Samsung Group’s billionaire heirs outlined a long-awaited plan to pay one of the largest inheritance-tax bills in history, a more than 12 trillion won ($11 billion) transfer of assets that will take place over several years.
The family of Lee Kun-hee, who died last year, revealed the size of the total bill, along with its intention to donate 1 trillion won for medical facilities and approximately 23,000 works of art. Under South Korea law, the heirs are allowed to make the tax payment over five years. “It is our civic duty and responsibility to pay all taxes,” the family said in a statement released on Wednesday.
The drama over succession at South Korea’s largest company has captured the country’s attention for years, ever since Lee, the patriarch and longtime head of Samsung Electronics Co., suffered a debilitating heart attack in 2014. His son, Jay Y. Lee, has been accused in two different lawsuits of illegal behavior to ensure control over the conglomerate and is currently serving a jail sentence after a conviction in the first case for corruption. When his father died last year, the elder Lee left behind a fortune of almost $21 billion, with the bulk of it comprised of stakes in four Samsung units. That included a 4.2% holding in the electronics arm, an art collection estimated to be worth as much as 3 trillion won and some properties.
South Korea has one of the highest inheritance taxes in the world, at 50% when it exceeds 3 billion won. Another 20% levy is added when passing down shares owned by the largest shareholder. The average across the countries in the Organization for Economic Cooperation and Development, or OECD, is about 15%, according to the Tax Foundation based in Washington, D.C. The inheritance bill levied on the Lees is one of the largest ever in the country and globally, equivalent to three to four times the Korean government’s total estate-tax revenue last year, the statement said. The nation’s law allows its settlement in six installments while pledging assets as collateral for the amount due. That’s how LG Group Chairman Koo Kwang-mo and his sisters are paying their estate levy of more than 900 billion won.
The Lees are also donating tens of thousands of art pieces, including 60 that the South Korean government designates as national treasures or treasures, which will go to the National Museum of Korea. Artwork from artists such as Marc Chagall, Claude Monet and Pablo Picasso will be given to the National Museum of Modern Contemporary Art. The heirs would have had to pay taxes to inherit them had they not given them away.
Separately, the Lees will donate 700 billion won to fight infectious diseases and 300 billion won to help children with cancer and rare illnesses over a 10-year period. Billionaires who run afoul of the law often give away large sums of cash or assets toward public interests.Samsung Electronic’s Jay Y. Lee
The family hasn’t disclosed yet how the late Lee’s stakes will be split up. Earlier this week, the heirs applied to change the largest shareholder of Samsung Life Insurance Co. to the surviving spouse and children, without specifying the stake each will have, Yonhap News reported.
While Jay Y. Lee, Kun-hee’s only son, owns less than 1% of Samsung Electronics, he’s the biggest holder of Samsung C&T Corp. with a 17% stake, giving him substantial sway over the tech behemoth. The 52-year-old was poised to succeed his father as chairman of Samsung Electronics but was sent back to jail in January for bribery charges in a scandal that led to the impeachment of former President Park Geun-hye in 2017.
He’s also being tried over the merger of two Samsung units in 2015 that helped solidify his control over the group. He denied all of the allegations related to financial crimes and breach of duty, and calls for pardoning the de-facto leader of the group have grown among business leaders over concerns that Samsung Electronics will suffer as a result.
Even though the world’s largest maker of memory chips, consumer electronics and gadget displays is led by three chief executive officers, the absence of Lee could hurt the company’s long-term investments and strategic planning. The stock has stayed stable for most of the year even as the company reported first-quarter profit climbed 44%.