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September 29, 2007
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| Lone Star Funds has filed a lawsuit against the National Tax Service, demanding that the authority rescind its decision to slap a tax on the U.S. private equity firm’s gains from selling the Star Tower office building in southern Seoul, the Seoul Administrative Court said yesterday. “Lone Star claims that it is not subject to the tax payment on the Star Tower sale because the sale was carried out by its Belgium operation and is under the protection of the Korea-Belgium tax treaty,” said a spokesman for the court. Lone Star’s Seoul office declined to comment. Insight Communication, a PR firm hired by Lone Star’s U.S. headquarters, said it could not offer further information. Lone Star purchased Star Tower, now renamed the Gangnam Finance Center, in 2001 for 620 billion won ($677 million), and sold it to the Government of Singapore Investment Corp. for 900 billion won in December 2004, turning a profit of 280 billion won. The deals were conducted by Star Holdings, a Belgium-based operation of Lone Star. Korea’s tax authority imposed a 61.3 billion won tax on the profits from the sale, based on the rationale that Star Holdings is a paper company established for the purpose of evading taxes. Lone Star filed an appeal against the measure, but the National Tax Tribunal turned it down in July. However, Lone Star has consistently argued that Korea and Belgium have a double-taxation avoidance agreement. “According to the treaty Korea has with Belgium the tax on the gain from the sale of the shares is taxable in Belgium, not Korea,” the fund said in a recent release. The National Tax Service raided Lone Star in late August to probe the recent sale of its stake in Kukdong Engineering & Construction and Star Lease. The authority has been looking into ways to levy taxes on the equity fund for its 1.5 trillion won in capital gains from the sell-off of its stakes in Kukdong E&C, Star Lease and Korea Exchange Bank. By Seo Ji-eun Staff Writer [spring@joongang.co.kr] |
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