Samsung heirs' gift taxes down on faltering share prices

The heirs of de facto head of Samsung Electronics Co. Lee Kun-hee, who has been hospitalized since May, faced a nearly 10 percent cut in their inheritance taxes over the past three months on a fall in the company's share prices, data showed Thursday.

If Lee's shares in Samsung Electronics are transferred to his offspring -- his son Jay-yong, who is forecast to be the heir apparent, and his two daughters, Boo-jin, and Seo-hyun -- their gift taxes are estimated at 3.71 trillion won (US$3.62 billion), down 9.41 percent from 4.15 trillion won posted on June 3, when shares reached their yearly high.

The decline came as the world's No. 1 maker of smartphones closed at 1,201,000 won Friday, down 18.2 percent over the cited period from 1,470,000 won, as investors' appetite for the firm fell with its key source of revenue, the mobile unit, posting disappointing earnings for the second quarter.

Lee, who virtually controls Samsung Group, the country's No. 1 conglomerate, through a complex maze of cross-shareholding, holds a

3.38 percent stake in the tech arm, along with a 0.05 percent stake in preferred shares.

Under South Korean law, a shareholder whose securities assets hover above 3 billion won is subject to a gift tax of 50 percent.

The tax is taken from the four-month average share price at the point of inheritance plus 20 percent of that amount.

Analysts said the recent losses mainly came as Samsung Electronics' net income came to 6.25 trillion won in the April-June period, down 19.5 percent from the 7.77 trillion won a year earlier, with the company showing little hope for a full-fledged recovery amid the rise of Chinese rivals.

Earnings from its IT and mobile business division, the company's main revenue source, fell 29.6 percent on-year to 4.42 trillion won in the second quarter from 6.28 trillion won a year earlier.

Industry watchers, on the other hand, said Samsung has also remained reluctant to make efforts to defend the falling share prices to ease the gift tax burden, to generate cash that could be used to fund the children's stake purchases and other costs needed to strengthen their standing in the Samsung empire.

Lee holds a 20.76 percent stake in Samsung Life Insurance Co. and a 1.37 percent stake in Samsung C&T Co., which were estimated at 4.5 trillion won and 165 billion won, respectively, as of Friday. (Yonhap)