Lone Star Funds is hoping to challenge the KRW351 billion (€264 million; $348 million) withholding tax it paid in the $3.5 billion sale of Korea Exchange Bank to Hana Financial Group, according to local reports.
The two parties agreed to pay a withholding tax of 10 percent, which they paid on Monday. “Hana Financial and Lone Star agreed to the fact that the tax must be paid so we paid the withholding tax as scheduled,” an official at the Korean banking group was reported saying in the Korea Herald.
However, Lone Star is now “reviewing measures” to challenge the payment, either by means of retrieving part of the withholding tax or getting a tax exemption on its sale of the Korean bank, the newspaper reported, citing an unnamed source. As of Wednesday, no filing to the state tax agency has been received from the firm.
In 2003, the private equity firm acquired a 64.6 percent stake in KEB in 2003 for KRW2.1 trillion. The deal was marred by scandal and became politically contentious. In December 2011, South Korea's financial regulator ordered Lone Star to sell most of its stake in KEB within six months. It finally sold to Hana.
Lone Star is well acquainted with Korea's National Tax Service. In 2007, 27 officials raided Lone Star's Korea office after it sold 13.6 percent of the bank. In the raid, the officials took away 11 boxes of data and documents relating to recent deals, according to Lone Star.