The Lee family, which owns South Korea’s Samsung conglomerate, will offload valuable pieces of art to pay off a massive tax bill. Blog Post
The ruling Lee family has announced plans for one of the highest inheritance taxes in the world, offered rare Picasso and Monet paintings for sale and boasted about its extra donations to South Korean society.
South Korea’s richest family will have to pay more than $10 billion in inheritance tax after the death of Samsung’s top executive in October.
Lee Kun Hee.
The inheritance tax rate in South Korea is 50% and can be higher in case of transfer of shares in a company. Lee Kun-hee’s wife and three children had until Friday to indicate how they would pay the bill.
Under local law, Lee has five years to pay the full amount, which must be paid in six installments, the first of which will be paid this month, Samsung said in a statement Wednesday. The inheritance tax of 12 trillion South Korean won, equivalent to about $10.8 billion, is the largest in the country’s history.
Paying all taxes is our civic duty, the Lee family said in a statement.
Along with the tax payment plan, Samsung says the Lee family will donate more than $900 million to build new medical facilities in South Korea and for children suffering from cancer and other rare diseases.
About 23,000 pieces from Lee Kun-hee’s private art collection will be donated to two South Korean national museums. These include works by Pablo Picasso, Salvador Dali and Claude Monet, as well as artworks including 14 national treasures of South Korea. These gifts, worth billions of dollars according to local media, reduce the taxable portion of Lee Kun-hee’s estate.
Samsung is South Korea’s largest conglomerate, with dozens of subsidiaries ranging from consumer electronics to life insurance to theme parks. Before his death at the age of 78, Lee Kun-hee was the richest man in South Korea according to Forbes, a title he held for 12 years.
52, was the fourth richest man in the country and had led Samsung since May 2014, when his father became incapacitated after a heart attack.
Lee Jae-yong has been in prison since January. He received a 30-month prison sentence following his retrial in 2017 for bribing a former South Korean president. His previous sentence of about a year behind bars has been offset against his new sentence, meaning he could be released in July 2022.
But business lobby groups petitioned the South Korean president this week.
Moon Jae In.
to pardon Lee Jae Young. They believe that Samsung, and by extension the country, needs the leadership of the business tycoon in these turbulent times for the semiconductor industry. The country could lose its number one status overnight, business lobbyists wrote in a letter.
The Samsung empire dominates the country’s economy and is South Korea’s largest exporter. Previous South Korean presidents have pardoned business tycoons – including twice Lee Kun-hee – citing economic or national interests.
Public support for the pardon of Lee Jae-yong, grandson of Samsung’s founder, is very strong. According to a local poll released this week, nearly seven in 10 South Koreans favor pardons, while about a quarter oppose them.
Samsung emphasized in a statement Wednesday its underlying philosophy of contributing to the nation through entrepreneurship. The statement in Korean repeatedly referred to Samsung’s commitment to buguk, or service to the country.
Apart from the philanthropy and promises of payment, Samsung has not disclosed any details on exactly how the Lee family will receive the money or how the late chairman’s shares will be distributed.
The inheritance tax payment equates to more than half the value of Lee Kun-hee’s entire estate, which includes Samsung shares and real estate, the company said. Samsung has not disclosed the actual amount of the late president’s estate.
For decades, the families that head South Korea’s largest conglomerates have had inheritances in their names, transferred money to tax avoidance funds, sold business interests, taken out loans backed by interests or increased dividends.
A likely option for the Lee family to make the first payment is to sell Samsung shares and take out a loan, although subsequent payments can only be covered by dividend payments from Samsung shares held by the family, said Mike Cho, a professor of economics at Korea University in Seoul who has long researched generational change at the largest South Korean conglomerates.
Before his return to prison, Lee Jae-yeon, seeking to improve his and Samsung’s image, issued a rare apology for the bribery scandal and other issues related to his estate, while vowing not to pass on his role to his children.
As his family’s direct ownership in Samsung declines, Lee Jae-yong, known in the West as JY, will increasingly have to justify his position through his achievements rather than his birthright, Cho said.
If J.I. Lee shows leadership and skill, he is safe, Cho said. Possession won’t be so important.
Samsung said the amount paid by the Lee family was at least three times the amount the South Korean government received from all property taxes last year.
By comparison : The family of LG’s late chairman, Koo Bong-mu, owed about $820 million after his death in 2018.
Email Timothy W. Martin at [email protected]
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