Gift (증여)

A gift is a contract that transfers property to another person free of charge, and it is a legal concept governed both by contract law under the Civil Act and by taxation issues under the Inheritance

Gift

Overview

A gift (贈與; 증여) is a contract formed when one party expresses the intent to give their own property to the other party free of charge and the other party accepts (Article 554 of the Civil Act). In other words, the core element is a "gratuitous transfer," in which property is transferred without payment of consideration, and it is clearly distinguished from sales and exchanges, which involve consideration. At the same time, a gift lies within the realm of contract law under the Civil Act while also serving as the underlying concept of gift taxation under the Inheritance and Gift Tax Act, so in actual transactions both the requirements for formation of the contract and the tax treatment must be examined together.

Key Details

1. Legal Nature of a Gift under the Civil Act

Gratuitous contract / unilateral contract: The donor bears only the obligation to give the property, and the donee bears no obligation of counter-performance.
Consensual contract: It is formed by the mere agreement of the parties, and delivery or registration of the object is not a requirement for formation.
Informal contract: No written document is required. However, a gift not made in writing may be rescinded by either party (Article 555 of the Civil Act). That said, the portion already performed cannot be rescinded.
Warranty liability: In principle, the donor bears no warranty liability for defects in the object (Article 559 of the Civil Act). There are exceptions, such as where the donor knew of a defect but failed to disclose it.
Special types of gifts: These include gifts subject to a burden, periodic gifts (Article 560 of the Civil Act), gifts upon death (Article 562 of the Civil Act, applying the provisions on testamentary gifts by analogy), and acts of donation.

2. Gifts and Gift Tax under Tax Law

The Inheritance and Gift Tax Act designates as a gift tax taxpayer "a person who has acquired property free of charge through a gift from another person (excluding a gift that takes effect upon the death of the donor)." In other words, gift tax is a tax paid by the donee who receives the property, and in principle it is reported to the tax office having jurisdiction over the donor's address.

Gift property deduction (aggregated over 10 years)

Spouse: 600 million won
Lineal ascendants (adult donee): 50 million won / minor donee: 20 million won
Lineal descendants: 50 million won
Other relatives (blood relatives within the 6th degree, relatives by marriage within the 3rd degree): 10 million won
Others: no deduction

Gift tax rates (progressive rates based on the tax base)

Up to 100 million won: 10%
Over 100 million won to 500 million won: 20%
Over 500 million won to 1 billion won: 30%
Over 1 billion won to 3 billion won: 40%
Over 3 billion won: 50%

The filing deadline is within 3 months from the last day of the month in which the gift was received, and a filing tax credit (3%) applies when the return is filed within the deadline. Failure to file or underreporting results in additional taxes (penalties).

3. Provisions on Presumed and Deemed Gifts

The Inheritance and Gift Tax Act provides various "presumption of gift" and "deemed gift" provisions to supplement the substance-over-form principle.

Presumption of gift between spouses or lineal ascendants/descendants (Article 33): Where funds for acquiring property are received in such a relationship, it is presumed to be a gift.
Difference in low-price acquisition / high-price transfer (Article 35): If the difference between the market price and the transaction price exceeds a certain threshold, that difference is treated as a gift.
Benefits such as forgiveness of debt (Article 36): Benefits obtained through forgiveness of debt, provision of collateral, free use, etc., are treated as gifts.
Title trust (Article 45-2): Where property is registered in the name of an organization without legal capacity or of another person, the actual owner is deemed to have received a gift.
Insurance proceeds (Article 34): Receipt of insurance proceeds insuring the death of another person is treated as a gift.

Because of these provisions, prior tax review is essential when moving real estate, stocks, or corporate funds between family members.

4. Gift Subject to a Burden (부담부증여)

A gift subject to a burden is a form in which the donee receives property on the condition of assuming the donor's debt. In this case, the amount of the assumed debt is treated as an onerous transfer, so capital gains tax is imposed on the donor, while gift tax is imposed on the donee for the net asset value remaining after subtracting the debt. A typical case is transferring a house to one's children while a mortgage loan is outstanding, and the decision is made by comparing the burdens of capital gains tax and gift tax.

5. Summary of Procedure

1. Conclusion of the gift contract (oral is possible, but a written contract is recommended to prevent disputes)

2. Organization of public records such as registration, entry in the register, and transfer of title

3. Filing of gift tax (within 3 months from the last day of the month in which the gift was received)

4. Payment of the tax amount and, if necessary, application for installment payment or payment in annual installments

Recent Trends

The major changes in 2024–2025 are as follows.

New marriage and childbirth gift property deduction: For gifts made on or after January 1, 2024, an additional 100 million won may be deducted for gifts received from lineal ascendants within two years before or after the marriage registration, and an additional 100 million won per child is granted upon the birth of a child. As a system designed to encourage marriage and childbirth, its practical use has increased.
Discussions on reorganizing tax rates and deductions: In the government's 2025 tax law amendment bill, a plan was announced to lower the maximum inheritance and gift tax rate from 50% to 40% and to expand the child deduction from 50 million won to around 500 million won, and deliberations are under way in the National Assembly. Depending on whether it is finalized and the timing of its implementation, demand to adjust the timing of gifts is increasing.
Family business succession and SME special treatment: The requirements and post-management (such as maintaining employment) of the special treatment for gifts in family business succession are being repeatedly amended, so the latest requirements must be checked when establishing a succession plan.
Taxation of virtual asset gifts: Virtual assets such as Bitcoin are also treated as property subject to gift tax, and with the taxation of income from the transfer and lending of virtual assets taking effect in 2025, calculating the tax burden at the disposal stage after a gift has become important.
Strengthened carryover taxation and post-management: If gifted real estate is transferred within a certain period, carryover taxation applies, and the National Tax Service is strengthening verification of expedient gifts and borrowed-name transactions for the purpose of tax evasion.
Reporting convenience systems: Electronic filing of gift tax via Hometax, automatic gift tax calculation services, and preview services have been expanded, allowing taxpayers to simulate the tax amount in advance.