Samsung’s Lee family to pay more than 12 trillion won inheritance taxes

FILE PHOTO: Samsung Group Chairman Lee Kun-hee reacts during a news conference regarding his resignation at the company’s headquarters in Seoul April 22, 2008. REUTERS/Jo Yong-Hak/File Photo/File Photo

SEOUL — The family of deceased Samsung Electronics chairman Lee Kun-hee said on Wednesday it will pay more than 12 trillion won ($10.78 billion) in inheritance taxes for the estate of the late patriarch.

Lee, who is credited with transforming Samsung into the world’s largest smartphone and memory chip maker, died on Oct. 25. His estate included shareholdings in Samsung affiliates valued at $17 billion.

The Lee family’s handling of the hefty inheritance tax bill – one of the largest ever in both Korea and globally – had been closely watched as it could have resulted in the dilution of the family’s controlling stake in Samsung.

The family had been discussing using shares in affiliated companies as collateral for personal loans to pay part of the tax bill, a measure that would avoid the sale of their extensive Samsung holdings, Reuters reported last week, citing sources.

The family’s statement on Wednesday did not give details of how Lee’s shares will be distributed among the heirs or whether any will be sold. Besides loans, the family is expected to use dividends from both their own and Lee’s shareholdings to pay the tax, analysts have said.

Lee’s shareholdings included a 4.18% stake in Samsung Electronics, 0.08% of Samsung Electronics preferred shares, 20.76% of Samsung Life Insurance, 2.88% of Samsung C&T, and 0.01% stake in Samsung SDS, which according to South Korean tax code valuation were worth about 18.96 trillion won ($17 billion).

South Korea’s tax code allows payment in instalments, with one-sixth of the total tax bill to be paid first, then the rest over five years at an annual interest rate currently set at 1.2%.

The family also announced it will donate 1 trillion won to public health care charities, including for the creation of a specialized infection diseases laboratory. Lee’s extensive collection of antiques and paintings will be donated to the National Museum of Korea and other cultural organizations.