Korea Issues Back Tax Bills To Six Foreign Fund Firms

by Mary Swire, Tax-News.com, Hong Kong

03 October 2005

Six foreign fund firms have been landed with a total back tax bill of more than US$200 million by the Korean National Tax Service after an investigation which began earlier in the year.

The probe, which began in April, came in response to growing public anger over the level of profits made by several foreign investment funds from the buying and selling of distressed South Korean assets in the late 1990s.

According to the NTS, the funds evaded taxes by nominally basing themselves offshore, paying high rates of interest to their overseas affiliates, using illegal expenses and failing to report securities transactions in accordance with the law.

"In accordance with our basic policy of applying tax rules indiscriminately to local and foreign capital, we conducted the tax investigation into some foreign funds which were alleged to have avoided taxes after earning big profits at home," the tax agency said in a statement.

"For those five foreign funds, where we have completed the investigation, we have collected a total of 214.8 billion won ($206.8 million) in taxes that have not been reported," it added.

Han Sang-ryul, the head of the NTS investigation bureau, is reportedly preparing to refer up to three executives of the foreign funds in question to prosecutors. The Financial Supervisory Service is also being informed of the funds' wrongdoing.

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