In recent years, large bakery cafés — often built on high-value suburban land — have gained a reputation among affluent households as a vehicle for tax planning. (Yonhap)
SEOUL, Feb. 1 (Korea Bizwire) — South Korea’s National Tax Service said it will begin a nationwide review of large bakery cafés amid growing concerns that the businesses are being used by wealthy families to sidestep inheritance and gift taxes.
The agency announced last week that it would conduct a fact-finding investigation into large-scale bakery cafés in Seoul and Gyeonggi Province, focusing on whether owners have exploited loopholes in the country’s family business inheritance tax exemption system.
While the initial review is aimed at identifying institutional weaknesses, officials said cases showing signs of tax evasion would be escalated into full-scale tax audits.
In recent years, large bakery cafés — often built on high-value suburban land — have gained a reputation among affluent households as a vehicle for tax planning. Under current rules, land used for qualifying family-run businesses can be transferred with substantial tax exemptions if the enterprise is operated for at least 10 years before inheritance and continues for five years afterward.
Critics say the system has enabled some asset holders to convert real estate holdings into nominal bakery businesses solely to qualify for exemptions. In one commonly cited example, a plot of land worth roughly 30 billion won could be transferred with little or no inheritance tax after being operated as a bakery café for the required period.
President Lee Jae-myung raised concerns about such practices earlier this month, asking senior aides to review whether the policy was being misused.
The tax authority said it will examine whether cafés registered as bakeries are in fact operating primarily as coffee shops — which are not eligible for the exemption — by analyzing revenue structures. It will also scrutinize cases in which residential homes are built on café property, which would disqualify the land from being treated as inheritance-eligible business assets.
For cafés operated through corporate entities, investigators will assess ownership structures, management control and whether family members genuinely run the business, rather than using it as a shell to secure tax benefits.
The inheritance exemption system was originally designed to help small and midsize companies pass down skills, technology and management continuity. Authorities say its use as a tax-avoidance tool undermines both the spirit of the law and public trust in the tax system.
The National Tax Service said it plans to analyze findings from the review and propose institutional reforms to the finance ministry, while continuing to support legitimate family business succession through advisory programs.
The move reflects growing political and public pressure to tighten oversight of wealth transfers as inequality and tax fairness remain central issues under the Democratic Party–led government.
M. H. Lee (mhlee@koreabizwire.com)
