Seoul: Wealthy individuals are increasingly leaving South Korea under the strain of inheritance tax burdens.
According to Yonhap News Agency, the Korea Chamber of Commerce and Industry, referencing a report by UK-based immigration consultancy Henley and Partners, revealed that the estimated annual net outflow of South Korean high-net-worth individuals doubled from 1,200 in 2024 to 2,400 in 2025. This places South Korea fourth globally in such outflows, following the United Kingdom, China, and India.
The chamber highlighted that inheritance taxes, which can reach up to 50 to 60 percent, are a significant factor accelerating this capital outflow. South Korea currently enforces one of the highest inheritance taxes worldwide, with a top rate of 50 percent on inherited assets exceeding 3 billion won ($2.1 million). An additional 10 percent surcharge applies to controlling shareholders of corporations, raising the effective maximum rate to 60 percent. This heavy tax burden poses challenges for small and medium-sized enterprises in transferring businesses to the next generation, as many are reluctant to lose half or more of transferred assets to taxes.
Alarmingly, inheritance tax is no longer confined to the super-rich. As the economy has expanded, it increasingly impacts the middle class. From 2002 to 2024, the number of inheritance taxpayers surged from 1,661 to 21,193, and inheritance tax revenue ballooned to 9.64 trillion won ($6.64 billion). Given the largely unchanged tax structure since 2000, projections indicate that inheritance tax revenue could soar to 35.8 trillion won by 2072.
Despite the growing exodus of wealthy individuals, the National Assembly has been inactive on inheritance tax reform. The ruling party, which holds control, seems hesitant to pursue reform, perceiving it as "tax cuts for the rich." Even proposals for structural reform, such as taxing heirs individually instead of the estate at progressive rates, remain stalled.
The business community suggests that if immediate tax rate cuts are politically challenging, the government should make compliance more manageable. Recommendations include extending the installment payment period for inheritance taxes from 10 to 20 years, or implementing a five-year grace period followed by installment payments. They also advocate for allowing taxes to be paid with listed shares and for extending the valuation period for inherited stock.
If the government and ruling party cannot immediately overhaul the inheritance tax system, they should at least consider the business community's calls for practical supplementary measures. Adjustments in payment methods could alleviate the strain on business succession and asset preservation.
While higher taxes on the wealthy might seem beneficial for boosting revenue and aiding the poor, in practice, it can lead to the relocation of wealthy individuals to avoid such taxes. Without change, the exodus from South Korea is likely to continue, raising concerns about the country's sustainable future if its affluent citizens leave due to tax fears.