South Korean Banks Face Combined Tax Bill of $25.86 Million for Undervaluing Samsung Insurance Holdings

South Korea's tax authorities have imposed a combined tax bill of around 27 billion won (approximately $25.86 million) on five major banks, including Kookmin Bank, following an investigation into their handling of Samsung Life Insurance Co.'s stock. The National Tax Service found that the banks had undervalued their holdings of Samsung Life Insurance shares by nearly half when they received the shares in July and August this year. The decision has been met with an immediate appeal from the banks, who argue that the market price of the shares should be between 300,000 won and 320,000 won, rather than the 700,000 won value set by the tax office.

Key Takeaways:

• The National Tax Service has imposed a combined tax bill of 27 billion won ($25.86 million) on five South Korean banks, including Kookmin Bank, for undervaluing their holdings of Samsung Life Insurance Co.'s stocks.
• The tax office found that the banks calculated the value of one share of Samsung Life Insurance at between 270,000 won and 350,000 won, when they received the shares in July and August this year, and this value was nearly half of the price set by the tax office.
• The tax office set the price of one share of Samsung Life Insurance at 700,000 won, based on the value calculated by Samsung Chairman Lee Kun-hee when he admitted to having mismanaged the firm and donated his shares to the banks and creditors of Samsung Motors in 1999.
• The five banks, including Kookmin Bank, KorAm Bank, Hana Bank, Shinhan, and Kookmin, will immediately appeal the case to the National Tax Tribunal.
• The tax authorities will demand 11 billion won from KorAm Bank, 6.8 billion won from Hana Bank, 4.6 billion won from Shinhan, and 3.9 billion won on Kookmin Bank.
• The banks argue that the market price of the shares should be between 300,000 won and 320,000 won in consideration of the price traded on the unlisted share market.

Statistics:

• Combined tax bill imposed on five South Korean banks: approximately 27 billion won ($25.86 million)
• Taxes demanded from KorAm Bank: 11 billion won
• Taxes demanded from Hana Bank: 6.8 billion won
• Taxes demanded from Shinhan Bank: 4.6 billion won
• Taxes demanded from Kookmin Bank: 3.9 billion won
• Original value of one share of Samsung Life Insurance set by Samsung Chairman Lee Kun-hee: 700,000 won
• Value of one share of Samsung Life Insurance calculated by the banks: between 270,000 won and 350,000 won

Sources:

• Yonhap
• Asia Pulse