Lone Star Loses 168.2 Billion Won Tax Refund Case in Seoul Appeals Court
The Seoul High Court ruled against Lone Star Funds in a long-running dispute over 168.2 billion won in taxes, following a Supreme Court decision that the disputed refunds belonged to Korean withholding agents rather than the U.S. private equity firm.
A South Korean appeals court ruled Thursday against U.S. private equity firm Lone Star Funds in a long-running lawsuit seeking the return of 168.2 billion won, or about $125.9 million, in taxes from the national government and the Seoul city government.
The Seoul High Court issued the decision after the Supreme Court sent the case back for further review in April 2025. The dispute centers on taxes connected to profits Lone Star earned from investments in South Korea and on who was legally entitled to receive refunds of withheld taxes.
Lone Star and affiliated entities acquired substantial stakes in Korea Exchange Bank, Kukdong Engineering & Construction and Starlease between 2002 and 2005. The investors later generated large profits by selling some of those holdings in 2007.
The firm paid less tax than comparable domestic companies would have paid, relying on a tax treaty between South Korea and Belgium, where the investment vehicle involved in the transactions was based. South Korea’s National Tax Service later imposed additional corporate taxes on Lone Star and related entities, offsetting those assessments against taxes that had already been withheld.
Lone Star challenged the corporate tax assessments in a separate case. In 2017, the Supreme Court sided with the firm and rejected the tax authority’s argument that the company maintained a fixed place of business in South Korea. Tax authorities subsequently issued refunds, but excluded the sums associated with the withheld taxes.
The private equity firm then brought the current lawsuit against the South Korean government and Seoul municipality. It sought 153 billion won from the national government and another 15.2 billion won from the city, bringing the combined claim to 168.2 billion won.
A lower court and an earlier Seoul High Court panel had ruled in Lone Star’s favor. The Supreme Court, however, overturned that outcome and remanded the matter. It concluded that the right to the withheld-tax refunds belonged to Korea Exchange Bank and other entities that had acted as withholding agents, rather than to Lone Star itself.
Thursday’s appellate ruling applies that higher-court interpretation and marks the latest turn in years of litigation surrounding Lone Star’s investments and tax obligations in South Korea. The decision concerns entitlement to the specific withheld-tax refunds and follows the Supreme Court’s distinction between the investor and the Korean entities that collected and remitted the taxes.