Why did Lone Star Funds seek a 168.2 billion won tax refund from the Korean government and Seoul city?

Lone Star sought the return of taxes withheld from profits on its Korean investments. It had argued that its investment company, based in Belgium, was covered by the Korea-Belgium tax treaty and had earlier won a separate case challenging corporate taxes.

Court rules against Lone Star in $125.9 mil. tax case

Q: What did the Supreme Court decide about Lone Star’s claim to withheld taxes?

The Supreme Court remanded the refund case to the appeals court, ruling that the withheld taxes belonged to Korea Exchange Bank and other withholding agents rather than Lone Star. The Seoul High Court then ruled against Lone Star in the returned case.

Q: Which Korean investments did Lone Star and its affiliates sell for profit?

Between 2002 and 2005, Lone Star and affiliate firms bought large shares in Korea Exchange Bank, Kukdong Engineering Construction and Starlease. They made substantial profits by selling some of those shares in 2007.

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Summary

The Seoul High Court on Thursday ruled against Lone Star Funds in its suit against the Korean and Seoul city governments over 168.2 billion won in taxes. The case returned to the appeals court after the Supreme Court remanded it, ruling that refunds of withheld taxes belonged to Korea Exchange Bank and other withholding agents, not Lone Star. The firm had sought 153 billion won from the government and 15.2 billion won from the municipality.

Key Facts

Lone Star and affiliate firms bought large stakes in Korea Exchange Bank, Kukdong Engineering Construction and Starlease between 2002 and 2005, then sold some of the shares at a profit in 2007.
The firms cited the Korea-Belgium tax treaty to pay less tax than local companies would have.
The National Tax Service levied additional corporate taxes against Lone Star and its entities, offsetting them with withheld taxes.
The Supreme Court ruled in Lone Star’s favor in 2017 in a separate case seeking cancellation of corporate taxes, rejecting the tax authority’s argument that the firm had a fixed footing in Korea.

By Yonhap

Published Oct 22, 2026 12:36 pm KST
Updated Oct 22, 2026 1:21 pm KST

This 2006 file photo shows Lone Star's signboard in a building located in Gangnam, Seoul. Yonhap

An appeals court on Thursday ruled against U.S. private equity firm Lone Star Funds in its suit against the Korean and Seoul city governments to return a combined 168.2 billion won ($125.9 million) in taxes.

The Seoul High Court handed down the ruling against Lone Star after the Supreme Court returned the case to the appeals court for review in April last year.

The Texas-based firm had earlier filed the suit against the state and the municipality, seeking the return of withheld taxes in connection with profits from its investments in Korea.

Lone Star and affiliate firms purchased large shares of Korea Exchange Bank, Kukdong Engineering Construction and Starlease between 2002 and 2005, and made huge profits by selling some of the shares in 2007.

They paid smaller taxes than local companies would have, citing the tax treaty that Korea has with Belgium where the company that made the investment was based.

The National Tax Service (NTS) levied additional corporate taxes against Lone Star and its entities, offsetting them with withheld taxes.

Lone Star then filed a suit seeking cancellation of the corporate taxes and the Supreme Court ruled in favor of Lone Star in 2017, rejecting the NTS' argument the company had a fixed footing in Korea.

After tax authorities refunded the taxes, excluding the amount from the withheld taxes, Lone Star sued the government and the municipality, seeking 153 billion won and 15.2 billion won, respectively.

While a lower court and the Seoul High Court ruled in favor of Lone Star, the Supreme Court remanded the case, ruling the refund of the withheld taxes belongs to Korea Exchange Bank and other withholding agents, not Lone Star.

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