Gun-Ho was all ears when President Song said that he had an idea about resolving the high tax problem. President Song smiled and said, “I’m not talking about tax evasion, sir. I think that we can pay taxes in installments.”
“Pay taxes in installments?”
“GH Mobile’s current net earnings after tax are 13.3 billion won, but without considering tax, our net earnings are 17.1 billion won. If we combine this amount with the acquisition proceeds for Dyeon Korea of 272 billion won, it’s 289.1 billion won. In other words, the amount of 289.1 billion is subject to tax.”
“That’s right.”
“If we subtract transfer tax and corporate tax from this amount, the amount of money that we can distribute as dividends will be reduced almost in half. It could be even less than 150 billion won.”
Gun-Ho let out a sigh.
“So, I’m suggesting that we should distribute 200 billion won among the shareholders as dividends for now, and when the time comes to pay taxes, we can pay them in installments. If the amount of taxes is high, they allow us to pay them in installments. The amount of 289.1 billion won will be subject to tax, and after we distribute 200 billion won, we will still have 89.1 billion won available. We can pay taxes with it. We don’t have to distribute dividends every year, so, if we distribute 200 billion won this year, we can skip distributing dividends for the next 2 to 3 years. As we pay our taxes in installments, we can also research on the ways to reduce our tax amount.”
“Hmm.”
“Once 200 billion won is distributed among the shareholders, I will take only 300 million won which comes from the earnings made by business activities, and I will return to you the rest of the amount.”
“Alright. Let’s think about it since we still have time.”
After President Song left the office, Gun-Ho called for Accounting Director Min-Hwa Kim.
“When do we send out our financial documents for an external audit?”
“It will be around mid-January, sir. It takes time for us to prepare the financial documents on our side.”
This year’s performance report that Gun-Ho received was based on estimates since it was still December. The exact numbers would be available in mid-January. However, the numbers were expected to be about the same as the estimates.
Gun-Ho showed the company’s bank account to the accounting director, that was holding the acquisition proceeds of Dyeon Korea.
“We received the sales proceeds for selling GH Mobile’s ownership interest in Dyeon Korea. It’s 272 billion won.”
“Wow! It’s a lot of money, sir.”
“One-third of them will be gone once we pay the transfer tax.”
“The amount of tax is a lot too.”
“GH Mobile invested in Dyeon Korea with 4.5 billion won in cash and another 4.5 billion won by contributing its current building. So, as to this 9 billion won, you can say that we are retrieving our investment fund. Accordingly, it will need to be recorded as such.”
“Yes, sir.”
“263 billion won, which is 272 billion won less 9 billion won, will be our investment profits. I want you to add these numbers to our accounting this year.”
“Yes, sir.”
“I can hold this bank account book in my office, right?”
“Yes, sir. I just need a copy of the deposit statement. I will make a copy of it.”
After the accounting director left the office, Gun-Ho started dozing off on the sofa in his office. At that moment, his phone started ringing, and it was Jae-Sik Moon.
“Mr. Chairman Goo? It’s me, Jae-Sik Moon.”
“Oh, President Moon. How are you?”
“Did you receive this year’s performance report that we had sent to you?”
“Yes, I received it. And, you did a good job.”
“Antang GH Transportation Company didn’t make a good profit this year, but I’m sure that we will make more next year. We had to pay for the terminal workers in their construction team as they still belong to the joint venture. But, the team will be dissolved in February next year, so we don’t have to pay their wages, and our profits will increase accordingly.”
“How many workers are there in the construction team right now?”
“There are 7 of them. Some of them are Gongchengshi (skilled engineers) with a license, and we are paying them a high salary. So, once the team is dispersed, we will save good money there. Also, we are planning to add a few additional buses, so our sales revenue will increase as well. I think we can begin to send profits to you in Korea starting next year.”
“Hmm, really? That’s good to know.”
“And about GH Food Co., Ltd., we worked hard, but its sales revenue this year is 3.5 billion won with a profit of 700 million won only. I’m sorry about that. Hehe.”
“Don’t say that. I think you and your wife are doing great. If the 700 million won is a profit after tax, I want you to distribute it as dividends.”
“Really? Thank you. I will let Soon-Young’s mom know that.”
“I believe that you— President Moon— will take 70 million won, and your wife will take another 70 million won, and I will receive 560 million won as dividends, right?”
“That’s correct since I own 10% of GH Food Co., Ltd., and my wife owns another 10%, and you own the remaining 80%. So, the numbers are correct.”
“Well, tell your wife that I thank her for her hard work this year.”
“Okay, I will. I’m going to pay off the loan that I took out from a bank using the condo in Incheon City as collateral, with the dividend money.”
“Oh, that’s right. You and your wife borrowed that investment fund from a bank using your condo as collateral and made your investment in GH Food with the loan. Well, I think it is a good idea for you to pay off the loan with the dividend money, otherwise, you will have to keep making a payment to the bank for the interest loan.”
Gun-Ho noticed that Jae-Sik Moon sounded cheerful lately, and Gun-Ho was happy for him.
‘It seems that Jae-Sik Moon gained some confidence in himself. He had a hard life living in a basement just because he was born into a poor family. Now, he is making good money and also establishing a good social status, which is really nice. I’m happy for him.’
After getting off the phone with Jae-Sik Moon, Gun-Ho stretched himself.
“Maybe I’m going to stop by GH Machines. I no longer have to go to Dyeon Korea, so I will just go to see Jong-Suk Park instead.”
Gun-Ho told Secretary Hee-Jeong Park that he was about to leave, and he asked her to have his car ready.
Gun-Ho was walking out of the building to go to his car when he saw President Song also walking to his car in the parking lot.
“Are you going somewhere, Mr. President Song?”
“Oh, sir. Yes, I have a lunch appointment with S Group’s vice president.”
“Oh, is that right?”
“Where are you heading to, sir? Are you going to GH Machines?”
“Yes. I want to see how President Jong-Suk Park is doing.”
“It seems that President Park is doing good. I can tell that he works really hard.”
“That problem is that the company’s sales revenue is still low. They made 1.4 billion won this year according to their performance report. Well, I have to consider the fact that they have been in business for 2 months only.”
“I still think he is doing great. It’s just a start, and it looks to be a good start. I have no doubt that their sales will steadily increase.”
“Jong-Suk Park is an excellent engineer; I know that. The thing is that the sales area is new to him. That’s my concern.”
“I see your point, sir. It is true that many engineers are stubborn, and they don’t know how to effectively communicate and deal with potential buyers. What if we do this?”
“What are you suggesting?”
“I’m on my way to meet with S Group’s vice president for lunch. While having lunch with him, we are going to discuss a product using EP rubber that GH Mobile will supply S Group with. The thing is that we need to insert a double metal ring to the product before shipping it to S Group. And, I asked GH Machines to build this double metal ring for GH Mobile.”
“Building metal rings won’t bring in much revenue, will it?”
“It will be around 15 million won per month, sir.”
“15 million won per month would add only less than 200 million won to its annual sales revenue. Well, it could be just a start. And, GH Machines need more work to increase its sales anyway.”
