The Supreme Court has returned the case to the Seoul High Court, urging it to reconsider a ruling from the appellate court that stated the South Korean government must refund approximately 160 billion won in taxes to the American private equity fund Lone Star.
According to the legal community on the 25th, the Supreme Court's First Division, led by Chief Justice Noh Tae-ack, has partially overturned the original ruling in a lawsuit filed by Lone Star and nine other investment groups against the South Korean government and Seoul, and sent the case back to the Seoul High Court.
Earlier, the first and second trial courts ruled that the government and Seoul must refund the 168.2 billion won in taxes imposed on Lone Star.
Lone Star acquired domestic corporations such as Korea Exchange Bank, Hyundai Engineering & Construction, and Staris from 2002 to 2005, and made billions in profits from their sale between 2007 and 2012. However, Lone Star paid less tax on the profits earned in Korea compared to domestic corporations, because it is headquartered in Belgium and is subject to the Korea-Belgium tax treaty.
The tax authorities determined that it was appropriate to impose taxes on Lone Star as if it were a domestic corporation, given that it maintained a fixed place of business in Korea, and demanded payment of approximately 800 billion won in taxes. Lone Star contested this by filing a lawsuit to cancel the imposition of 170 billion won in corporate tax. In 2017, the Supreme Court ruled in favor of Lone Star, canceling the corporate tax.
Subsequently, Lone Star filed another lawsuit against the government and Seoul, claiming it had not received the refund of the corporate tax of 168.2 billion won canceled by the Supreme Court's decision. The first trial court also ruled in favor of Lone Star, and the second trial court dismissed appeals from both sides.
The Supreme Court stated, "The withholding tax paid by the corporations acquired by Lone Star was paid in the name of the corporations, so it is reasonable to view the right to national tax refunds as belonging to the corporations." It also added, "The appellate ruling misunderstood the nature of the national tax refund claim and the legal principles regarding its rights holder, and failed to conduct necessary investigations."