Finance ministry officials hold a press briefing on the government's push to replace the estate tax system with an inheritance tax at the government complex in the central city of Sejong, March 12. Yonhap

The government on Wednesday pre-announced the revision of tax laws aimed at replacing the decades-old estate tax system with an inheritance tax to ease tax burdens on beneficiaries, the finance ministry said.

Under the proposed revision, Korea will push to revise the inheritance tax and gift tax act,as well as the framework act on national taxes, to replace the estate tax system with an inheritance tax by 2028, according to the Ministry of Economy and Finance.

Korea currently imposes an estate tax, which is levied on the net value of a deceased person's whole estate. In contrast, most advanced economies levy an inheritance tax, which requires beneficiaries, such as spouses and children, to pay taxes based on the assets they each inherit.

Under the current five-tier system, the top tax rate stands at 50 percent for inherited assets exceeding 3 billion won ($2.1 million). The rate rises to 60 percent for those inheriting shares in large corporations.

For example, if assets worth 3 billion won are inherited by a spouse and two children, with each receiving 1 billion won, a total of 440 million won in tax is levied under the current system.

Under the proposed new system, the tax burden would be significantly reduced. Each child would pay 90 million won in taxes, while the spouse would be exempt, as the tax base and deduction rates would be applied individually based on their respective inherited assets.

The ministry said the minimum personal deduction will be set at 1 billion won. If the total personal deductions fall below this amount, the shortfall will be applied as an additional deduction for direct descendants and ascendants who are heirs.

The ministry plans to submit the revision bills to the National Assembly in May following the required 40-day period of advance notice. (Yonhap)