April 20, 2024

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[THE INVESTOR] Korea’s top court ordered tax authorities on Oct.24 to cancel the 173.3 billion won (US$150.70 million) corporate tax levied on several overseas units of private equity firm Lone Star for their investment in local companies.  

The Supreme Court upheld the lower court’s decision that the tax imposed on nine titular companies that belong to Lone Star IV, set up in tax havens, was not lawful. It agreed that it is difficult to acknowledge the plaintiffs have “fixed business establishments” here.

“There was no misinterpretation of legal principles in the previous rulings which found the corporate tax levied not lawful,” the court said.

The holding firms -- in names only -- are based in Luxembourg, Belgium and Bermuda and they purchased large shares of Korea Exchange Bank and mid-sized builder Kukdong Engineering & Construction in the early 2000s.

They had made huge profits including an annual 416.7 billion won dividend payout from KEB, but only paid 15 percent of the return as income tax in accordance with the Korea-Belgium tax treaty.

They also logged high returns when they sold off their stakes in these companies and paid relatively smaller amounts of taxes.

The Seoul district office of the National Tax Service launched a probe into the firms in 2007 and levied taxes in 2012.

By Alex lee and newswires (alexlee@heraldcorp.com)