South Korean Court Rejects Lone Star's Claim for Tax Refunds from Central and Seoul Governments

An appellate panel sided with South Korea’s central government and Seoul municipal authorities, rejecting a civil suit by U.S. private-equity firm Lone Star and eight related companies. The Seoul High Court reversed earlier rulings that ordered the government to return withholding and local taxes, after the Supreme Court had remanded the case and nullified a prior tax-refund order. Lone Star had acquired stakes in Korea Exchange Bank, Kukdong Engineering and Construction and Star Lease, later earning large profits and paying dividends to a Belgian affiliate, which it claimed exempted it from Korean tax under the South Korea-Belgium treaty.

Korean tax officials nonetheless levied corporate and other taxes, prompting the lawsuit. The court concluded that the earlier refunds were invalid because the firm does not have a permanent establishment in the country.