As Samsung Electronics Vice Chairman Lee Jae-yong and the late Samsung Chairman Lee Kun-hee’s family are settled at around 11 trillion won, interest in the inheritance proposal is drawn. Heirs must file and pay the inheritance tax by the end of April of next year.
This is the largest of all successive business inheritance taxes. So far, LG Group Chairman Koo Kwang-mo’s property inheritance tax inherited from Chairman Seon-dae was the highest of KRW 9215 billion. This is three times higher than last year’s annual inheritance tax reported tax amount (3.7 trillion won).
According to the business and financial industry, on the 22nd, Chairman Lee Kun-hee’s stock inheritance value was 11,366.43 billion won. This was calculated based on the average of the stock closing price for a total of four months, two months before and after the deceased death. The average stock valuation of Chairman Lee over four months was about 18.93 trillion won.
■ In case of adding real estate to stocks, the inheritance tax may exceed 12 兆.
The shares of Samsung Group’s major affiliates held by Chairman Lee Kun-hee, announced at the end of September, are 4.18% of Samsung Electronics’ common stock and 0.08% of preferred stock, 20.76% of Samsung Life, 2.86% of Samsung C&T, and 0.01% of Samsung SDS.
When the largest shareholders of large corporations inherit or donate their stocks, a 20% premium is added. In addition, according to the inheritance tax law, a maximum tax rate of 50% is applied when the gift amount exceeds 3 billion won. In other words, the tax rate for Chairman Lee’s stock valuation is about 60%, which is 50% of the valuation (120%) with a 20% premium. Therefore, even if the 3% deduction due to voluntary reporting is applied, the total inheritance tax amounts to about 11.40 trillion won.
In addition, it is predicted that the total inheritance tax will exceed 12 trillion won if the real estate, cash equivalents, and other properties owned by Chairman Lee Kun-hee are added to the stock inheritance tax.
Chairman Lee is known to own the land around Pogok-eup, Yongin-si, Gyeonggi-do, as well as detached houses in Hannam-dong, Itaewon-dong, and Jangchung-dong in Seoul, and buildings in Cheongdam-dong. The property value of real estate alone is estimated to be over several hundred billion won.
■ The key to financing… Discussing annuity payment, dividend policy, equity sale, etc.
The key is how to finance the inheritance tax of at least 11 trillion won. In fact, it is not possible to make a lump sum payment, so it is possible to use an annuity payment.
Annuity payment is an extension of the period so that part of the tax can be paid after the legal filing deadline if some requirements for the amount of tax to be paid are met. Payments are made in installments for five years, which is an annuity payment period. It is a method of applying 1.8% of annual interest, paying one-sixth when reporting, and distributing the remainder for five years.
The business community expects that the Samsung family will strengthen dividend policy and use special dividends at the end of the year to raise financial resources. According to a report by the Korea Investment & Securities Research Institute, Yoo Jong-woo, last year’s dividend income of Samsung’s total family was 7246 billion won, reaching hundreds of billions of billion won, but it is far below the annual inheritance tax.
According to the CXO Research Institute, the dividend amount received by Chairman Lee Kun-hee from Samsung Electronics, Samsung Life Insurance, and Samsung C&T (including the former Samsung C&T) for 20 years until last year exceeded 2.5 trillion won. Of these, Samjeon Electronics alone received a dividend of over 1.6 trillion won. The combined dividends received by Mrs. Hong Ra-hee and Lee’s family are worth more than 3 trillion won. Considering that the dividend received so far was reinvested in a place with a high yield to increase wealth, it is highly likely to be used as an important resource for inheritance tax.
In particular, the 2020 dividends, which will be received next year, do not have to pay separate inheritance tax. In fact, it is one of the important resources for President Lee’s family to pay the inheritance tax. If dividends are paid at the level of last year, Chairman Lee Kun-hee’s regular dividend for stocks is estimated to be around 500 billion won. In addition, there is a high possibility that a special dividend will be additionally paid.
Special dividends are additional payments to shareholders in addition to the regular dividends at the end of the year. In the case of Samsung Electronics, in 2017, it announced that it would return 50% of the free cash flow (FCF) generated over the three years from 2018 to 2020 to its shareholders. Based on this, the possibility of paying special dividends has increased.
The research institute said, “There is a growing atmosphere that special dividends can be expanded more than expected in that the shareholders can make their wallets thicker and the family members of Chairman Lee Kun-hee can raise separate funds that are not included in the scope of inheritance.” .
In the case of Samsung Electronics, only shareholders who hold stocks by December 28 this year can receive special dividends next year. If Samsung Electronics pays special dividends at 1,000 won per common share, the chairman’s family will receive an additional 340 billion won. The dividend for Chairman Lee Kun-hee alone is expected to exceed 800 billion won, and if all dividends for shares held by the bereaved family are combined, it is expected to reach 1 trillion won.
Accordingly, it was observed that during the five years in which the inheritance tax was paid in installments, Chairman Lee’s family would receive a dividend of 3 trillion won or more, assuming they maintain their current stake.
Nevertheless, a scenario where insufficient inheritance tax resources are financed by some stocks as collateral or an inheritance tax through the sale of shares is also discussed. In this case, it is possible to consider how to use the stakes that have a relatively less influence on the governance structure of Samsung Electronics.
Along with the provision of financial resources for inheritance tax, how the property of Chairman Lee Kun-hee will be divided among the bereaved is also of interest. In the long run, Vice Chairman Lee Jae-yong, President Lee Bu-jin, and Chairman Seo-Hyun Lee can be an important source of financial resources for being alone within the group.
■ How is the Samsung family’s property split?
The first criterion for the division of property is the will of Chairman Lee Kun-hee. If Chairman Lee left his will, the property would be divided accordingly. If there is no will, it is decided by mutual agreement between the survivors as the second priority. In this case, it is analyzed that there is a high possibility of reaching an agreement between the family centering on Mrs. Hong Ra-hee.
The third priority follows the legal inheritance ratio. If the property is divided according to the legal inheritance, Mrs. Hong Ra-hee will have three-ninths of the total inherited property, and the three children, including Vice Chairman Lee Jae-yong, will inherit at the rate equal to two-ninths each. For Samsung’s governance structure, it is one of the things to watch carefully about who will take ownership of Samsung Electronics and how much.
“In terms of the reputation and social contribution of Chairman Kun-hee Lee, who possessed the best wealth in Korea, we can expect a plan to contribute a substantial amount of donations in the name of Chairman Lee.” The attention can be focused on whether it will be enough and what kind of public interest corporation it will appear in.”
■ Korea’s highest inheritance tax rate, 2nd in OECD… “We need to consider expanding the installment payment period, etc.”
In the business world, it is pointed out that the taxation system remains at the level of about 20 years ago, and the burden of inheritance tax is high.
Korea’s highest inheritance tax rate is 50%, which is the second highest among OECD countries after Japan (55%), but applying the largest shareholder’s premium evaluation (20% premium) to the stock value at the time of corporate succession, the highest tax rate is applied at 60%. It is the highest level.
Accordingly, opinions have been raised that if it is difficult to reduce the inheritance tax rate, it is necessary to reduce the burden on the taxpayer even if the installment payment period is extended first, and furthermore, the inheritance tax tax reform should be initiated.
The current inheritance tax is highly dependent on a small number of high-value taxpayers, so annual tax volatility is high. For example, when 10 trillion won of inheritance tax is paid in installments for 10 years, the rate of change in the number of inheritance taxes in the first year is 28.1%, which is significantly lower than the lump sum payment (312.5%) and the current 5-year installment payment (50.0%).
Related Articles
The late Lee Kun-hee stock inheritance tax is 11,366 billion… Largest ever
Lee Kun-hee’s stock property 22 兆’the highest ever’… likely to reach 11 trillion in inheritance tax
Lee Kun-hee shares increased by 3.6 yen this year… Kakao Kim Bum-soo doubles ↑
“Chairman Lee Kun-hee, the highest inheritance tax rate among OECD countries”
An official of the Korea Economic Research Institute said, “If the inheritance tax rate is lowered in the short-term so that the obstacles of’punitive inheritance tax’ can be eliminated during corporate succession, and capital gains tax is introduced only to corporate succession in the future, corporate succession will be possible.” “There is a concern that it will weaken the entrepreneurship by making the succession of management rights as well as the decrease in inherited property,” he said.
A business official said, “Adjusting the inheritance tax rate requires a comprehensive determination of the annual corporate tax and income tax rate, as well as the inheritance tax rate,” and said, “If the inheritance tax rate decreases and the annual taxes such as corporate tax and income tax increase, it may eventually lead to a tax imitation. Because there is a need for careful system maintenance,” he said.