Family Business Inheritance Deduction Calculator

Check eligibility for Korea’s family business inheritance deduction (Inheritance and Gift Tax Act Article 18-2): a deduction of the family-business estate value capped at KRW 30/40/60 billion by how long the deceased ran the SME or mid-size company (10-20 / 20-30 / 30+ years). Covers the 40% (listed 20%) 10-year shareholding and CEO-tenure tests for the deceased, the heir conditions (age 18+, 2-year engagement, executive and CEO appointment), the mid-size cap where non-business inherited assets exceed 200% of the heir’s inheritance tax, and the 5-year post-management recapture.

Tax scenario inputs

Enter Korea-related tax assumptions in KRW. The model uses a simplified effective-rate estimate.

Taxable transfer value

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Estimated gross tax

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Net tax after adjustment

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After-tax amount

₩50,000,000,000

Effective rate

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This English page is a simplified Korea-related tax planning estimate. It does not reproduce official forms, progressive brackets, exemptions, local surtaxes, filing classifications, or eligibility decisions. Confirm current Korean rules before filing, paying, investing, or restructuring.

Related calculators

What is the family business inheritance deduction?

Korea’s family business inheritance deduction lets an heir who takes over a small or mid-size enterprise that the deceased ran for 10+ years deduct the value of that family-business estate from the inheritance tax base, up to KRW 60 billion.
It is set out in Article 18-2 of the Inheritance and Gift Tax Act and is meant to keep long-built businesses from being broken up by heavy inheritance tax so they can pass smoothly to the next generation.

The cap rises with how long the deceased ran the business — KRW 30, 40, or 60 billion — so the longer the business was operated, the larger the tax saving.
But three groups of conditions (business, deceased, and heir) must all be met, and detailed rules on shareholding, CEO tenure, and heir engagement make eligibility hard to judge.

Korea-based, 2026 rules. This calculator reflects the Inheritance and Gift Tax Act Article 18-2 (in force from 2026-01-02) and its Enforcement Decree Article 15 (in force from 2026-02-27). It is a reference estimate for Korean inheritance tax and does not replace professional filing advice.

The three requirement groups

All three groups below must be satisfied.
If even one group fails, no deduction is allowed, so each must be checked carefully.

1. Business requirements

The business must be a small enterprise (SME) or a mid-size enterprise whose main line of business is an eligible industry under the Enforcement Decree.
An SME must have total assets under KRW 500 billion, and a mid-size enterprise must have average revenue under KRW 500 billion over the prior three fiscal years.

  • • A large company with average revenue of KRW 500 billion or more over the prior three years is excluded.
  • • Some industries, such as real-estate leasing, may be excluded from the eligible-industry list.
  • • Both sole proprietorships and corporations qualify; a corporation is judged on the inherited shares.

2. Requirements for the deceased

The deceased must have run the business continuously for 10+ years, and this operating period sets the deduction cap.
The shareholding and CEO-tenure tests must also be met.

  • • The deceased and related parties combined must have held at least 40% (20% for a listed company) of total shares continuously for 10+ years.
  • • During the operating period the deceased must have served as CEO for one of: at least 50% of the period; 10+ years (with the heir succeeding and serving through the inheritance date); or at least 5 of the last 10 years before the inheritance date.
  • • A sole proprietor is judged on the period of owning and running the business as the representative.

3. Requirements for the heir

The heir must be 18 or older on the inheritance date and must have worked directly in the business for at least 2 years before that date.
However, the 2-year engagement is waived if the deceased died before age 65 or died from an unavoidable cause such as a disaster.

  • • The heir must take an executive position by the inheritance tax return deadline.
  • • The heir must become CEO within 2 years of the return deadline.
  • • If the heir’s spouse meets these conditions, the heir is treated as meeting them.

How the limit and deduction are calculated

The cap depends on how long the deceased ran the business.
The actual deduction is the smaller of the family-business estate value and this cap.

Deduction cap by operating period (Article 18-2(1))

  • • 10 to under 20 years: KRW 30 billion
  • • 20 to under 30 years: KRW 40 billion
  • • 30 years or more: KRW 60 billion

Deduction formula

Deduction = min( family-business estate value , period cap )
  • • The estate value is the value of business-use assets for a sole proprietorship, or share value minus the non-business asset ratio for a corporation.
  • • If the estate value exceeds the cap, only the cap is deducted and the excess is not.
  • • For a mid-size enterprise, the deduction can be denied when non-business inherited assets exceed 200% of the inheritance tax due.

Korean inheritance tax uses a five-tier progressive rate from 10% to 50% depending on the tax base.
Reducing the base by the deduction cuts tax at the marginal rate; deducting KRW 50 billion at a 50% marginal rate saves a very large amount of inheritance tax.

How to use this calculator

Step 1. Enter the business details

Choose SME or mid-size enterprise, and enter the average revenue over the prior three years and whether it is listed.
Revenue of KRW 500 billion or more excludes the business, so enter it accurately.

Step 2. Enter the deceased’s details

Enter the operating period, the largest-shareholder ratio and holding period, and the CEO tenure.
The 30/40/60 billion cap shows automatically based on the operating period.

Step 3. Confirm the heir conditions

Select yes/no for age 18+, 2-year engagement, and executive and CEO appointment plans.
If the deceased died before age 65, the 2-year engagement is waived.

Step 4. Enter the estate value and judge

Enter the family-business estate value in units of 100 million won and press Judge.
The pass/fail of each group, the deduction amount, and the tax saving appear at once.

Pitfalls people often miss

The mid-size company non-business asset cap

For a mid-size enterprise, if the heir’s non-business inherited assets exceed 200% of the inheritance tax the heir must pay, the family business deduction is denied.
This limit does not exist for SMEs, so it deserves special attention in mid-size succession.

For example, if the heir’s inheritance tax is KRW 10 billion and non-business inherited assets are KRW 30 billion, that exceeds KRW 20 billion (200% of the tax), so the deduction is denied.
Selecting mid-size enterprise in the calculator lets you enter these two values to test for denial.

The 5-year post-management recapture

Even after receiving the deduction, if within 5 years of the inheritance date the heir breaches the post-management conditions without justifiable cause, the deducted tax plus interest is recaptured.
The large deduction is granted on the premise that the heir keeps running the business.

  • • Disposing of 40% or more of business-use assets triggers recapture in proportion to the disposal.
  • • Recapture applies if the heir stops working in the business or the inherited shareholding decreases.
  • • Failing to keep the 5-year average headcount or total payroll at 90% of the baseline breaches the employment-maintenance rule.

Three paths for the CEO-tenure rule

The deceased’s CEO-tenure requirement is met by satisfying just one of three paths.
So even without serving for half the operating period, it can be met another way.

  • • Served as CEO for at least 50% of the whole operating period.
  • • Served for 10+ years, with the heir succeeding to the role and serving through the inheritance date.
  • • Served as CEO for at least 5 of the last 10 years before the inheritance date.

Frequently asked questions

Q. How is the operating period counted?

A. It is the period the deceased ran the business continuously; under 10 years means no family business is recognized.
The cap is KRW 30 billion for 10 to under 20 years, KRW 40 billion for 20 to under 30 years, and KRW 60 billion for 30 years or more.

Q. If there are several heirs, do they all get the deduction?

A. The deduction applies to the family-business estate received by a qualifying family-business heir.
Actual allocation and eligibility can differ per heir, so confirm with a professional.

Q. Does real-estate leasing qualify?

A. The deduction applies only to businesses whose main line is an eligible industry listed in the Enforcement Decree.
Some industries such as real-estate leasing may be excluded, so check the industry code first.

Q. Can it be combined with the farming inheritance deduction?

A. The family business deduction (Article 18-2) and the farming inheritance deduction (Article 18-3) cannot both apply (Article 18-4).
You must choose whichever one is more favorable.

Q. Can I file directly from this result?

A. This is a reference judgment tool.
Actual filing requires evidence of the industry, asset composition, shareholding structure, and engagement history, so consult a tax professional.

Tips and cautions

  • Confirm the operating period precisely: the cap swings between KRW 30, 40, and 60 billion, so the continuous operating period must be nailed down.
  • Distinguish the 40% and 20% tests: the threshold is 40% for unlisted and 20% for listed companies, held continuously for 10+ years.
  • Prepare the heir engagement early: having the heir work in the business for 2+ years before the inheritance date secures this condition.
  • Mid-size firms should check non-business assets: the deduction can be denied when non-business inherited assets exceed 200% of the inheritance tax.
  • Do not forget the 5-year post-management: asset disposal, leaving the business, share reduction, or employment breaches trigger recapture with interest.

Check your family business inheritance deduction now

Verify the business, deceased, and heir conditions one by one, and estimate the period-based cap, the deduction, and the tax saving.

Based on the Inheritance and Gift Tax Act Article 18-2 and Enforcement Decree Article 15, 2026 rules.