Court rules against Lone Star in $125.9 mil. tax case

An appeals court decided against private equity firm Lone Star Funds in a tax dispute with the Korean and Seoul city governments, resulting in a loss of $125.9 million in taxes. The ruling came after the Supreme Court sent the case back to the appeals court for further review in April 2022. The Texas-based firm had initiated legal action against the state and municipality, demanding the return of withheld taxes linked to profits from its investments in Korea.

Lone Star and its affiliates acquired significant stakes in Korea Exchange Bank, Kukdong Engineering Construction, and Starlease between 2002 and 2005, securing substantial profits from the sale of shares in 2007. They claimed lower taxes than comparable local companies due to a tax treaty between Korea and Belgium, where the investing company was based.

The National Tax Service (NTS) imposed extra corporate taxes on Lone Star and its subsidiaries, which were then offset by the withheld taxes. Lone Star subsequently filed a lawsuit seeking the cancellation of these additional taxes.