Korea’s tax agency said Tuesday it plans to impose a corporate tax on U.S.-based buyout fund Lone Star Funds’ investment gains from the purchase of a local skyscraper instead of the previously-imposed transfer income tax, which a Seoul court ruled illegal.

Nearly 100 billion won ($89 million) in corporate taxes will be levied next month on the fund’s capital gains of nearly 245 billion won, stemming from its purchase and sale of a commercial high-rise in the posh southern part of Seoul.

The decision came after the Supreme Court ruled earlier in the day that the tax agency’s previous levying of 100 billion transfer income tax is against local tax law.

The top court said the transfer income tax should be dropped, upholding two previous courts’ decision on the lawsuit filed by Lone Star in 2005 to cancel the tax.

The Supreme Court’s ruling was grounded on the reasoning that Lone Star, as a foreign-based firm, is not subject to income taxes.

The ruling was widely interpreted, however, as having left room for the tax agency to come up with the corporate tax.

The tax service said, “The Supreme Court’s decision to view (Lone Star) as a foreign corporation means that only the specific tax is wrong and the taxation itself is not problematic.” 

(Yonhap News)