Court rules against Lone Star in 168.2 billion won tax case

Key facts

• Appeals court denied Lone Star's bid to reclaim 168.2 billion won in taxes.
• The ruling was against South Korean and Seoul city governments.
• The case involved profits from Lone Star's investments in South Korea.
• Lone Star purchased shares of Korea Exchange Bank, Kukdong Engineering Construction and Starlease between 2002 and 2005.

An appeals court on Thursday ruled against U.S. private equity firm Lone Star Funds, denying its attempt to reclaim 168.2 billion won (US$125.9 million) in taxes from South Korean and Seoul city governments. The Seoul High Court's decision came after the Supreme Court returned the case for review.

Lone Star had sued seeking the return of withheld taxes related to profits from its investments in South Korea between 2002 and 2005, including shares in Korea Exchange Bank, Kukdong Engineering Construction and Starlease. The firm sold some shares in 2007, arguing for lower taxes based on a treaty with Belgium, where its investment company was based.

The National Tax Service levied additional corporate taxes, which Lone Star contested. While the Supreme Court had previously ruled in favor of Lone Star in 2017, it later remanded the case, stating that the refund of withheld taxes belonged to withholding agents like Korea Exchange Bank, not Lone Star directly.