With Samsung’s controlling family having completed payment of roughly 12 trillion won in inheritance tax, the issue of succession costs among Korea’s conglomerates is back in the spotlight. Attention is now turning to Hanwha Group. Although Chairman Kim Seung-youn effectively wrapped up the transfer of management control last year by gifting part of his stake in Hanwha Corp. to his three sons, the gift tax incurred in the process came to less than 300 billion won. The outcome reflects a structure that reduced the cash burden from direct share gifts, as Hanwha Energy—an unlisted company controlled by the third generation—became the largest shareholder of Hanwha Corp.
From left in the photo: Kim Dong-kwan, vice chairman of Hanwha Group; Kim Dong-won, president of Hanwha Life Insurance; and Kim Dong-seon, vice president of Hanwha Galleria. / Chosun DB
According to the Financial Supervisory Service’s electronic disclosure system (DART) on the 19th, Chairman Kim gifted half of his 22.65% stake in Hanwha Corp.—11.32%—to his three sons in March last year. Based on the average closing price over the two months before and after the gift valuation date (April 30, 2025), the three heirs—Hanwha Group Vice Chairman Kim Dong-kwan, Hanwha Life President Kim Dong-won and Hanwha Galleria Vice President Kim Dong-seon—are estimated to have paid 296.6 billion won in gift tax (assuming a 60% tax rate). Focusing only on the eldest son, Vice Chairman Kim Dong-kwan, who received 4.85%, his estimated gift tax burden was 127.1 billion won. With Vice Chairman Kim later increasing his stake to 9.76%, Hanwha is now seen as having largely completed its third-generation succession.
Compared with other groups, Hanwha is widely viewed as having achieved relatively effective tax minimization. After the late LG Group Chairman Koo Bon-moo died in May 2018, LG Group Chairman Koo Kwang-mo and his two siblings inherited Koo’s 11.28% stake in LG Corp. If the inheritance tax is estimated using the average closing price over the two months before and after the inheritance start date, the bill comes to about 867.2 billion won.
At the time of inheritance and gifting, the market capitalization figures stood at 96.9783 trillion won for LG Group and 87.3568 trillion won for Hanwha Group, meaning Hanwha secured group-wide control at a relatively lower cost. In the year the inheritance and gift transfers took place, the LG siblings’ stake in LG Corp. was 18.58%, while the three Hanwha brothers’ stake in Hanwha Corp. was 20.52%.
Hanwha’s tax savings also stand out compared with other chaebol families that completed succession work around a similar period. In Shinsegae’s case, Group Chairman Chung Yong-jin and Shinsegae Co. Chairwoman Chung Yoo-kyung took over discount-store and department-store control after receiving gifts from their mother, General Chairwoman Lee Myung-hee, in September 2020—8.22% of E-Mart for Chung Yong-jin and 8.22% of Shinsegae Co. for Chung Yoo-kyung. Their combined gift tax is estimated at 296.3 billion won.
In February last year, Chung Yong-jin spent 225.1 billion won to buy the remaining 10% stake held by Lee. In April that year, Chung Yoo-kyung also received Lee’s remaining 10% stake as a gift (estimated gift tax: 100.3 billion won). Over the past six years, the two have paid a combined 621.8 billion won in gift taxes and share-purchase costs.
In Samsung’s case, the succession was largely completed before the death of the late Chairman Lee Kun-hee in October 2020. Samsung Electronics Executive Chairman Lee Jae-yong paid 3.006 trillion won in inheritance tax on about 5 trillion won worth of listed shares in Samsung C&T, Samsung Life Insurance, Samsung Electronics and Samsung SDS that he inherited. The estimated inheritance tax for Hotel Shilla President Lee Boo-jin was 2.729 trillion won, while Samsung C&T President Lee Seo-hyun’s was 2.4521 trillion won. The three completed payment of their inheritance taxes in April.
Estimated inheritance and gift taxes on listed shares for LG, Hanwha and Shinsegae Groups / Reporter Yoon Seung-jun
Hanwha’s ability to finish succession at a relatively low cost stems from the fact that Hanwha Energy—effectively a “family company”—sat at the top of the group’s governance structure and controlled Hanwha Corp. Hanwha Energy’s shareholders include Vice Chairman Kim Dong-kwan (50%), President Kim Dong-won (20%) and Vice President Kim Dong-seon (10%).
Hanwha Energy, which previously held 9.7% of Hanwha Corp., acquired an additional 12.45% through a tender offer in July 2024 and after-hours block trades in December 2024. With Chairman Kim’s gift of 11.32% to his three sons the following year, Hanwha Energy rose to become the largest shareholder of Hanwha Corp.
Hanwha Energy traces its origins to Hanwha S&C, founded in 2001 with paid-in capital of 3 billion won. Initially, Hanwha Corp. held 66.67% and Chairman Kim held 33.33%. In 2005, Hanwha Corp. transferred its entire stake to Vice Chairman Kim for 2 billion won (purchase price per share: 5,100 won), after which Chairman Kim transferred stakes to his other sons for 500 million won each (16.5% each). The three brothers thus became the de facto controlling shareholders. Hanwha S&C remained an unlisted family firm, expanding the brothers’ control through capital increases and strengthening group-wide influence through investments in affiliate stakes.
In 2017, Hanwha S&C was split into H Solution and Hanwha S&C, and Hanwha Energy was incorporated as a subsidiary of H Solution. Then in 2021, Hanwha Energy absorbed its parent H Solution via a merger, and that same year Hanwha Energy acquired 5.46% of Hanwha Corp. as it accelerated succession preparations.
Share of sales to related parties at Hanwha S&C, H Solution and Hanwha Energy / Reporter Yoon Seung-jun
In effect, the company that started as Hanwha S&C became H Solution through the 2017 split (with the post-split Hanwha S&C later absorbed into Hanwha Systems), and then changed back to Hanwha Energy after Hanwha Energy’s 2021 absorption of H Solution (which was dissolved).
The issue is that Hanwha Energy—effectively acting as a holding company for Hanwha Corp.—generated a substantial portion of its sales from business with group affiliates, thereby lowering the cash burden needed for succession. A review of consolidated audit reports shows that from 2005 to 2016 Hanwha S&C recorded 7.8812 trillion won in sales, of which 3.9108 trillion won (49.6%) came from transactions with affiliates and other related parties.
During the H Solution period, from 2017 to 2020, the share of related-party sales was also high at 29.9%. From 2021 through last year, related-party sales accounted for 18.5% of Hanwha Energy’s revenue—still significant. After the merger, Hanwha Energy’s spending on purchasing Hanwha Corp. shares amounted to 116.4 billion won in 2021 and 151.9 billion won in 2024.
Having grown on the back of group revenue, the company could be used as a “cash channel” for the owner family. In November last year, Hanwha Energy paid an interim dividend, distributing 100 billion won to the three brothers—nearly matching its separate net profit of about 120.6 billion won. Based on their shareholdings, Vice Chairman Kim is estimated to have received 50 billion won, while President Kim and Vice President Kim each received 25 billion won.
At the end of last year, President Kim and Vice President Kim also sold 5% and 15% of their Hanwha Energy stakes, respectively—an estimated 276.4 billion won for President Kim and 829.1 billion won for Vice President Kim. With gift taxes being paid in installments over five years under a deferred-payment scheme, the proceeds are expected to be used as a funding source for gift tax payments or for buying stakes as part of a future process to establish independent management systems, such as a potential affiliate split.
Kim Woo-chan, a professor at Korea University Business School, said, “The company became Hanwha Energy through a series of splits and mergers, and the gains can be viewed as having been obtained through preferential business allocation,” adding, “There was controversy in the past over the alleged bargain-price sale process by which Hanwha Corp. transferred its Hanwha S&C stake to the owner family’s children, and it was a case that could negatively affect other shareholders, given that better-quality services might have been received if transactions had been made with other companies.”
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