Samsung heirs to pay $6 billion inheritance tax

Seoul: The heirs of ailing Samsung Group patriarch Lee Kun-hee face one of the biggest inheritance tax bills ever, and appear to have little option but to pay up.

By some calculations, Mr Lee’s 45-year-old son Jay Y. Lee, the group’s presumed heir apparent, and his two sisters could be on the hook for about $6 billion in tax under South Korea’s top level inheritance tax rate of 50 percent.

To put that in perspective, the United States expects to collect just $16 billion this year in estate and gift taxes — a levy that has long been a political bone of contention and which many rich Americans go to great lengths to minimise.

However, attempts by the Lee family to ease its tax burden could weaken its control over an empire it now runs through a complex structure of interlocking ownership and risk stirring up public condemnation.

The elder Mr Lee’s assets, held mostly in shares of Samsung Electronics, the world’s dominant smartphone maker, and Samsung Life Insurance, have a market value of around 13 trillion won ($12.7 billion). Depending on how the inheritance levy is applied, tax on those holdings could top 6 trillion won at current levels.

Because the shares are crucial to maintaining management control of the group’s various affiliates, analysts say the family would aim to retain them even at great expense.

“The typical strategy is to adjust the amount of assets before death, take advantage of deductibles that are legally permitted or gift assets to push down the inheritance tax bill in advance. But at 6 trillion won, deductibles don’t have much meaning,” said Ku Sang-su, a certified public accountant at law firm Jipyong.

“Once chairman Lee pas-ses, there aren’t many options to reduce the inh-eritance tax.”