알파경제 - Retrial Begins in Lone Star’s KRW 168.2 Billion Tax Refund Lawsuit Against Korea

Photo courtesy of Yonhap News

 

[Alpha Biz= Kim Sang Jin] A retrial has begun in Lone Star Funds’ lawsuit seeking the return of KRW 168.2 billion in taxes from the South Korean government and the Seoul Metropolitan Government.

On March 19, the Seoul High Court held the first hearing in the remanded case filed by nine Lone Star-related entities, including HudCo Partners for Korea, seeking restitution for alleged unjust enrichment.

The case was sent back for retrial after the Supreme Court overturned earlier rulings in April last year, which had ordered the government to return KRW 153.4 billion and Seoul City KRW 15.2 billion.

The Supreme Court ruled that even if the corporate tax assessment was invalid, the right to claim a refund for withheld taxes generally belongs to the withholding agent—such as financial institutions—rather than Lone Star itself.

At the hearing, Lone Star maintained its position that the underlying tax imposition was unlawful and that the full amount should be refunded. Its legal representatives argued that the disputed taxes should be regarded as effectively paid by Lone Star, citing prior deductions and partial refunds during the taxation process.

The government countered that, as Lone Star has been deemed a foreign entity without a permanent establishment in Korea, the taxes in question were paid through withholding. It also argued that any refund claim is time-barred under the statute of limitations.

The dispute stems from Lone Star’s investment in Korea Exchange Bank. After acquiring a 51% stake in 2003, the firm sold its shares in 2010, generating gains of approximately KRW 4.6 trillion. Tax authorities later imposed corporate taxes exceeding KRW 800 billion, but the Supreme Court ruled in 2017 that the taxation was unlawful.

While the government refunded KRW 22.8 billion—excluding withholding taxes—Lone Star filed a separate lawsuit seeking the full amount. Lower courts sided with Lone Star, but the Supreme Court reversed the decision, leading to the current retrial.

The court is expected to conclude hearings on July 9, with a ruling to follow. If the outcome aligns with the Supreme Court’s position, the government and Seoul City would not be required to return the disputed amount.

 

 

 

알파경제 Kim SangJin Reporter(ceo@alphabiz.co.kr)