'Tax Imposition Cancellation Lawsuit' Lee Jae-hyun, Chairman of CJ, Virtually Confirmed Victory

Cancellation of 156.2 Billion out of 167.4 Billion in Second Trial
Supreme Court Confirms Original Ruling, Saying "No Error"

Lee Jae-hyun, Chairman of CJ Group. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Seongpil Cho] CJ Group Chairman Lee Jae-hyun has effectively secured a victory in a lawsuit against the tax authorities demanding the cancellation of excessive tax imposition.

The Supreme Court's First Division (Presiding Justice Park Jeong-hwa) announced on the 20th that it upheld the appellate court's ruling in the appeal case filed by Chairman Lee against the Seoul Jungbu Tax Office to cancel the imposed gift tax, confirming the cancellation of 156.2 billion KRW out of the 167.4 billion KRW tax imposed. In 2013, Lee was arrested and prosecuted on charges of creating slush funds totaling over 620 billion KRW and evading 54.6 billion KRW in taxes. He was also accused of tax evasion through nominee transactions by establishing seven paper companies and special purpose companies (SPCs) in the British Virgin Islands, a tax haven, and trading stocks through them.

The key issue in the case was whether Chairman Lee was the actual owner of the CJ affiliate stocks. Lee's side argued that "there was no agreement on nominee trust with the SPCs and overseas financial institutions." Nominee trust refers to registering the ownership of assets, which should be publicly disclosed, under someone else's name instead of the actual owner. The first trial court ruled that "Lee's personal funds were involved, and both holding and disposal were conducted for Lee's benefit," deeming the taxes except for an additional 7.1 billion KRW penalty tax as legitimate. In contrast, the second trial court stated, "It cannot be considered a nominee transaction by Lee, and since the transactions were between the SPC and overseas financial institutions, Lee is not subject to taxation."

The Supreme Court also found no legal or logical errors in the second trial's judgment. The Supreme Court stated, "Based solely on the evidence submitted by the tax authorities, it cannot be sufficiently proven that Lee is the actual owner of the stocks in question or that there was an agreement regarding nominee trust." It further ruled, "Acquisition of stocks through SPCs is not an illegal act," and "there is insufficient evidence to conclude that Lee evaded gift tax through this."

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