from the last day of the month in which the gift was made, and a penalty tax is imposed if not filed.
For example, even if the gift was made on August 5, the filing deadline is not November 3 but November 30.

⑤ Acquisition tax on gifts
ㆍFor gifts of cash, no acquisition tax is imposed on the gift
ㆍFor gifts of real estate/securities, acquisition tax on the gift is imposed separately

We plan to post an article on acquisition tax on gifts next time, so please keep that in mind.