Samsung owner family to finish paying $7.95 bil. inheritance tax

Late Samsung Group Chairman Lee Kun-hee's widow Hong Ra-hee, front, and Samsung Electronics Executive Chairman Lee Jae-yong attend a charity event at Seoul National University Children's Hospital in central Seoul, Oct. 21, 2024. Courtesy of Seoul National University Hospital

The family of late Samsung Group Chairman Lee Kun-hee is set to complete one of the largest inheritance tax payments in Korea’s history, with the final installment of the 12 trillion won ($7.95 billion) tax due this month.

Once the payments are completed, uncertainties surrounding Executive Chairman Lee Jae-yong’s grip on Samsung Group are expected to ease.

The heirs — the late chairman’s widow Hong Ra-hee and his children Lee Jae-yong, Lee Boo-jin and Lee Seo-hyun — will make the sixth and final installment this month, completing the payment process that began in 2021 following the former chairman’s death in 2020.

Lee Kun-hee’s estate, valued at about 26 trillion won, included a vast portfolio of Samsung shares, real estate and private art collections. Hong bore the largest share of the tax at approximately 3.1 trillion won, followed by their children at 2.9 trillion, 2.6 trillion and 2.4 trillion, respectively.

The family opted to pay the tax in six installments over the past five years.

To finance the payments, family members turned to different approaches.

Hong and her daughters gradually sold shares of key affiliates such as Samsung Electronics, Samsung SDS and Samsung C&T. Earlier this year, Hong signed a trust agreement to sell 15 million Samsung Electronics shares, stating that the agreement is aimed at paying off the tax.

On the other hand, Lee Jae-yong did not sell his stakes in key Samsung companies, instead relying on dividends and personal loans to finance his payments, which is interpreted as an effort to preserve his control on Samsung’s ownership structure, centered on Samsung C&T.

Lee’s holdings have risen steadily, with his stake in Samsung Electronics now at 1.67 percent, up from 0.7 percent before inheriting his father’s shares. Over the same period, his stake in Samsung C&T increased to 22.01 percent from 17.48 percent, while his stake in Samsung Life Insurance rose to 10.44 percent from 0.06 percent.

Over the past five years, the family members are believed to have received about 4 trillion won in dividends from affiliates since Lee Kun-hee’s death, with the total exceeding 6 trillion won when including dividends accumulated prior to his passing.

With the tax issue resolved, the family-led conglomerate is expected to step up investments in semiconductors, artificial intelligence and biopharmaceuticals, and accelerate business restructuring as management uncertainty eases.