On May 27, the Seoul High Court ruled that the 104 billion won (US$93.8 million) corporate tax levied on Lone Star by the Yeoksam District Tax Office is fair, with the only exception being 39.2 billion won (US$35.4 million) in surtax. The appellate trial was filed by the plaintiffs, including Lone Star Fund III, that called the taxation on the profits from the sale of Star Tower located in Yeoksam-dong, Seoul into question. “When principal and additional taxes are imposed via a single tax bill, the tax amounts and the reasons for the taxation have to be written separately, which is the administration procedure that the office failed to comply with at this time,” the court explained.
However, the court said the taxation had no problem at all except for that part. “Star Holdings S.A., the Belgian corporation Lone Star ran during the course of the acquisition and sale of Star Tower, served the purpose of tax evasion, and it is fair to see the plaintiffs themselves as those liable for tax payments,” it continued, adding, “Lone Star claimed that Korea cannot levy the corporate tax according to the Korea-U.S. Tax Treaty, but Lone Star is a corporation in excessive real estate possession according to the domestic tax law, and thus Korea can levy the tax on its capital gains.”
The tax authorities are predicting that even the 39.2 billion won surtax will be able to be imposed in the near future. The court said that the surtax can be levied again, with the administrative error corrected, before the expiration of the exclusion period.