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Post Lee Kun-hee

Samsung heirs may face record-high $10 bn inheritance tax bill

Dec 22, 2020 (Gmt+09:00)


From left: Samsung Group heirs Lee Seo-hyun (Samsung Welfare Foundation chair), Lee Boo-jin (Hotel Shilla CEO), Jay Y. Lee (Samsung Electronics vice-chairman)
From left: Samsung Group heirs Lee Seo-hyun (Samsung Welfare Foundation chair), Lee Boo-jin (Hotel Shilla CEO), Jay Y. Lee (Samsung Electronics vice-chairman)

The Samsung Group heirs, including Samsung Electronics Co.'s de facto leader Jay Y. Lee, may be looking at a record-high $9.9 billion inheritance tax bill, industry watchers speculate as they wait for the final verdict on Dec. 22.

The tax bill is likely to be the highest amount imposed on a South Korean company in the nation's history of charging inheritance tax, considering that, at the time of his death, the group's late patriarch Lee Kun-hee was the richest man in the country with shareholdings valued at around 18 trillion won ($16.2 billion).

Chairman Lee, credited with making Samsung a global brand for electronics and semiconductors, passed away in October at the age of 78. His three children and wife are set to take over his Samsung unit shareholdings.

The inheritance tax can be calculated by averaging the closing price of shares in companies that Chairman Lee held a stake in between Aug. 24 and Dec. 22, two months before and after his death.

His ownership included a 4.18% stake in Samsung Electronics, a 17.33% stake in Samsung C&T Corp., a 9.2% stake in Samsung SDS Co. and a 20.76% stake in Samsung Life Insurance Co. He also held a 0.08% stake in Samsung Electronics through preferred shares.

The estimated inheritance tax based on Chairman Lee’s shareholdings as of Dec. 21 hovers around 18.9 trillion won. His heirs are expected to pay around 11 trillion won in taxes after applying premium rates and deductions. This is about 400 billion won more than the estimated tax calculated at the time of his death given the recent bullish performance of Samsung affiliates’ share prices.

Also, the real estate held by Chairman Lee is likely to add a sizeable chunk to the tax bill. The late patriarch owned half of the 13.2 million-square-meter Everland, the country's largest theme park, in addition to his home in Hannamdong, a high-end residential area in Seoul.

His property holdings are evaluated at over 1 trillion won, meaning that the Samsung heirs may see their tax bill climb to the 12 trillion won range given that 50% of the real estate inheritance value is taxable.

The massive tax bill may push Samsung Group's family members to sell some shares in Samsung units to secure cash. The potential share sale could lead to the ownership family's weakened control over the conglomerate, leaving them vulnerable to activist shareholders, as reported earlier.

Samsung Group's family members will be required to file and pay the inheritance tax by the end of April next year. They can opt to make installment payments in which they pay one-sixth of the total during the reporting period and pay off the remaining amount in installments over the next five years. 

The Samsung heirs will likely follow the lead of LG Group Chairman Koo Kwang-mo who chose to make installment payments on his inheritance taxes totaling 921.5 billion won. 


Write to Hyung-suk Song at click@hankyung.com

Danbee Lee edited this article.

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