Jay Y. Lee, Vice Chairman at Samsung Electronics | 2nd from left

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Samsung Heirs Lee Jae-Yong and Family to Pay $10.7 Billion in Inheritance Tax from $22 Billion Estate

30th April 2021 | Hong Kong

The heirs and family of Samsung including current Vice-Chairman of Samsung Electronics Lee Jae-Yong, will be paying inheritance tax of around $10.7 billion (12 trillion won) for inheriting around $22 billion estate from the late Samsung Chairman Lee Kun-Hee who died in October 2020.  South Korea has one of the world’s highest inheritance tax rates with tax rate at 50%, and more if the estate has a controlling interest in a company.

“Samsung Heirs Lee Jae-Yong and Family to Pay $10.7 Billion in Inheritance Tax from $22 Billion Estate”

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Payment & Donations for $10.7 billion Inheritance Tax Bill

Jay Y. Lee, Vice Chairman at Samsung Electronics | 2nd from left

The Lee family plans to pay the full amount of the inheritance tax over a period of 5 years, including reducing the inheritance tax through public donations of arts and medical funding.    The $10.7 billion inheritance tax is likely to be paid from stock dividends and possibility of bank loans. 

The estate’s collection of antiques and paintings will be donated to the National Museum of Korea and other cultural organisations.  The collection includes national cultural assets and paintings by Korean painters such as Park Soo-keun and Lee Jung-seop and 23,000 art pieces including works by artists Marc Chagall, Pablo Picasso, Paul Gauguin, Claude Monet, Joan Miro and Salvador Dali. 

For medical funding, the Lee family will donate around $900 million to fund infectious disease research and treatment for children with cancer and rare illnesses.

 

Samsung – Global Giant and South Korea Chaebol

Samsung Electronics

The late Samsung Chairman Lee Kun-Hee had led Samsung in 1987, following the death of his father Lee Byung-chul, who founded Samsung.  The late Samsung Chairman Lee Kun-Hee led Samsung through a massive transformation to become a global electronics giant.  Today, Samsung is a global leader in technology, electronics and industry.  In 2020, Samsung reported $212.4 billion in revenue and net income of $23.7 billion.  

Samsung is also South Korea’s largest chaebol, a term used to describe South Korea’s large, family-run conglomerates that played an important role in the country’s economic development.

 

Samsung Scandal, South Korea President Ousted

Lotte World Tower, Seoul, South Korea

The Lee family heir and Current Vice-Chairman of Samsung Electronics Lee Jae-Yong is current serving a 2.5 years sentence for bribing South Korean President Park Geun-hye and her close confidante to win government support for a 2015 merger between two Samsung affiliates. 

The corruption scandal was uncovered in 2016 and South Korean President Park Geun-hye was subsequently ousted from office.  

 

KPMG Global Business Tax Monitor for 2020

Samsung Electronics

According to KPMG Private Enterprise Report on Global Family Business Tax Monitor for 2020,  South Korea have the highest tax rate in the region and one of the highest in the world for transfer of a family business.  For a transfer on death of a EUR 10 million business in South Korea, the tax can be reduced to zero with the EUR 14.2 million (KRW 20 billion) exemption if the heir has been in the family business for at least 10 years.  The relief would not apply for a larger business with value above EUR 100 million.

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In Asia-Pacific, China does not have a gift or inheritance tax.  There have also been no changes to China’s tax policy with respect to the succession of family business.  In Australia, there is also no wealth or gift tax.

Tax rates on a family business with EUR 10 million value:

  • United States have one of the highest gift or inheritance tax, before exemptions ($10 million inflation-adjusted tax exemption scheduled to sunset after 2025)
  • France, United Kingdom, Netherlands, Spain and Ireland have one of the highest tax rates in Europe (transfer at death), before tax exemptions.
  • In Asia-Pacific, China have no gift or inheritance tax while South Korea have one of the highest tax in the world.
  • In Australia, there is no wealth or gift tax.

 

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