Samsung Family Tied Up in 12 Trillion Won Inheritance Tax... 2.6 Trillion Won Worth of Stocks Sold

Company Dividend Financing
Samsung Maintains Dividends
Some Say "Inheritance Tax Rate Excessive"

The Samsung owner family, who must pay 12 trillion won in inheritance tax, is disposing of Samsung Electronics and affiliate shares worth 2.6 trillion won to raise funds. This covers about 20% of the inheritance tax they need to pay.

According to a disclosure by the Financial Supervisory Service on the 6th, on the 31st of last month, Hong Ra-hee, former director of the Samsung Museum Leeum, Lee Boo-jin, president of Hotel Shilla, and Lee Seo-hyun, chairperson of the Samsung Welfare Foundation, signed a securities disposal trust contract with Hana Bank. The purpose of the contract was disclosed as "for inheritance tax payment." The contract period is from the 31st of last month until April 30 of next year.

The Samsung Electronics shares to be sold amount to about 0.5%. Hong Ra-hee will sell 0.32%, Lee Boo-jin 0.04%, and Lee Seo-hyun 0.14%. Based on the closing price on the previous trading day, the 3rd (69,600 won), the total is 2.0761 trillion won. Hong Ra-hee’s portion is 1.345 trillion won, Lee Boo-jin’s 167.1 billion won, and Lee Seo-hyun’s 564 billion won. On the same day, Lee Boo-jin also signed trust contracts to sell shares of Samsung C&T (0.65%), Samsung SDS (1.95%), and Samsung Life Insurance (1.16%). The total sale amount based on the closing price on the 3rd is 499.3 billion won.

The Samsung owner family has been paying inheritance tax in installments every year since the death of the late Lee Kun-hee, former chairman of Samsung, in 2020. It is known that they raise funds by selling shares or taking secured loans. The total inheritance tax on the entire inheritance, including affiliate shares, real estate, and cash, is estimated to exceed 12 trillion won. The family of the late chairman Lee Kun-hee has been paying the inheritance tax in installments over five years since April 2021. A Samsung official said, "The inheritance tax funding is being handled by the family of the late chairman Lee Kun-hee, so there is nothing further to disclose."

Samsung Electronics Chairman Lee Jae-yong, former Samsung Museum of Art Leeum Director Hong Ra-hee, and Samsung Welfare Foundation Chairperson Lee Seo-hyun attended the "Lee Kun-hee 3rd Anniversary Memorial Concert" held on the 19th of last month at the Samsung Electronics Human Resources Development Center Concert Hall in Yongin, Gyeonggi Province.
[Photo by Yonhap News]

In the business community, there are opinions that the inheritance tax rate burden on owner families is too high, not only for Samsung but also for other companies. The Korea Economic Research Institute stated that Korea’s highest inheritance tax rate is effectively the highest in the world. For direct descendants of founders, the highest inheritance tax rate on business succession is 50%, which is lower than Japan’s 55%. However, a 20% surcharge is added for major shareholders and others. The effective tax rate rises to 60%, the highest in the world.

Owner families mostly cover the inheritance tax funding through company dividends. For example, Lee Jae-yong, chairman of Samsung Electronics, does not receive any salary and pays inheritance tax through company dividends and stock-secured loans.

Whether the company will increase dividends is uncertain. Samsung Electronics maintains quarterly dividends at 361 to 362 won per share. Although Samsung Electronics’ stock price rose 17% over the past year, its performance was poor, barely maintaining profits due to the semiconductor market downturn. It has decided to execute capital expenditures at an annual maximum level of 53.7 trillion won. It is assessed that there is little room to increase dividends.

Lim Dong-won, a research fellow at the Korea Economic Research Institute, said, "Dividend expansion is mentioned as a way to raise inheritance tax funds," but added, "Excessive dividends will be a burden on companies."