The dispute dates back to 2001 when Lone Star’s Belgium affiliate purchased a commercial high-rise and sold it in 2004, gaining nearly 250 billion won in profits. (image: KobizMedia/ Korea Bizwire)
SEOUL, Dec. 15 (Korea Bizwire) – Ending a decade-long legal battle. South Korea’s top court on Thursday confirmed the validity of the tax the government imposed on U.S. private equity firm Lone Star’s profits from its sale of a Seoul building,
The Supreme Court upheld a lower court’s decision which approved the 64.8 billion won (US$55 million) tax the Yeoksam District Office of National Tax Service levied on Lone Star Fund III over the sale of the skyscraper in southern Seoul.
The amount excludes 39.2 billion won which the tax office had levied as additional tax. The Seoul High Court canceled the surtax, saying it was imposed without meeting procedural requirements.
The dispute dates back to 2001 when Lone Star’s Belgium affiliate purchased a commercial high-rise and sold it in 2004, gaining nearly 250 billion won in profits.
Local tax authorities imposed some 100 billion won in transfer income tax, against which Lone Star filed a suit.
After a long legal battle up to the top court, the final ruling was in favor of the U.S. firm. The court said the company is subject to corporate tax, not income tax.
The tax office then levied 100 billion won in corporate tax, which again prompted Lone Star to file another lawsuit to nullify the decision.
Lone Star has claimed that it should be exempt from paying the tax because the affiliate was based in Belgium, citing a deal the European country struck with South Korea to avoid double-taxation and tax evasion.
The country’s top court, however, said the Belgian company was established to avoid taxes, saying the profits through the property deal actually went to the U.S.-based Lone Star Fund III.
(Yonhap)
