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November 08, 2007
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| A ruling in a tax case yesterday by the Seoul Administration Court contrasts sharply with an earlier judgement by the court on the use of paper companies to avoid acquisition taxes in the course of business deals. The court yesterday said it was fair for the Gangnam District Office to levy an acquisition tax on the Government of Singapore Investment Corporation for its December 2004 purchase of Star Tower, currently known as the Gangnam Finance Center, in southern Seoul, from U.S. private equity firm Lone Star. The Singaporean company used two paper companies to complete the transaction, with neither holding fully 51 percent of the property. Under Korean law, a company buying more than 51 percent of an asset is subject to acquisition tax as the “controlling shareholder.” The Gangnam District Office slapped a 17 billion won ($18.7 million) acquisition tax on the deal, reasoning that the two firms were merely paper companies that were not officially in operation, and that the Singaporean government company was the controlling shareholder. The Seoul court said, “As the mother company has full control of its two subsidiaries, the legal liability for share acquisition [in Star Tower] will go to the Government of Singapore Investment Corporation.” The verdict contrasts with a judgement made on Oct. 31, 2006 in which the same court found that Ocmador Pacific B.V., based in the Netherlands, was not subject to an acquisition tax despite acquiring ING Korea Property using two paper companies to each hold 50 percent of the asset. The Jongno District Office imposed an acquisition tax of 2 billion won on the deal and the company filed suit against the measure. The court favored Ocmador Pacific. It said, “Defining those subsidiaries as paper companies simply aimed at illegally saving taxes is hard.” By Seo Ji-eun Staff Writer [spring@joongang.co.kr] |
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