Financial Investment Tax and Virtual Asset Tax Deferral Passed...Inheritance and Gift Tax Law Amendment Rejected

The National Assembly Holds Plenary Session on the 10th to Pass Budget-Related Bills
Amendments to the Value-Added Tax Act and Restriction of Special Taxation Act, Democratic Party's Revision Passed

On the 10th, the National Assembly held a plenary session and passed an amendment to the Income Tax Act that includes the abolition of the Financial Investment Income Tax (Fin-Invest Tax). The taxation of virtual asset income, which was scheduled to be implemented next year, has been postponed by two years.

At the plenary session held that day, the National Assembly approved the amendment to the Income Tax Act with 204 votes in favor, 33 against, and 38 abstentions out of 275 members present. The amendment mainly abolishes the Fin-Invest Tax imposed on financial investment income exceeding 50 million won from stocks, bonds, funds, derivatives, etc., and postpones the implementation date of virtual asset income taxation from January 1, 2025, to January 1, 2027, by two years.

The above photo is not related to the article. Photo by Kim Hyun-min

Additionally, a provision exempting companies from fully taxing childbirth support payments made to employees or their spouses within two years after the birth of a child, up to twice, was also passed. The child tax credit amount was expanded, increasing the annual tax credit for children and grandchildren aged 8 or older to 100,000 won per child.

The amendment to the Inheritance and Gift Tax Act, on which the ruling and opposition parties disagreed, was finally rejected with 98 votes in favor, 180 against, and 3 abstentions out of 281 members present.

The government-submitted amendment to the Inheritance and Gift Tax Act includes deleting the tax base bracket exceeding 3 billion won, which currently applies the highest tax rate of 50%, and applying a 40% tax rate to the tax base bracket exceeding 1 billion won. This lowers the highest tax rate from 50% to 40%. It also expands the tax base bracket subject to the minimum tax rate of 10% from 100 million won or less to 200 million won or less. The child deduction is increased from the current 50 million won per person to 500 million won, and the provision that added a 20% premium to the valuation of stocks or equity shares of major shareholders or major investors when evaluating inherited or gifted property is abolished.

Park Su-young, a ruling party member of the National Assembly’s Planning and Finance Committee who participated in the proponent debate, said, "This is an effort to reform the outdated inheritance tax system that has been maintained for over 20 years despite social and economic changes," adding, "The inheritance tax exemption amount has remained unchanged for 27 years, while inflation has doubled and asset prices have increased 2.2 times, causing the proportion of inheritance tax payers among the deceased to rise from 1% in 1997 to 6.8% in 2023, a sevenfold increase."

On the other hand, the opposition party opposed the amendment, labeling it as a "super-rich tax cut" due to the reduction of the highest inheritance tax rate and the expansion of business inheritance deductions. Oh Ki-hyung of the Democratic Party said, "This is not the time for tax cuts," and pointed out, "Due to unreasonable tax cut policies every year, tax revenue shortfalls are repeatedly occurring."

Other tax law amendments designated as budget-related bills, including the Corporate Tax Act, Individual Consumption Tax Act, Transportation·Energy·Environment Tax Act, and Liquor Tax Act, were all passed as originally submitted by the government. However, the amendments to the Value-Added Tax Act and the Restriction of Special Taxation Act were passed with the Democratic Party’s revised proposals instead of the original bills.

This content was produced with the assistance of AI translation services.