Top 1.5 pct. took more than half of all inheritance in 2009

Of the 288,503 Koreans who were subject to inheritance taxes in 2009, just 1.5 percent (4,340) paid such taxes, the National Tax Service said Tuesday.

A variety of tax deductions is to blame for the drastic fall in the number of payers of inheritance taxes, it added.

Inheritors benefit from a host of inheritance tax-related deductions. First, debt is excluded from inherited property and second, an inheritance under 500 million won (463,000 U.S. dollars) in value is tax exempt.

Along with a basic deduction of 500 million won, spouses also get an additional deduction for an inheritance up to 3 billion won (2.8 million dollars). So inheritors are unlikely to pay inheritance taxes unless they are super wealthy.

Inherited property of the richest 1.5 percent who paid inheritance taxes accounted for more than half of all inherited assets in the nation. In 2009, the inheritance of the 4,340 people on whom inheritance taxes were levied was worth 10.11 trillion won (9.35 billion dollars), accounting for 51 percent of the combined inheritance figure of 19.81 trillion won (1.8 billion dollars) in the country.

By type of inherited asset, real estate made up almost 70 percent with land accounting for 41 percent and buildings 27 percent. This was followed by financial assets such as deposits and insurances with 16 percent and securities with 11 percent.

The share of inherited buildings increased from 14 percent in 2005 to 27 percent in 2009 thanks to soaring real estate prices centering on Seoul’s posh Gangnam district, according to experts.

Though just 105 people inherited wealth worth more than 10 billion won (9.26 million dollars), the inheritance taxes they paid amounted to almost half of the combined inheritance taxes of 1.55 trillion won (1.44 billion dollars). Because the inheritance tax is progressive, an inheritance of more than 3 billion won raises the tax rate to 50 percent.

jsonhng@donga.com