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Inheritance tax

Samsung heirs to donate nearly $3 bn in cash, art

By Apr 28, 2021 (Gmt+09:00)

Inwangjesaekdo, a landscape painting by Jeong Seon in 1751, is South Korea's 216th national treasure and included in the art collection donated by the Samsung heirs.
Inwangjesaekdo, a landscape painting by Jeong Seon in 1751, is South Korea's 216th national treasure and included in the art collection donated by the Samsung heirs.

The Samsung Group heirs announced on Wednesday their donation of 2 trillion won ($1.8 billion) worth of art from the collection they inherited from the late Chairman Lee Kun-hee, along with a contribution of 1 trillion won ($900 million) in cash to build South Korea's first infectious disease center to treat rare disease patients.

With the donation, South Korea's largest group continues on the late patriarch's pledge made in 1987 during his inauguration speech as the group chairman: "Samsung will make even more contributions and sacrifices to the community than required, while contributing to the development of the national economy."

The unprecedented, largest private donation ever in the country was unveiled as the first installment of the heirs' inheritance tax of 12.5 trillion won comes due on Friday. The tax bill is the highest ever imposed on a South Korean family and represents three to four times the total amount of inheritance taxes the country collected last year. 

The donation and the tax combined is equivalent to 60% of their inherited assets, worth 26.1 trillion won, from Lee who died last October. The donated 23,000 pieces of art, valued at 2 trillion won, range from hundreds-old Korean national treasures to iconic modern and contemporary paintings. The donations will be exempt from inheritance taxes. 

A Samsung official said the cash and massive art donation by the group's founding family would not be a one-off event. The group heirs, led by Samsung Electronics Co. Vice Chairman Jay Y. Lee, will continue to make contributions to society in various ways, in line with the late chairman's motto announced in a group CEO meeting in May 2010: "A company's mission is to upgrade the health and quality of life of human beings."

The Lee family, including Jay Y. Lee's two sisters, will pay one-sixth of the inheritance tax, or 2 trillion won, by Friday and then pay the remainder in five annual installments. Samsung did not specify how to divide the inherited assets among the heirs and how to fund the tax payment. It is understood they will seek loans from banks to cover the shortfall

The inherited assets are composed of shares, including stakes in Samsung Electronics and other Samsung units, worth a combined 19 trillion won; an art collection valued at 3 trillion won; real estate; and cash. Of the total, taxes on inherited shares alone are estimated at slightly over 11 trillion won. 
Lee Boo-jin (Hotel Shilla CEO, left), Hong Ra-hee (the late Lee's wife, center) and Jay Y. Lee (right) attend Lee's funeral in October 2020
Lee Boo-jin (Hotel Shilla CEO, left), Hong Ra-hee (the late Lee's wife, center) and Jay Y. Lee (right) attend Lee's funeral in October 2020

Their massive art donation includes 14 government-designated national treasures such as Inwangjesaekdo, a 270-year-old landscape painting, and will be contributed to the country's national museums and other galleries run by local governments. The late patriarch's lavish art collection also encompasses the paintings of iconic Western artists including Bacon, Chagall, Giacometti, Monet, Picasso and Rothko. 

Art market observers said Lee's extensive art collection, if put up for international auction, could fetch as much as 10 trillion won, or five times more than the estimated value.
A piece from Claude Monet's (1919-1920) Water Lilies series is included in the art collection donated by the Samsung heirs.
A piece from Claude Monet's (1919-1920) Water Lilies series is included in the art collection donated by the Samsung heirs.

PROMISE FULFILLED 13 YEARS LATER

On behalf of the Samsung heirs, Samsung Electronics said in a statement that the 1 trillion won cash donation will center on 500 billion won to build an infectious disease clinic with state-of-the-art equipment and 150 beds. A further 300 billion won will be used to treat patients with pediatric cancer and rare diseases, which will likely benefit 17,000 children over the next 10 years.

The remaining 200 billion won will be spent to build an updated research center and buy relevant equipment for the country's national infectious disease research institute. 

In 1989, the late Lee launched a welfare foundation with private money of 10.2 billion won and a child care center in that same year.

Lee Kun-hee (left) at an opening ceremony for a daycare center in July 1990
Lee Kun-hee (left) at an opening ceremony for a daycare center in July 1990

With the donation, Samsung's founding family makes good on the late Lee's promise of 13 years ago. Back in April 2008 when Lee was indicted for hiding his personal wealth in other peoples' names, he promised to give away part of his personal wealth for the common good, after paying the relevant taxes and penalty fees. At the time, Samsung Group had considered donating stocks or setting up a charity foundation, but the discussions were abruptly brought to a halt after the late Lee was hospitalized for years following a heart attack in 2014.

The spread of the global pandemic led the Samsung heirs to switch into donating cash to the healthcare sector, instead of setting up a foundation, according to industry sources.

"We shared the view that contributing to the development of the healthcare sector would be exactly in line with the late chairman's pledge to contribute to the common good," the Samsung heirs said in the statement.

Lee Kun-hee inspects the construction of Samsung General Hospital
Lee Kun-hee inspects the construction of Samsung General Hospital

 


Write to Jeong-Soo Hwang and Hyung-Suk Song at hjs@hankyung.com

Yeonhee Kim edited this article.

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