Korea's heir-focused succession tax breaks miss 675,000 older-led SMEs without a successor

Most of the owners complaining about tax are not the ones leaving the family route. If the 2025 survey's shares describe the same respondents, 72.5% of chief executives still intend to hand the company to a child ^[9]. That means at least 52.5 of the 80 points citing tax as the main obstacle come from family-succession planners, about two-thirds of the group ^[8][21]. Among owners who have left the family route, tax ranks fourth as a reason ^[10]. Reluctance to hand children a company in a hard market leads at 26.8%, about 2.4 times the 11.3% who blame tax ^[10][17]. A weak industry outlook (18.1%) and children who do not want the job (15.5%) also come ahead of it ^[10].

Tax reaches the outside route through the code's design. The family business inheritance deduction and special gift tax treatment apply when a company passes to children, while tax and financing help for a professional manager or employee buyer is relatively limited, Seoul Economic Daily reported ^[1]. An insider with decades at the firm who is named as successor still has to buy the founder's shares. Paying for them out of their own pocket is hard when the company is worth tens of billions of won or more ^[12]. Choi Soo-jung, who leads the policy research division at the Korea Institute for Small Business and Startups, put it this way: "Because the current support framework for business succession is built largely around transfers within the family, there are not many programs available when an owner wants to hand the company to a professional manager or a third party" ^[2].

The state's first answer is a matchmaker. The ministry's business succession M&A program, new this year, pairs older owners who want to sell with buyers and helps with valuation, deal structuring and post-merger integration ^[13]. The ministry's 675,000 figure is 28.6% of 2.36 million older-led firms ^[16]. The program's 200 participants come to one for roughly every 3,375 successorless companies ^[18], and the 56,000 in manufacturing alone are 280 times this year's intake ^[7][19]. The report does not describe the program lending buyers money ^[13].

Among owners off the family route, 46.4% plan to install a professional manager or sell, against 9.1% who plan to close ^[11][20]. The outcomes split from there. Rep. Jeon Eun-soo's employee buyout act, if it passes with financing attached, would let hired managers become owners ^[15]. A larger matching program would give the 21.1% who plan to sell a market to sell into ^[11]. Without either at scale, the closure share rises.

We think sales to other companies are the likeliest result. A corporate acquirer is the buyer best able to pay for a stake priced in tens of billions of won, and the insider who knows the clients and the technology is the one the current rules leave short of funding ^[12][1]. The view is wrong if Jeon's act arrives with tax treatment close to the family deduction. For now the report describes the bill as still in preparation ^[15].