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Is Samsung Set To Be Re Shaped Because Of Massive Death Taxes?

Is Samsung set to be reshaped with the founding family facing payouts of billions of dollars in death taxes following the passing of Company founder 78-year-old chairman Lee Kun-hee?

Speculation is mounting that Samsung could face a major shakeup with the real possibility emerging that certain divisions will have to be sold to facilitate a massive inheritance tax bill.

Lee Kun-hee took over Samsung in 1987 and introduced radical measures which helped propel the company from a second-tier electronics manufacturer to an international tech giant.

He owned major stakes in the conglomerate’s crown jewel Samsung electronics, as well as the holding company Samsung C&T, Samsung Life Insurance and Samsung SDS.

Analysts say his heirs face billions in taxes from his share assets alone.

His 52-year-old son, Lee Jae-yong, who has managed the sprawling South Korean technology group since 2014 has twice been accused of fraud over his role in a 2015 merger deal at the tech giant and is currently awaiting trial is set to be key as to the direction Samsung will have to take to resolve the payments.

At 50%, Korea’s inheritance tax rate is one of the world’s highest. A premium can be added to shares if the deceased has a controlling interest in a company, potentially taking the top rate to around 60%.

Mr Lee was the richest person in South Korea, according to Forbes, with a net worth of nearly $30 billion.

Bloomberg reported that the heirs are unlikely to sell stock to finance the charge.

According to Chung Sun-sup, chief executive officer of Seoul-based corporate-analysis firm Chaebul.com. Samsung Group companies will most likely increase dividends to help pay for it lifted their shares.

“Share sales can cause trouble as they would reduce the family’s control over the group. No conglomerates would do so,” Chung said. “Instead, most of them opt to make the cash payment over five years. Cash can be prepared through means such as dividends or salaries.”

That’s how Chairman Koo Kwang-mo, who took over the reins of LG Group in 2018 after his father’s death, is doing it: He and family members are paying their 921.5 billion won ($817 million) inheritance tax over five years.

Currently Lee Jae-yong is mired in legal troubles linked to a controversial merger of two Samsung affiliates in 2015 that cemented his control of the group.

While he holds less than 1% in Samsung Electronics, through the union he secured a 17% control in Samsung C&T Corp., which in turn directly owns 5% of the tech company.

Lee is awaiting a final ruling on a bribery case that sent him to prison in 2017, and he’s facing a separate trial on financial-fraud charges including stock-price manipulation to facilitate his succession. While he has denied any wrongdoing, he made a personal apology for the recurring corruption scandals at Samsung and pledged not to hand down leadership to his children.

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