Lee Young-han, Dean of Tax Graduate School at University of Seoul, "Inheritance and Gift Strategies Are Directly Linked to Corporate Survival"

Lee Young-han, Dean of the Graduate School of Taxation, University of Seoul

"Due to the tax burden related to corporate succession, companies such as Three Seven, Lock&Lock, and Unidus have lost their management rights. Tax strategies for succession, including inheritance and gifts, are directly linked to the survival of a company. It is more important than anything else for corporate accounting and tax personnel to develop the capabilities and knowledge to establish and execute effective tax plans."

On the 12th, Lee Young-han, Dean of the Graduate School of Taxation at the University of Seoul, emphasized the necessity of corporate tax strategies in a phone interview with Asia Economy.

Dean Lee stated, "Recently, cases where companies give up management rights or sell to private equity funds due to tax issues, resulting in the disappearance of small but strong long-lived companies, have become frequent. Such risks need to be managed by tax strategy experts within companies, and many experts capable of doing this well must be nurtured."

He continued, "For companies founded during the high-growth period of the 1980s and 1990s, the time has come for management transition from the founder to the second generation. From the company's perspective, succession strategies are crucial. Additionally, due to the rise in real estate asset values, general public interest in inheritance and gifts has increased. Although tax strategies and techniques have been continuously developed to meet this demand, there is a shortage of experts to carry them out," he expressed concern.

In fact, South Korea's top inheritance tax rate is 50%, the second highest among OECD member countries after Japan (55%). If corporate management rights are inherited as well, the tax rate is surcharged to 60%. Dean Lee explained, "Typically, management rights are exercised with a 20-30% stake, but if inheritance and gift issues are faced without proper strategies, the tax burden forces the sale of shares, resulting in loss of management rights. Another problem is that excessive borrowing to cover taxes can cause financial difficulties for the company, hindering its growth potential."

The University of Seoul's Graduate School of Taxation, the nation's top tax and accounting education institution, plans to conduct a 10-week training program starting next month to nurture tax strategy experts. Dean Lee introduced, "Corporate tax practitioners often worry that 'I perform tasks routinely and repetitively, lacking theoretical frameworks.' We plan to operate the program so that they can acquire specialized knowledge on inheritance issues, corporate succession taxation, and tax planning through real-world cases presented by 14 faculty members, top specialized lawyers in the field, and practitioners with long experience in tax authorities."

Dean Lee expressed confidence that this tax strategy expert course could become a new industry-academia cooperation model. He said, "The theoretical frameworks and knowledge in taxation possessed by the Graduate School of Taxation will be disseminated to the practical field, raising the level of tax practice. This will serve as an industry-academia cooperation model. Furthermore, if experts participating in this course form networks and actively engage in discussions and information exchange related to inheritance and gifts, Korea's tax practice can develop in a better direction," he anticipated.

Dean Lee also emphasized a shift in perception regarding tax strategies. He stated, "Tax strategy is a process of identifying potential issues, including taxes, that may arise when a company conducts management activities such as investments or plans for corporate succession, and considering the optimal solutions to resolve them. It should be understood from the perspective of tax planning rather than negative connotations such as tax avoidance or evasion."

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