Hospitals Excluded from Family Business Inheritance Deduction...Hospital Directors Say, "We Must Sell Medical Assets to Pay Inheritance Tax"

1,934 out of 3,380 Hospitals Affected

In the 2026 tax reform plan announced by the government on August 3, hospitals were excluded from the industries eligible for the family business inheritance tax deduction, deepening the conflict between financial authorities and the hospital sector over the tax policy changes.

The Korean Hospital Association (hereinafter referred to as the Association) released a statement on August 18, demanding a reconsideration of the decision to completely exclude hospitals from the deduction target. The Association argued that hospitals unable to proceed with succession would ultimately be forced to close or be sold.

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A significant portion of hospital assets is tied up in land, buildings, operating rooms, intensive care units, and non-current medical assets such as CT and MRI equipment. Without the deduction, paying the inheritance tax would require selling assets used for patient care or taking on debt. The Association stated, "The disposal of assets could directly result in reduced bed capacity or the closure of hospitals," adding, "A significant number of relevant hospitals are in local regions, handling essential services like childbirth, pediatric care, and emergency surgeries, so this could lead to gaps in essential medical services." The Association also emphasized that hospital succession represents not just the transfer of property, but the "continuity of responsibility," and that the negative impact of disrupted succession would extend beyond owners to local residents.

According to the government's plan announced on August 3, the family business inheritance deduction limit will increase from 60 billion won to 100 billion won, but the industry classification for eligibility will shift from broad to detailed categories, resulting in the exclusion of hospitals, pharmacies, as well as supermarkets, transportation, parking, and warehousing businesses. Only 727 of the 1,205 total business categories will remain eligible. The definition of "family business" will also be newly limited to companies with patents, trade secrets, or specialized skills, and the system will introduce a process requiring approval by a public-private review committee. The required period of business operation by the decedent will be strengthened from 10 to 30 years, the required prior involvement of heirs from 2 to 5 years, and the post-management requirement from 5 to 10 years. If passed as originally proposed, the new rules will apply to inheritance cases commencing after July 1, 2027.

The government cites fairness as its justification. President Lee Jaemyung stated on social media on August 13, "Curtailing undue tax reductions is the path to normalizing taxation," while National Tax Service Commissioner Kwanghyeon Lim pointed out that the unclear definition of family business had allowed businesses with significant real estate holdings to benefit from the deduction, exposing a structural loophole.

The scope of application is also a point of contention. Of the 3,380 hospitals nationwide, 1,934 (57.2%) will be affected, including 87 of the 338 general hospitals. Many of these hospitals, equipped with inpatient, surgical, emergency, and intensive care facilities, serve as essential regional medical hubs and are among the beneficiaries of the government's comprehensive secondary general hospital support project and specialized essential function enhancement support project.

This content was produced with the assistance of AI translation services.