Small Alamo
Lone Star scored another victory in Korean courts of law. In an appeal trial on hundreds of billions of won in taxes, the court issued a ruling partially in favor of LSF-KEB Holdings, SCA, an affiliate of US-based Lone Star in Belgium, which stirred up controversy by enjoying big financial gains through selling off its KEB shares. On Sept. 23, the Seoul High Court ruled partially in favor of LSF-KEB Holdings, SCA in a lawsuit to cancel the refusal of the return of its taxes against the superintendent of the Namdaemun Tax Office in Seoul, as the court did in the past. In Feb. 2012, LSF-KEB Holdings gave 329 million shares (51.02 percent) of KEB to Hana Financial Group for 3.9156 trillion won (US$3.2840 billion).
A representative at the Seoul Regional Tax Office told Hana Financial Group, “You have to pay the withholding tax for money for stock trading. Thus, Hana Financial Group paid 391.560 trillion won, 10 percent of the money, in taxes, and paid the remainder to LSF-KEB Holdings in Mar. 2013. In July 2007, LSF-KEB Holdings asked the Namdaemun Tax Office to return the withholding tax, claiming that the Korea-Belgium tax agreement rules out taxes on their profits from selling stocks, so saves them the tax. But the tax office rebuffed it, giving rise to a legal battle with LSF-KEB Holdings.”
In Nov. of last year, the court of first instance upheld Lone Star’s claim, saying that it would cancel the refusal of the return of tax for the paid withholding tax of 177.2 billion won (US$148.6 million). The court also ordered the Korean National Tax Service to cancel 1.969 billion won (US$1.651 million) of the corporate tax in 2010 paid by Hana Financial Group, which made a purchase of stock from Lone Star.
On the other hand, a case for this ruling is included in a lawsuit for a compensation claim for US$4378.6 million filed to the International Centre for Settlement of Investment Disputes (ICSID) in 2012. In this Investor-State Dispute (ISD) lawsuit, Lone Star claimed compensation for financial damages incurred due to the refusal of the approval of a sale contract between HSBC and KEB and from the imposition of tax on the purchase of Star Tower, which violated the Korea-Belgium tax agreement.