GIC Real Estate fined USD$15.5 million for tax evasion in Korea Gangnam

News article by The Korea Times

Singapore firm ordered to pay tax for Star Tower

By Na Jeong-ju, The Korea Times

A court delivered its final ruling Monday that the acquisition tax imposed on a Singaporean firm for its purchase of a Seoul office building was justifiable.Singapore’s GIC Real Estate purchased the 45-story Star Tower building in Gangnam, southern Seoul, from U.S. private equity firm Lone Star in December 2004 through two paper companies it set up just days ahead of the deal.Gangnam District Office levied 16.9 billion won ($15.5 million) in acquisition tax on GIC Real Estate, claiming it used the two paper firms to evade taxes. The Singaporean firm refused to pay and took the case to court.

After an eight-year legal battle, the Seoul High Court made the final ruling that the acquisition tax on the Singaporean firm was justifiable.The decision comes about 10 months after the Supreme Court overturned a lower court’s ruling that GIC Real Estate wasn’t obliged to pay the tax because the contract was signed by the two subsidiaries.“We rule that GIC Real Estate actually took charge of acquiring the tower,” the Seoul High Court said in its ruling. “The subsidiaries that were used for the deal had no prior business performance or any employees. GIC Real Estate and the two subsidiaries even shared the same address.”“We believe GIC Real Estate established the two subsidiaries in order to avoid the acquisition tax,” the court added.Seoul City welcomed the ruling, saying it will deal sternly with foreign firms that have used paper companies to evade taxes and bypass Korean laws.

GIC Real Estate is a subsidiary of Singapore’s one of two sovereign wealth fund companies, the Singapore Government Investment Corporation. Its chairman is Singapore’s current Prime Minister Lee Hsien Loong. The other soveriegn wealth fund company is Temasek Holdings, whose CEO is Lee Hsien Loong’s wife, Ho Ching. The 2 SWF companies manages Singapore’s national reserves which comprises largely of special government bonds issued to the Central Provident Fund, the nationalized compulsory saving scheme.



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