Newsletter | August 2014, Issue 3
	TAX
	Supreme Court affirms High Court’s decision recognizing an intermediate holding company as beneficial owner
	According to the Korea-Netherlands Tax Treaty, capital gain from the sale of shares of a Korean corporation held by a Dutch company is not taxable in Korea.  The case involved the transfer of shares of a Korean corporation held by a Dutch holding company to an unrelated Korean corporation.  The Tax Authorities deemed the Dutch holding company as a conduit and imposed withholding tax to its shareholder, a French company, by arguing that the shareholder was the actual beneficial owner of the capital gain. The Administrative Court ruled that the Dutch holding company is the beneficial owner of capital gain in light of the following considerations: (i) the Dutch holding company was established a long time ago (about 30 years) and holds shares in approximately 50 other companies; (ii) engaged in the business by establishing a Korean corporation for approximately 12 years; (iii) directly received the remuneration on the share transfer and reinvested the same into its own business without distributing it to the French company; and (iv) the Dutch holding company engaged in administrative matters on the share transfer.  The judgment of the Administrative Court was upheld at the High Court and then later affirmed by the Supreme Court. This case is the first of its kind where the Supreme Court has recognized an intermediate holding company as the beneficial owner.  Kim & Chang represented the plaintiff in the case.
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