Seoul:An appeals court has ruled against the U.S. private equity firm Lone Star Funds in a lawsuit seeking the return of a combined 168.2 billion won (US$125.9 million) in taxes from the South Korean and Seoul city governments.
According to Yonhap News Agency, the Seoul High Court delivered its judgment against Lone Star after the Supreme Court referred the case back to the appeals court for further review in April of the previous year. The Texas-based firm had initiated the suit to recover taxes withheld in connection with profits from its South Korean investments.
Lone Star and its affiliate firms had acquired significant stakes in Korea Exchange Bank, Kukdong Engineering Construction, and Starlease between 2002 and 2005, realizing substantial profits from the sale of some of these shares in 2007. The firm had argued for lower taxes than those imposed on local companies, citing a tax treaty between South Korea and Belgium, where the investment entity was based.
The National Tax Service (NTS) imposed additional corporate taxes, offsetting them against the withheld taxes. Lone Star's initial suit sought the cancellation of these corporate taxes, and the Supreme Court sided with Lone Star in 2017, dismissing the NTS's claim that the company had a permanent establishment in South Korea.
After the tax authorities refunded the taxes, excluding the withheld amounts, Lone Star pursued further legal action against the government and the municipality, demanding 153 billion won and 15.2 billion won, respectively. Although a lower court and the Seoul High Court initially ruled in Lone Star's favor, the Supreme Court later determined that the refund of withheld taxes should be allocated to Korea Exchange Bank and other withholding agents, not Lone Star.