Parents’ Contributions to South Korea’s Children’s Independence Fund Count Toward 20 Million-Won Gift-Tax Exemption

Parents who contribute to South Korea’s planned Children’s Independence Fund will not receive a separate gift-tax exemption. Their payments will count toward the existing exemption for gifts to minor children.

If a child receives no other gifts, parents could deposit 2 million won a year without creating a gift-tax liability. Current tax rules exempt up to 20 million won in gifts received by a minor from direct ascendants over a 10-year period. The calculation uses the amount parents actually deposit, not the fund’s investment value.

The fund will allow parents to invest in their child’s name until the child turns 18, with the government adding support based on household income. Families at or below 50% of median income will receive 1.2 million won a year regardless of the parents’ contribution. Families between 50% and 100% of median income will receive twice their contribution, capped at 1 million won a year. Families between 100% and 150% will receive matching contributions up to the same annual cap. Households above 150% will receive no government support.

The Financial Services Commission asked the finance ministry to treat parental contributions separately from the existing gift-tax limit. The ministry instead decided to combine them with other gifts, citing fairness with other forms of transfer.

The commission has set a 9.2417 trillion-won budget for next year. It allocated 2.0855 trillion won to youth asset-building programs, including 1.7 trillion won for a youth savings account and 146.5 billion won for the Children’s Independence Fund. Another 1.0828 trillion won will support programs such as special Sunshine Loans and Sunshine Loans for young people.

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Parents’ contributions to the Children’s Independence Fund will also be combined with the existing gift-tax exemption limit.