South Korea debates Legacy 10 tax incentives for inheritance donations

South Korean lawmakers and experts are discussing the introduction of a ‘Korean-style Legacy 10’ system to encourage legacy giving to public interest corporations. A proposed amendment to the Inheritance and Gift Tax Act aims to provide a tax credit of 10% on the calculated inheritance tax if an individual donates more than 10% of their inheritance to a public interest corporation.

Proponents argue that the system could significantly increase private asset transfers to the public sector, potentially addressing welfare gaps in areas such as education, environment, and housing. Research suggests that while current donation intentions are around 29%, they could rise to over 53% if these tax incentives are implemented. To prevent misuse for corporate succession, the amendment excludes public interest corporations closely related to large enterprises from receiving these benefits.

However, the Korea Association of Certified Public Tax Accountants has raised concerns regarding practical implementation. They suggest that the law must address potential issues such as fluctuations in asset valuation during tax audits or legal disputes regarding forced heirship (legitime), which could cause the donation ratio to fall below the required 10% threshold after the initial filing. Experts also emphasized the need for robust transparency and verification mechanisms to ensure that tax benefits are not used as a means of tax avoidance.