The Samsung family struggled to pay inheritance tax: Mortgage of shares to borrow $ 3 billion, the late wife of the Chairman and his daughters had to sell shares

According to Bloomberg, Samsung – the richest family in South Korea is using stocks as collateral for a loan of 3 billion USD. The move is arguably the best way for them to pay one of the largest inheritance taxes in the world and remain in power in the Samsung empire.

By the end of last month, loans had nearly quadrupled compared to the end of 2021. That was also the year when Jay Y. Lee and his family announced plans to pay more than 12 trillion won in taxes (9). .2 billion USD) to 6 times in 5 years after the death of late Chairman Lee Kun-hee.

Borrowing money on stock mortgages is a way for wealthy families in South Korea to use when they face the world’s largest tax rate that can be up to 60%.

“Samsung family heirs can increase their loans even more because that’s the best way to pay taxes,” said Park Sangin, a professor at Seoul National University. “They won’t want to sell shares for cash because that would reduce their power in the empire.”

Some say the heavy tax bill burden could also put pressure on shares of companies controlled by billionaires.

“This could create a conflict of interest with shareholders in their company,” said Lee Changhwan, CEO of Align Partners Capital Management. For example, families of billionaires may not want their stock prices to rise because it could increase the tax burden.

Meanwhile, mortgages for loans pose a risk as family members sell part of their stock.

Shares of four companies in the group, including Samsung Electronics and Samsung C&T, are used as collateral for the inheritance tax. The total value of the Samsung family shares currently mortgaged is $13.3 billion . This number is the second largest of the 500 richest people on Bloomberg’s list of billionaires. Larry Ellison is currently the number one billionaire when he mortgaged up to $36.4 billion worth of stocks for loans as of the end of last week.

The total assets of the Samsung heirs reached 17.5 billion USD after removing the pledged shares. In addition to using the shares as collateral for a loan, Mr. Lee’s mother, Hong Ra-hee, and her daughters also disposed of a portion of their shares, including selling a 0.33% stake in the company. Samsung Electronics for 1.4 trillion won last March. Samsung Electroncis appointed the family’s only son, Jay Y, to the position of Chairman in October last year. His net worth is $8.7 billion according to Bloomberg statistics.

In addition to Samsung, the family of Mr. Kim Jung-ju – the late billionaire, the founder of the online game company Nexon is also facing a huge tax bill. They had to transfer part of their ownership in parent company NXC Corp to the government last month as part of a tax payment. This move has turned the Korean Ministry of Economy and Finance into the second largest shareholder of this private company, owning 47%.

Source: Bloomberg