The KRW 500m lump-sum deduction (Inheritance Tax and Gift Tax Act, Art. 21(1)) and the financial-asset deduction (Art. 22(1)) apply only where inheritance commences "on the death of a resident". Only the KRW 200m basic deduction (Art. 18) covers the death of "a resident or a non-resident".
The condition attached to "the first 500 million is untaxed"
The most widely held belief about Korean inheritance is that the first KRW 500m escapes tax. The basis for it is the lump-sum deduction. Article 21(1) of the Inheritance Tax and Gift Tax Act lets heirs and legatees deduct the greater of KRW 500m or the sum of the basic and other personal deductions. But the opening words of that provision are "where inheritance commences on the death of a resident". Its application is confined to residents. The financial-asset deduction is the same: Article 22(1) allows up to KRW 200m against net financial assets "where inheritance commences on the death of a resident". Article 20(1), covering other personal deductions, opens the same way. Article 18, on the basic deduction, is worded differently: "Where inheritance commences on the death of a resident or a non-resident, KRW 200 million shall be deducted from the taxable value of the inheritance." Resident and non-resident stand side by side. Read together, the conclusion is clear: in a non-resident’s estate, essentially only the KRW 200m basic deduction survives.
How far that moves the liability
Why losing 500m of deductions matters shows up in the rate structure. Article 26 sets progressive rates: 10% on a base up to KRW 100m, 20% over 100m to 500m, 30% over 500m to 1bn, 40% over 1bn to 3bn, and 50% above 3bn. Fewer deductions mean a larger base, and a larger base reaches higher brackets — so the difference is amplified rather than simply matching the lost deduction. One factor pulls the other way, though. Article 3 taxes all inherited property worldwide where the decedent was a resident, but only property located in Korea where the decedent was a non-resident. For a non-resident, the taxable scope narrows. For someone with substantial assets abroad and modest Korean assets, that narrowing can outweigh the loss of deductions. Which position is better therefore depends on the composition of the estate, and cannot be known without calculating it.
Residency is not nationality
So residency comes before everything else. The Act borrows the concept from the Income Tax Act, and Article 1-2(1) there defines a resident as an individual with a domicile in Korea or a place of residence there for 183 days or more, and a non-resident as anyone who is not a resident. An overseas Korean who has kept Korean nationality may be a non-resident if life is centred abroad, and a foreign national with a Korean domicile may be a resident. Domicile is judged by where life is centred, independently of day count, so the 183-day figure does not settle it. In practice we weigh the certificate of entry and exit, the home-country tax residency certificate, where the family lives, housing owned or leased, and the location of occupation and principal assets. Where the position is genuinely arguable, assembling the basis for resident status is itself valuable work — because the 500m deduction turns on it.
The deadline may be nine months, not six
Article 67(1) requires filing within six months from the last day of the month in which inheritance commences, and Article 67(4) extends that to nine months where the decedent or an heir was domiciled abroad. In cross-border estates those extra three months are intensely practical. Heirs spread across several countries must each obtain powers of attorney and signature certification locally, and notarisation or certification at a Korean mission takes different lengths of time in different countries. A separate succession process may also be running in the home country. Even working backwards from nine months, the schedule is often tight. Gift tax, by contrast, allows no slack: Article 68(1) requires filing within three months from the last day of the month in which the gift is received. Where an overseas party is involved, document preparation can consume the whole period, so it is safer to check the document timetable before making the gift.
An estate cannot be planned after the death
Most of the variables that decide the outcome are fixed before inheritance commences. The decedent’s residency, where the property sits, and how the estate is composed together determine both the deductions and the taxable scope. Once inheritance has commenced none of them can be changed, and what remains is to value accurately and file on time. So if you live abroad and hold property in Korea, it is worth reviewing this while inheritance is still only a concern. Which assets sit on which side changes the deductions that will later apply.