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Tax ruling favors Seoul government and overturns a previous decision
December 05, 2007
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| A Korean appeals court overturned a lower court ruling and ordered the U.S.-based Lone Star Funds to pay the city of Seoul 25.2 billion won ($27 million) in taxes and penalties. The Seoul High Court made the ruling yesterday, the Seoul Metropolitan Government said in a statement. Kim Ji-ho, a Seoul-based spokeswoman for Lone Star, declined to comment. Lone Star is allowed to appeal the ruling, the government said. Lone Star filed a lawsuit against the city last August, arguing that additional taxes it slapped on its purchase of a 45-story building in 2001 were unreasonable. Under Seoul tax laws, companies incorporated for more than five years pay lower registration taxes on properties they acquire in the city. The office complex was purchased by Lone Star’s Star Tower subsidiary, C&J Trading, which had been incorporated for more than five years when the transaction was made. The company was established in 1996 but has shown no business transactions since then. Lone Star bought the firm in 2001. The Seoul government said it was due the additional taxes in June 2006 because Star Tower was inactive for a period before the transaction. That means the higher tax rate applies to Lone Star. The Seoul Administration Court ruled April 6 that Seoul had no claim to the taxes. The city appealed the ruling. Lone Star is party to other disputes with the Korean government related to the purchase of the Star Tower property. The U.S. buyout fund is also in a legal battle with prosecutors over the purchase of a controlling stake in the Korea Exchange Bank in 2003. The head of the Financial Supervisory Service said in an interview with a foreign media outlet in November that it would rule this month on the long-standing dispute over whether Lone Star Funds is the legitimate majority shareholder in the bank. A decision that Lone Star is not the lawful owner could imperil the fund’s planned sale of a 51 percent stake in KEB to HSBC, Europe’s biggest bank, for $6.3 billion. Bloomberg |
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