Samsung scions plan on paying 6 trillion won in taxes

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Samsung scions plan on paying 6 trillion won in taxes

Samsung has completed its review of the inheritance taxes that the three children of ailing Samsung Electronics Chairman Lee Kun-hee should pay on the 11.6 trillion won ($10.3 billion) they will inherit from their father, according to a report from the Korea Broadcasting System (KBS) on Wednesday.

The combined inheritance taxes will total 6 trillion won and son Jay Y. Lee, Samsung Electronics’ vice chairman, and his two younger sisters have determined to pay the entire amount, the report said, citing an anonymous executive at Samsung.

Samsung said it can’t confirm the report. This is the first time any concrete information about the richest man’s inheritance plans was unveiled.

The decision suggests the three offspring of the 73-year-old chairman won’t resort to the methods Lee’s father, Samsung founder Lee Byung-chull, adopted to avoid taxes - donating a large amount of his personal assets to a public foundation, for instance.

Although KBS’s source within Samsung said nothing has been decided on how the three children will raise the cash to pay the hefty tax bill, speculation instantly emerged that they would have to sell some of their shares in Samsung SDS, an IT service arm, and Cheil Industries, a fashion and resort affiliate, as soon as the six-month initial public offering lockup periods end. That would be May for Samsung SDS and June for Cheil Industries.

The companies’ share prices reacted immediately. Samsung SDS, listed 10th on the Kospi in terms of market cap, tumbled 7.5 percent from a day earlier to end at 277,000 won on Wednesday. Cheil Industries, listed eighth in market cap, closed 2.4 percent lower at 161,000 won.

Jay Y. Lee has an 11.25 percent stake in Samsung SDS and his two sisters - Lee Boo-jin, CEO of Hotel Shilla, and Lee Seo-hyun, president of Cheil Industries - each own 3.9 percent.

The tech solution company debuted on the benchmark Kospi last Nov. 14. On the day of its listing, the price rose to as high as 382,500 won and closed at 327,500 won.

Cheil Industries, the de facto holding company of Samsung, was listed on the Kospi last Dec. 18 as part of Samsung’s move to expedite the managerial succession of Jay Y., Lee Kun-hee’s only son and heir-apparent.

The 73-year-old chairman, who was hospitalized in May after a heart attack, is now at home, according to various sources.

Samsung affiliates have a complex web of cross shareholdings. Cheil Industries holds a 19.3 percent stake in Samsung Life Insurance, which has a 7.2 percent stake in flagship Samsung Electronics. Cheil’s diverse business portfolio ranges from fashion to construction, leisure and catering.

Jay Y. owns a 23.24 percent stake in Cheil, whereas his two sisters each hold 7.75 percent.

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