Inheritance and bestowal of mediumand small firm

 

                  Written by Selim tax accounting firm

           Translated by Eun Kyung, Park

 

Ⅰ. Outline

Inheritancetax in domestic is 10 times compared German and 4.5 times , Japan.

Itoccurs difficulty to operate medium and small firm after owner's death.

Governmentrevised tax law for it and we would like to explain classifying “beforestarting inheritance” and “after starting inheritance”.

 

Ⅱ. Tax favor before starting inheritance

1.Bestowal taxation special case for the establishing company fund.

Bestowal : from : Parents (over 60 years old)          to  :   child (over 18years old, establishing medium and small firm ).

       

 

 

• 500 million deduction

• 10% unilatary tax rate is applied

• Limit 300 million

Ifit is inheritance it will be ordianarily taxation.

 

<2>Specific condition

 (1) Giver

Parent:over 60 years old.

 (2) Receiver's condition

  Receiver: over 18 years old.

 

 (3) Establishing company fund condition

 ① Company should be established within1 year.

 ② Establishing fund should be usedwithin 3 years.

 

 (4) Excluded property

 ① Land and building

 ② Real estate right

 ③ Stocks

 ④ Other assets ( operating right,membership etc...)

 

 (5) Application tax favor

Submittinghead of a district tax office in the place of tax payment 「Breakdown of establishingcompany funds」and 「Application of establishing fund tax favor」

 

2.Bestowal special provisions on taxation for the family business succession

<1>Outline

˙ Parent (over 60 years old)

˙ Family business succession property(over 10 years operated company) ⇒ bestowal to child(over 18 years old).

 

˙ 500 million deduction

˙ 10% unilatary tax rate is applied

If it is inheritance ordinary tax is applied.

 

<2> Specific condition

 (1)Giver

 ① Parents: over 60 years old

 ② The largest shareholder of operated medium small firm over 10years.

 ③50/100 including giver's and affiliate party's shares.

 (2)Receiver's condition

 Child :over 18 years old resident

 (3)Should be taken office as CEO within 5 years

 (4)Asking for applying of taxation special case

Submitting head of tax office in the place ofpayment 「Application of bestowal taxation case applying 」 by filing deadline.

 

Ⅲ Tax favor after starting inheritance

1. Deduction for family business succession

<1> Outline

˙ Parent

˙ Inheritance property of family businesssuccession (medium and small from operated over 10 years) ⇒ child (over 18 years old)

 

< Taxation Favor>

˙ Basic deduction : 200 million + MIN (①②)

① Inheritance property of family businesssuccession

② Limit 20,000 million over 10 years,30,000 million operated medium and small company over 20 years, 50,000 millionoperated medium and small company over 30 years.

 

<2> Specific condition

(1) Inheritance condition for the familybusiness succession

 1)Individual enterprise: Business asset(land, building etc)- Security frombusiness asset= amount.

2) Incorporatedenterprise: company's share etc.