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Finance & PEF Tax

"The team is made up of a group of intelligent, very responsive people with a good support network."
– Chambers Asia-Pacific 2018

Overview

Our Finance & Private Equity (“PEF”) Tax Practice is recognized as the leading finance and private equity tax practice in Korea with a long and successful track record and the know-how of our seasoned tax specialists comprised of Korean and foreign lawyers, CPAs, tax consultants and former government officials and financial institution executives with deep industry knowledge and experience.  

The financial services and private equity industry is a complex and rapidly changing industry with new products and techniques to meet the demands of clients and foster economic growth while being subject to numerous regulations and supervision.  We work closely with our lawyers and other subject matter experts to deliver a comprehensive service covering the full spectrum of finance and private equity tax and related legal issues.  

Key Servicesshow

Financial Transactions and Products

Our Finance & PEF Tax Practice has substantial experience in dealing with complicated and diverse tax issues arising from a wide range of financial transactions, including securities issuance, Repos, securities lending, structured financings, financial derivatives, real property investment, project financing, M&A finance, reorganization and mergers and acquisition of financial institutions.  We deliver comprehensive legal advice in addition to tax advice, by working closely with our finance attorneys and industry specialists who regularly deal with regulatory changes in the finance industry.

 

Private Equity Transactions

Our Practice represents and assists private equity clients in setting up optimal investment structures for private equity transactions, including establishment of a domestic or offshore private equity fund, acquisition financing, reporting obligations in various jurisdictions, restructuring of a portfolio company, establishment of divestment strategy, and application of tax treaty benefits of foreign investors.

 

Financial Services Transfer Pricing

Within our Practice, we have a dedicated financial services transfer pricing team with substantial experience handling transfer pricing projects of financial clients.  We assist our financial clients mitigate risk by aligning practical transfer pricing solutions with their overall global business operations and objectives, assist with strategic documentation to support their transfer pricing practices, and provide practical solutions for efficient dispute resolution.  Our services include transfer pricing planning and documentation, dispute avoidance through advance pricing agreements and dispute resolution through tax audit assistance, tax appeal assistance, and mutual agreement procedures between competent authorities.

 

Tax Audit Assistance

Our Practice represents and assists financial institutions and private equity firms with tax audits.  Our tax audit assistance team is organized to fully leverage our comprehensive technical and practical knowledge in order to assist clients with addressing potential key audit issues and information submissions, formulating audit strategies and explaining clients’ position to the auditors during the course of any tax audit to prevent unfair tax assessments.

 

Dispute Resolution/Tax Appeal

Our Practice represents and assists our clients in dispute resolution proceedings in connection with all types of national and local taxes before the National Tax Service, Tax Tribunal, Board of Audit and Inspection, administrative courts, appellate courts and the Supreme Court.

 

Tax Law Amendment and Authoritative Tax Ruling

The heavy monitoring and regulation of the finance and private equity industries can also impact related tax rules.  In addition to providing tax advice related to frequently revised tax laws, regulations, rulings and guidelines, our Practice also assists our clients with tax law amendment projects and obtaining authoritative tax rulings.

Key Experiencesshow

Our Finance & PEF Tax Practice represents various clients from all sectors, including local and international commercial and investment banks, securities companies, insurance companies, asset management companies, private equity firms, investment advisors, credit card companies and leasing companies. 

 

Our Practice has successfully advised major domestic and foreign banks, investment banks, securities companies, insurance companies, financial holding companies, specialized credit financial companies, asset management companies, PEFs, pension funds and other various related organizations for more than the past 30 years.  Based on our expertise accumulated over the years, we provide comprehensive finance tax advisory services to our clients.

 

Tax Audit Assistance
  • Represented and assisted numerous domestic and foreign financial institutions, insurance companies and private equity firms in tax audits.

 

Private Equity Consulting Services
  • Assisted the set-up of a private equity fund and investment structure.
  • Provided tax advice on fund investment related contracts (e.g., share purchase agreement, asset/business transfer agreement, articles of incorporation of private equity fund).
  • Assisted the restructuring (e.g., recapitalization) and development of portfolio companies.
  • Provided advice on the investor’s tax implications at the investment and exit phase.
  • Assisted preparation of tax applications for foreign investors claiming reduced tax rates or an exemption under applicable tax treaties.
  • Provided tax advice for key persons operating the fund from Korean individual income tax perspective.
  • Provided advice on tax compliance matters in relation to the operation of a private equity fund.

 

Tax Appeal

We assist numerous financial institutions in successfully appealing against a broad range of precedent setting finance tax issues.

 
Tax Litigation
 
  • Interest rate on subordinated loan for SOC project.
  • Interest income tax exemption on foreign currency loan by credit specialty finance companies.
  • Dividend received deduction by financial holding company.
  • Recognition timing of gains/losses from ELW and related hedging transaction by liquidity provider. 
  • Deduction of bad debt allowance following the merger of a credit card company for corporate income tax purposes.
  • Dividend income related to gold banking products.
  • Application of a reduced tax rate under the Korea-Luxembourg Tax Treaty to SICAV 
  • Imposition of registration tax on foreign private equity fund.
  • Yen swap issue.
  • Deduction of reserve for loss from disposal or appraisal of treasury stock of bank for corporate income tax purposes.
 
Appeal to Tax Tribunal
 
  • Income/loss recognition of early terminated derivatives.
  • Tax on asset revaluation by life insurance companies.
  • Denial of unfair calculation of bad debt allowance by a bank.
 
Appeal for Review of Adequacy of Tax Imposition
 
  • Appropriateness of withholding tax imposition on capital gains.
  • Appropriateness of corporate withholding tax imposition.
  • Succession of net operating loss carry-over following the reverse merger of a bank.

 

Financial Services Transfer Pricing
APA
 
  • Assisted foreign financial institutions in successfully obtaining APA approvals on transactions of investment banking, fixed income, financial services, equity brokerage and stock borrowing and lending.
  • Assisted a foreign financial institution in successfully obtaining the first APA approval dealing with management service fee.
 
Transfer Pricing Study
 
  • Prepared transfer pricing documentations on management service fee, etc.
  • Prepared transfer pricing documentations on cross-border transactions by foreign financial institutions, including investment banking, equity brokerage, loan/syndication/risk participation, cash management, reinsurance, derivatives, fixed income, and stock borrowing and lending.
 
MAP
 
  • Assisted foreign financial institutions with the mutual agreement procedure relating to management service fees and various other transfer pricing disputes.

 

Tax Law Amendment and Authoritative Tax Ruling
Tax Law Amendment
 
  • Maintained capital gains tax exemption regime for investment in listed Korean shares by foreigners (25% rule).
  • Amended relevant regulations related to Repo and stock borrowing and lending transactions for collateral purpose.
  • Maintained the non-taxation of gains from long-term savings insurance.
  • Maintained the VAT exemption for services provided by a general partner to a private equity fund.
  • Maintained the deduction for contingency reserve and Liability Adequacy Test (“LAT”) under K-IFRS for corporate income tax purposes.
  • Revised the PEF-related partnership taxation regime for further improvement.
  • Abolished the regulations on insurance business expenses (disallowance of the deduction of any portion in excess of 110% of the estimated amount for corporate income tax purposes).
  • Expanded the date of expiration of the deferral of capital gains tax imposition for the newly incorporated financial holding company.
  • Maintained the dividend-paid deduction for the private equity fund that has not applied for the partnership taxation.
  • Clarified the scope of newly established holding companies entitled to favorable tax treatment.
  • Extended the date of expiration of the securities transaction tax exemption for the newly incorporated financial holding company.
  • Expanded the scope of entities entitled to suspension of book to tax adjustment of bad debt allowance (included domestic business places of foreign corporations under the scope of entities).
  • Clarified the tax withholding procedures on the application of the tax treaty by a non-resident and foreign corporation.

 

Authoritative Tax Ruling
  • Deductibility of certain guarantee fees between head office and branch.
  • Recognition of goodwill on the acquisition of a savings bank for tax purposes. 
  • VAT exemption for Korea Financial Telecommunications and Clearings Institute.
  • Scope of profit/loss from financial derivative transactions.

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