A court ruled that the tax authorities were wrong to impose 9 billion won in corporate tax on the BlueRun Ventures (BRV) Lotus Fund led by CEO Yoon Gwan, 51, and that the levy should be canceled. Yoon is the husband of Koo Yeon-kyung, head of the LG Welfare Foundation and the eldest daughter of the late former LG group chairman Koo Bon-moo.
The Administrative Division 5 of the Seoul Administrative Court (Presiding Judge Lee Jeong-won, Director General) on the 25th ruled for the plaintiffs in a lawsuit filed by BRV Lotus One Limited (BLI) and Power Empire Group Limited (PEG) seeking to cancel a corporate tax assessment by the head of the Gangnam District Tax Office.
The court canceled both the roughly 8 billion won in corporate tax assessed on BRV Lotus One for fiscal year 2015 and the approximately 980 million won in corporate tax on Power Empire for fiscal year 2017.
The BRV fund group led by Yoon is organized in a vertical structure with "BRV Partners Ltd." at the top, established in the Cayman Islands, a tax haven, followed by "BRV Partners Ltd.," "BRV Partners LP," and "BRV Fund 2012." Yoon is a limited partner (LP) of BRV Partners LP and an executive holding 99.9% equity of BRV Partners Ltd.
Plaintiffs BLI and PEG are corporations funded by BRV Fund 2012 to invest in domestic corporations. BLI was established in Hong Kong with 100% funding from BRV Fund 2012, and PEG was established under Seychelles law by BRV Fund 2012 and Accel Technology Holdings Limited (Accel), based in the British Virgin Islands.
The BRV fund group has separate investment advisory firms in the Cayman Islands, Hong Kong and Korea. BRV Korea Advisors, a Korean corporation, is a 100% subsidiary of BRV Lotus Holdings Limited, a Hong Kong corporation that is a 100% subsidiary of BRV International.
After conducting a consolidated tax audit in 2020, the National Tax Service imposed 9 billion won in corporate tax on BLI and PEG, which were established in Hong Kong by BRV Fund 2012. It assessed corporate tax on the 22.6 billion won capital gain BLI earned by selling all Hironic shares it acquired in 2014 the following year, and on the 19.4 billion won capital gain PEG earned by selling Daesung Industrial Gas shares and convertible bonds it acquired in 2014 in 2017.
BRV Lotus objected and filed a petition with the Tax Tribunal in 2022, but it was dismissed. BRV Lotus then filed an administrative suit in September of the same year.
In court, the tax authorities argued that corporations related to Yoon had fixed physical business sites in Korea where they conducted business activities. If a foreign corporation has a fixed place of business in Korea and conducts business there, it must pay corporate tax the same as a domestic corporation.
The tax authorities also said, "The actual decision-maker for the plaintiffs is CEO Yoon," adding, "Yoon made key decisions in Korea related to the plaintiffs' business activities, and BRV Korea employees in Korea carried out tasks related to the plaintiffs' business activities under Yoon's direction."
The court found the corporate tax assessment unlawful, ruling that the plaintiffs could not be deemed foreign corporations with domestic business sites. The court said, "BRV Korea is a domestic corporation that is a clearly separate legal entity from BLI and PEG, with no equity relationship," and added, "Even if BRV Korea employees acted under Yoon's direction, BLI and PEG are entities separate from Yoon, so Yoon's directions cannot be regarded as directions from BLI or PEG."
Separately, Yoon filed an administrative suit challenging the Gangnam District Tax Office's assessment of 12.37 billion won in global income tax but lost in February last year. Yoon is a U.S. national, but if a person stays in Korea for 183 days or more a year, that person must pay taxes the same as a domestic resident. At the time, the administrative court said, "Yoon appears to have Korea as the center of vital interests to which he is more closely connected personally and economically, so it is reasonable to view him as a resident of the Republic of Korea."