"Second Child Also Eligible for Gifted Property Deduction"… National Tax Service Publishes 'Gift Tax Consultation Casebook'

The National Tax Service announced on the 4th that it has created 'Inheritance and Gift Tax Knowledge II,' which compiles frequently asked gift tax consultation cases such as marriage and childbirth gift property deductions, which have been implemented since this year and have generated many taxpayer inquiries, as well as actual gift tax filing errors that occur during the reporting process.

An official from the National Tax Service explained, "The National Tax Service produces and distributes the 'Inheritance and Gift Tax Knowledge' series to directly address the questions of the general public who find it difficult to get help from tax professionals," adding, "This time, the frequently asked gift tax consultation cases cover topics that many people are curious about and can easily encounter in daily life, such as the application methods of general gift property deductions including marriage and childbirth gift property deductions, and whether to file when the gift tax is below the taxable threshold."

The following are the main contents included in the gift tax consultation casebook.

- I missed the childbirth gift property deduction because it has been more than 2 years since I gave birth to my first child. My second child is expected to be born soon, and I am wondering if I can apply for the childbirth gift property deduction.

▲ The childbirth gift property deduction applies regardless of the child's birth order, so if you receive property within 2 years from the birth date of the second child, the childbirth gift property deduction will apply.

However, unlike the marriage gift property deduction, it does not apply if the property is received before the birth date or adoption registration date, so if you plan to give a gift, it must be received after the child's birth date or adoption registration date.

Also, the marriage gift property deduction applies regardless of whether it is a first marriage or remarriage. Even if you give birth to or adopt a child while unmarried, you can still apply for the childbirth gift property deduction.

- I received 50 million won from my parents, and if I apply the 50 million won gift property deduction, there is no tax to pay. Do I still have to file in this case?

▲ Generally, gift tax must be filed and paid within 3 months from the end of the month in which the gift was received.

However, if the gift property deduction amount exceeds the value of the gifted property and there is no tax to pay, there is no disadvantage in not filing a gift tax return. Nevertheless, since the amount reported in the gift tax return is later recognized as the source of funds, it is recommended to file a gift tax return even if there is no gift tax to pay. When transferring the gifted property and calculating capital gains tax, the acquisition cost can be recognized based on the gift tax return details.

- I held a wedding ceremony in December 2021 but registered the marriage in December 2022 due to unavoidable circumstances. I received cash from my parents in May 2024 but did not apply the marriage gift property deduction because it was more than 2 years after the wedding ceremony.

▲ The marriage date refers to the registration date on the marriage certificate and is unrelated to the wedding ceremony date. Therefore, as in this case, even if the wedding ceremony was held in December 2021, if the marriage was registered in December 2022, it falls within 2 years before the gift date (May 2024), so the marriage gift property deduction can be applied.

- I borrowed wedding funds from my parents in 2023 and agreed not to repay the borrowed money in 2024, applying the marriage gift property deduction when filing.

▲ If the creditor (lender) forgives the debt, the debtor (borrower) must pay gift tax on the forgiven debt amount. The gift benefit obtained by the debtor through debt forgiveness is not a gift property to which the marriage or childbirth gift property deduction applies. Therefore, even if you agree to forgive the money borrowed from your parents in 2023 in 2024, the marriage gift property deduction does not apply.

If you receive cash as a gift and then repay the debt, rather than having the debt forgiven, the marriage gift property deduction can be applied to the cash gift.