An Inheritance Tax Invoice You ‘Can’t Fathom’: $10.8 Billion

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SEOUL — Picasso, Monet and Dalí are among the many property South Korea’s richest household is parting with because it prepares to pay one of many largest inheritance tax payments in historical past.

The Samsung household introduced on Wednesday that it could pay $10.8 billion in inheritance taxes after the dying of Lee Kun-hee, Samsung’s chairman, final 12 months. South Korea has one of many highest inheritance taxes on this planet. ​The household is required to tell the tax authorities of the way it plans to pay the invoice by Friday.

The reply could have deep implications for the household’s management of the corporate, the most important and most worthwhile family-run conglomerate in South Korea. ​

Mr. Lee was credited with turning Samsung into a worldwide tech large identified for its semiconductors and smartphones. However the reclusive chairman stored many secrets and techniques, together with how he wished to separate his wealth ​amongst his spouse and three youngsters after he died.

Mr. Lee’s solely son, Lee Jae-yong, is the de facto chief of Samsung. If he inherits his father’s shares in Samsung subsidiaries, it should tighten his management of the corporate. However it stays unclear how a lot he’ll inherit or how he’ll increase the billions of {dollars} wanted to pay the inheritance tax. ​

Analysts anticipated Mr. Lee to promote some nonessential Samsung shares and safe financial institution loans​, hoping to pay them again with dividend payouts ​from his Samsung holdings​.

“The right way to break up Chairman Lee’s fortune is on the coronary heart of the query of who controls Samsung,” mentioned Chung Solar-sup, editor of chaebul.com, which screens South Korea’s household conglomerates, also called chaebol. “It seems that the household has not but reached an entire settlement.”

The Lees are South Korea’s richest household. The $10.8 billion is greater than half the worth of the daddy’s complete property, and greater than thrice the full inheritance taxes the federal government collected final 12 months, in accordance with Samsung.

The household ​mentioned it could donate Mr. Lee’s private artwork assortment of 23,000 works to nationwide and provincial museums in South Korea as a part of its plan to get rid of his property. The gathering is estimated to be value $2.2 billion by some South Korean media. It consists of certainly one of Claude Monet’s “Water Lilies” and Pablo Picasso’s “Portrait of Dora Maar.”

The household additionally dedicated $900 million to struggle the expansion of infectious ailments, and to assist youngsters affected by most cancers and uncommon ailments. Half of the sum shall be spent constructing South Korea’s first hospital devoted completely to infectious ailments.

The Lee household mentioned the donations mirrored Mr. Lee’s intentions of “giving again to communities. ”​ However this sudden generosity comes from a household that has struggled to enhance its public picture.

In January, the son, who’s vice chairman of Samsung, was imprisoned after being sentenced to 2 and half years for bribery. ​In latest weeks, enterprise lobbying teams have ​appealed to the federal government to pardon ​Lee Jae-yong in order that he may lead Samsung amid rising uncertainty within the semiconductor trade.

“It’s our civic obligation and duty to pay all taxes,” the Lees mentioned on Wednesday in an announcement.

​The household has not at all times abided by that rule.

Samsung has lengthy confronted accusations of making an attempt to safe a father-son switch of energy in any respect prices, even when that meant breaking legal guidelines, avoiding taxes and shopping for political affect. It’s an issue that Lee Jae-yong has acknowledged himself.

“All the issues principally began from this succession situation,” he mentioned final 12 months. “Any further, I’ll ensure that no controversy occurs once more relating to the succession situation.”

His father acquired a suspended three-year jail sentence in 2009 for evading taxes on billions of {dollars} he secretly inherited from his father, the Samsung founder Lee Byung-chull. He hid the cash in inventory accounts opened within the names of his aides. Samsung on the time mentioned Lee Kun-hee had stored the key funds to guard the corporate from hostile takeovers from international buyers.

Lee Jae-yong’s authorized hassle stemmed from the same drawback. In January, ​he was convicted of bribing South Korea’s former president Park Geun-hye to acquire authorities assist for a merger of two Samsung subsidiaries in 2015. The merger was meant to tighten his management over Samsung.

Who will management Samsung has been the topic of a lot public curiosity for the reason that father’s dying. The corporate accounts for one-fifth of South Korea’s complete exports. Samsung Electronics, the flagship of the group, alone posted $213 billion in income and $32 billion in working revenue final 12 months.

Lee Jae-yong has been working the conglomerate since a coronary heart assault incapacitated his father in 2014. He owns solely 0.7 p.c of Samsung Electronics however holds 17.5 p.c of Samsung C&T, a subsidiary created by way of the 2015 merger. His siblings additionally maintain smaller stakes, giving the household a controlling stake within the firm.

By means of an online of round holdings, the household continues to regulate the conglomerate. ​Samsung C&T owns 5 p.c of Samsung Electronics and 19.3 p.c of Samsung Life. Samsung Life owns 8.5 p.c of Samsung Electronics.

Lee Kun-hee owned 4.18 p.c of Samsung Electronics, in addition to 20.7 p.c of Samsung Life. How these shares shall be divided amongst ​the household will have an effect on the son’s possibilities of working the enterprise.

By legislation, the chairman’s widow, Hong Ra-hee, is entitled to one-third of the full inheritance, with the remainder break up equally amongst ​Mr. ​Lee and his two sisters. However chaebol households typically attain a personal settlement to make sure that the eldest son controls the corporate.

Some South Koreans on Wednesday had been ​amazed to be taught the quantity of inheritance taxes to be paid by the Lee household.

“Odd folks like me can’t fathom how a lot it’s,” mentioned Park Quickly-mi, a stay-at-home mum or dad in Seoul. “It’s good for the chairman to ​​depart a lot cash in taxes and make such large donations for the society.”

Others weren’t so impressed.

This isn’t the primary time the Lee household has promised to make use of its wealth to learn society as half of a bigger scheme. Again in 2008, when Lee Kun-hee was indicted on costs of evading taxes, Samsung mentioned he would use the cash “not for the chairman or his household, however for some useful causes.”

The household had not stored its phrase till Wednesday, mentioned Kang Jong-min, a chaebol skilled on the civic group Solidarity for Financial Reform in Seoul. “It’s belatedly following up on its previous promise.”

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