Foreign funds face claims of $1.5b
South Korea's tax authorities have ordered five unnamed foreign funds to pay tax shortfalls of 215 billion won ($1.55 billion).
The National Tax Service said it would notify the Financial Supervisory Service about the rule breaches and might press for criminal charges against the funds.
After a six-month probe into foreign funds and the disposal of assets, the officials said the funds in question had evaded tax by under-reporting cash flows, inflating costs and abusing tax codes, the semi-official Yonhap news agency said.
Yonhap reported that one of the funds was United States-based Lone Star Fund. It was not stated how much each fund had to pay.
A tax investigation into a sixth fund is under way.
Meanwhile, Steven Lee, who headed the operations of Lone Star in South Korea, resigned on Wednesday. It is unclear if his resignation was related to the tax investigation.
The National Tax Service started investigations into six funds in April, following a public outcry over the profits funds had realised in turning around Korean distressed assets.
The only two that have been named are Lone Star and Carlyle Group.
Lone Star made 280 billion won on the sale of an office building this year, and is expected to reap handsome profits when it divests its 51 per cent stake in Korea Exchange Bank some time after November.
Carlyle made 700 billion won from a stake sale of KorAm Bank.
By registering in offshore tax havens, the foreign funds paid no Korean taxes on their gains.
Korea is in the process of revising its tax laws as they relate to double-taxation agreements.
A foreign corporate tax expert said that in making their South Korean investments, the funds had 'structured their deals very aggressively'.
With reports from Bloomberg
