The Chosun Ilbo reports, that Korea’s National Tax Service (NTS) plans to tax the profits from the sale of Korea Exchange Bank by U.S. private equity fund Lone Star.
According to the article, Lone Star currently owns 51.02 percent of KEB and the stake is expected to fetch KRW W5.7 trillion, including the premium paid on management control.
“Lone Star was taxed when it sold a partial stake in KEB back in 2007, so it must be taxed for the sale of the entire stake.”
- A senior official at the National Tax Service said Monday.
But Lone Star is expected to appeal to the National Tax Tribunal or file a lawsuit against the measure.
When it acquired KEB in 2005, Lone Star made the investment through a corporation in tax haven Belgium, and dual taxation treaties Korea had with both Belgium and the U.S. at the time stated that a business entity is required to pay taxes on gains from selling stocks, to the country where it is based.
Lone Star therefore argues that it is unfair for Korea to tax it on gains from KEB stakes.
However an NTS official said,
“If Lone Star profits by reselling KEB, this cannot be viewed as capital gains stemming from an equity sale but must be interpreted as profits from the sale of a permanent business establishment in Korea, and this is subject to taxes here.”
See ‘Lone Star KEB Update: Potential buyers not in position to acquire‘ for more information and links to previous posts.
(Source: Chosun Ilbo)
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