🚨 High-Net-Worth Individual Outflow

Today Korean Social News for Beginners | 2025.10.20

0️⃣ Wealthy Exit from Korea and Inheritance Tax Burden Issues

📌 Warning: 'Rich Leaving Korea'...2,400 Net Outflow Expected This Year

💬 Global consulting firm Henley & Partners predicted that South Korea would see a net outflow of 2,400 high-net-worth individuals in 2025. This ranks 4th globally, following the United Kingdom, China, and India. Meanwhile, the United Arab Emirates and the United States emerged as the top countries for wealthy inflows. Experts point to Korea's high inheritance tax rates, unclear tax structure, and political and economic uncertainty as main causes. Korea's inheritance and gift tax burden is at the highest level among OECD countries, with a nominal top rate of 50% and an actual burden exceeding 60% when including major shareholder premium assessments. While the government and National Assembly are discussing reforms, experts note that it will be difficult to see results in the short term.

💡 Summary

• High-net-worth individual outflow means more wealthy people leaving than entering a country.
• Korea recorded an outflow of 2,400 people in 2025, ranking 4th globally.
• High inheritance tax rates and economic uncertainty are cited as main reasons for leaving.

1️⃣ Definition

High-net-worth individual outflow means more wealthy people leaving a country than entering during a certain period. Generally, individuals with liquid assets of $1 million (about 1.3 billion won) or more are classified as high-net-worth individuals. Their movement goes beyond personal choice and directly affects a country's capital, investment, and jobs.

Wealthy people move for various reasons, but tax burden, economic stability, investment environment, education and healthcare quality, and political stability are the main factors. Continued net outflow can negatively impact the national economy, requiring policy attention.

💡 Why is this important?

• Wealthy people leaving means the simultaneous outflow of capital, investment, and jobs.
• It can lead to a weaker tax base and reduced economic vitality.
• It is an important indicator for evaluating national competitiveness and investment attractiveness.
• In the long term, it can negatively affect economic growth and industrial innovation.

2️⃣ Current Status and Causes of High-Net-Worth Individual Outflow

📕 Korea's Outflow Scale and International Comparison

• Korea's outflow scale increased sharply in 2025. Key facts include:

  • According to the Henley & Partners report, Korea recorded a net outflow of 2,400 people.
  • This ranks 4th globally after the UK (9,500), China (15,200), and India (4,300).
  • Net outflow has been increasing steadily over the past five years.
  • The larger the outflow, the greater its impact on the national economy.

• Meanwhile, some countries are seeing increased wealthy inflows. Key destination countries include:

  • The UAE became the top destination with an inflow of 6,700 people.
  • The United States ranked second with a net inflow of 3,800 people.
  • Singapore and Switzerland also show stable inflow trends.
  • These countries offer low tax rates and stable investment environments.

📕 Main Causes of Net Outflow

• High inheritance tax burden is the biggest factor. Key points include:

  • Korea's top inheritance tax rate is 50%, the highest among OECD countries.
  • Adding the 20% premium assessment on major shareholder stocks brings the actual burden over 60%.
  • Deduction limits are relatively low, affecting even the middle class.
  • Huge tax burdens during business succession create difficulties in company management.

• Economic and political uncertainty is also a major cause. Key issues include:

  • Geopolitical risks on the Korean Peninsula act as long-term uncertainty factors.
  • Policy changes following political transitions reduce predictability.
  • Frequent changes in real estate regulations and financial policies dampen investment sentiment.
  • There is a relative lack of globally competitive investment opportunities.

💡 Key Issues in High-Net-Worth Individual Outflow

1. Tax competitiveness: OECD's highest inheritance tax rate and complex tax structure
2. Capital outflow: Simultaneous departure of investment capital and job creation opportunities
3. Business succession difficulties: Difficulty in transferring businesses due to high tax burdens
4. National competitiveness: Falling behind in the competition to attract talent and capital
5. Weakening tax base: Long-term concerns about tax revenue decline and reduced economic vitality

3️⃣ Reform Discussions and International Cases

✅ Current Status of Inheritance Tax Reform Discussions

• Various reform proposals are being discussed in government and parliament. Key proposals include:

  • Reducing the top inheritance tax rate to 40% is being considered.
  • Switching to a beneficiary-based tax system to improve tax fairness.
  • Significantly expanding spouse and child deduction limits.
  • Easing requirements for business succession tax relief to support company transfers.

• Expected effects and concerns about reforms coexist. Key perspectives include:

  • Supporters emphasize effects like preventing capital outflow and strengthening corporate competitiveness.
  • Opponents worry about deepening wealth transfer and reduced tax revenue.
  • Experts recommend gradual reforms while maintaining tax fairness.
  • Many opinions call for a balanced approach considering international tax competitiveness.

✅ International Cases and Lessons

• The UK's non-resident tax system reform case. Key points include:

  • In 2017, the UK reduced tax benefits for non-residents.
  • Subsequently, wealthy exodus increased rapidly and tax revenue actually decreased.
  • This negatively affected London's real estate market and financial industry.
  • The UK government now acknowledges the side effects and is seeking remedies.

• France's wealth tax abolition experience. Key developments include:

  • France strengthened its wealth tax in the 1980s but experienced massive capital flight.
  • In 2017, the Macron government abolished the wealth tax and shifted to real estate-focused taxation.
  • This resulted in the return of wealthy individuals and increased investment.
  • It confirmed that tax design directly influences where wealthy people choose to live.

• Singapore and UAE success stories are also attracting attention. Key features include:

  • Singapore abolished inheritance tax and attracts capital with low corporate taxes.
  • The UAE has no income tax or inheritance tax, becoming the top destination for wealthy individuals.
  • Both countries have stable political environments and transparent legal systems.
  • These cases show that tax competitiveness is a core element of national competitiveness.

4️⃣ Related Terms

🔎 Top Inheritance Tax Rate

• The top inheritance tax rate is the maximum tax rate on inherited property.
  • The top inheritance tax rate refers to the maximum percentage of tax imposed when inheriting property after someone's death. Korea applies a top rate of 50% on amounts over 3 billion won, and with the 20% premium assessment on major shareholder stocks, the actual rate can reach 60%.
  • Inheritance tax has a progressive structure. First, 10% applies to amounts up to 100 million won. Second, rates of 20%, 30%, and 40% apply to amounts up to 500 million, 1 billion, and 3 billion won respectively. Third, the top rate of 50% applies to amounts over 3 billion won. Fourth, special provisions exist for business succession and agricultural inheritance, but requirements are strict.
  • Korea's inheritance tax rate is at the highest level among OECD countries. The US has 40%, Japan has 55% but with much higher deduction limits. The UK has 40% but spousal inheritance is tax-free. Germany has 30% with significant relief for business succession. While many countries are abolishing or lowering inheritance taxes, Korea maintains high rates, leading to active reform discussions.

🔎 Beneficiary-Based Tax System

• A beneficiary-based tax system taxes based on what each heir receives.
  • A beneficiary-based tax system means taxing each heir individually on their share rather than taxing the total estate. Korea currently uses an estate tax system that taxes the total inheritance, but switching to a beneficiary-based system could improve tax fairness.
  • Key features of beneficiary-based taxation include: First, each heir pays tax only on the amount they receive. Second, more heirs mean the tax burden is distributed and reduced. Third, small-amount heirs may pay no tax within deduction limits. Fourth, the progressive effect is mitigated compared to the estate tax system.
  • Major European countries like Germany and France have adopted beneficiary-based tax systems. This method can increase fairness among heirs and reduce tax burden differences based on family composition. Korea is considering this transition, but there are opinions calling for careful approaches due to concerns about reduced tax revenue and wealth transfer.

🔎 Business Succession Tax Relief

• Business succession tax relief is a tax benefit supporting smooth succession of small and medium-sized enterprises.
  • Business succession tax relief means deducting a certain amount from the taxable estate when inheriting a small or medium-sized enterprise that the deceased managed for 10 years or more. Deductions up to 60 billion won are possible, but strict requirements keep actual utilization rates low.
  • Main requirements for business succession tax relief include: First, the deceased must have continuously managed the business for 10 years or more. Second, the heir must have worked at the company for 2 years or more before the inheritance. Third, there are obligations to maintain the business type and employment for 10 years after inheritance. Fourth, failure to meet requirements results in additional tax collection.
  • The government is considering easing business succession tax relief requirements. Reform proposals under discussion include expanding the scope of allowed business type changes, easing employment maintenance obligations, and shortening the post-management period. The goal is to support smooth generational transitions and maintain competitiveness of companies.

5️⃣ Frequently Asked Questions (FAQ)

Q: Does high-net-worth individual outflow affect ordinary citizens too?

A: In the long term, it can lead to reduced jobs and lower economic vitality.

• Wealthy people leaving is not just a problem for the rich. First, when the companies they operated or investments they made decrease, job creation declines. Second, reduced tax payments from wealthy individuals burden national finances. Third, contraction in real estate and luxury goods markets damages related industries. Fourth, excellent talent and capital leave together, weakening national competitiveness.
• In the long term, this can lead to slower economic growth and fewer jobs for young people, indirectly affecting ordinary citizens' lives. Therefore, wealthy outflow is an important issue requiring attention from all of society.

Q: Won't lowering inheritance tax deepen wealth transfer?

A: Finding an appropriate balance is important, and other complementary measures are needed along with rate adjustments.

• Lower inheritance tax does not necessarily mean deeper wealth transfer. First, many point out that Korea's current inheritance tax rate is excessively high by OECD standards. Adjusting to an appropriate level is necessary for international competitiveness. Second, even with lower rates, minimizing tax revenue decline is possible by broadening the tax base and preventing tax evasion. Third, reasonable deduction system design can simultaneously protect the middle class and ease wealth concentration.
• What matters is not just the rate but the fairness and efficiency of the entire tax system. Policy design must comprehensively consider not only inheritance tax but also gift tax, corporate tax, and comprehensive real estate tax. Additionally, deepening wealth gaps can only be eased by combining other policies like strengthening social safety nets and expanding educational opportunities.

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