Last Year's 'Ilgam Molajugi' Gift Tax Amounted to 188.5 Billion Won

[Asia Economy Reporter Jang Sehee] Last year, the gift tax on 'preferential business allocation' by companies nearly reached 200 billion KRW.

According to data submitted by the National Tax Service to Yang Kyung-sook, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, the gift tax collected from preferential business allocation last year amounted to 188.5 billion KRW.

This is 2.8 times the amount in 2017 (68.1 billion KRW), with the tax amount increasing from 73.4 billion KRW in 2016, 68.1 billion KRW in 2017, 107.5 billion KRW in 2018, to 196.8 billion KRW in 2019.

The gift tax on preferential business allocation is imposed on controlling shareholders of beneficiary corporations that gain profits through preferential business allocation by related parties. For example, if a special related corporation allocates business to a corporation controlled by the company owner's child, resulting in profits, this is regarded as a gift and taxed accordingly.

Specifically, if the sales ratio to corporations related to the controlling shareholder among the beneficiary corporation's sales exceeds 30% (40% for mid-sized companies, 50% for small and medium enterprises), the controlling shareholder and their relatives holding more than 3% (10% for small and mid-sized companies) of direct or indirect shares in the corporation must pay taxes.

If sales to related corporations exceed 100 billion KRW, the tax applies even if the sales ratio exceeds 20%.

Last year, 1,226 companies paid gift tax on preferential business allocation.

The companies with the highest tax payments were large corporations, which paid a total of 154.8 billion KRW in gift tax on preferential business allocation.

Additionally, mid-sized companies paid 13.9 billion KRW, small and medium enterprises paid 8 billion KRW, and general corporations paid 11.8 billion KRW.