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The National Tax Tribunal on Thursday rejected three appeals by the U.S. fund Lone Star against W101.7 billion in punitive taxes on the profits from its sale of the Star Tower Building in Seoul (US$1=W938). Lone Star bought the building for W663.2 billion in June 2001 and sold it for W930 billion in December 2004, earning W296.8 billion in profits. Lone Star paid no taxes on the transaction at the time but was slapped with a W101.7 billion bill by the National Tax Service as a result of a tax probe in 2005.
At the time, the NTS said Star Holdings, the Belgium-based firm that held the Star Tower stocks, was a paper company, so it decided to consider Lone Star a U.S. company and applied a provision in the Korea-U.S. taxation treaty.
In March this year, Lone Star appealed, saying Star Holdings was a bona fide company and therefore Korea¡¯s dual taxation treaty with Belgium should apply. But in a press release, the NTT said Star Holdings is a conduit or paper company founded for the purpose of avoiding tax, carries out no normal business activities, and has no substantial governance and management rights over income. Lone Star is now threatening to sue in a Korean court.
(englishnews@chosun.com )
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