'Super Rich' Leaving Korea Due to Inheritance Tax Bomb... Increasing Trends in Immigration and US Stock Investment

Increase in US and Singapore Immigration Due to Inheritance and Gift Tax Burden
With Expectations for the Americas, Korean Retail Investors Surpass $100 Billion in Investment

As Korea's 'super-rich' flock to U.S. investor immigration due to the burden of inheritance and gift taxes, individual investors are also turning their attention to U.S. stocks.

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On the 10th, the U.S. Department of State announced that the U.S. consulate in Korea issued 365 investor immigration (EB-5) visas last year (based on the U.S. fiscal year). This is more than double the 171 visas issued in 2022. In June alone this year, 105 investor immigration visas were issued, far exceeding the average level.

Looking at the ranking of countries by the number of U.S. investor immigration visas issued this year, Korea ranked 5th after ▲China ▲Vietnam ▲India ▲Taiwan. It is interpreted that the so-called 'super-rich' are trying to leave Korea for countries with lower inheritance tax rates due to the heavy burden of inheritance and gift taxes. Although the U.S. does not have a particularly low inheritance tax rate itself (maximum inheritance tax rate is 40%), it is known to issue investor immigration visas relatively easily if one pays the cost, considering various deduction benefits and educational environments for children. In addition, many are reportedly aiming for immigration to countries like Singapore, which has no inheritance tax at all. Korea's highest inheritance tax rate is 60% (including the major shareholder surcharge), one of the highest levels in the world.

Not only manpower but also domestic funds seem to be rapidly flowing into the U.S. As the U.S. New York Stock Exchange continues its upward trend, the amount of U.S. stocks held by individual investors exceeded $100 billion (about 139.95 trillion KRW) for the first time. According to the Korea Securities Depository as of the 7th, the amount of U.S. stocks held by domestic investors recorded $101.36571 billion (about 141.8613 trillion KRW).

This is analyzed as a massive shift to U.S. stocks triggered by news of the Federal Reserve's (Fed) interest rate cuts and expectations of a strong market around Thanksgiving and year-end. On the other hand, despite the decision to abolish the financial investment income tax, the domestic stock market continues to show weakness. The Korea Exchange reported that individual investors sold a net total of 349.4 billion KRW worth of Korean securities over two days, from the 6th to the 7th of this month.