LG Group Family Head Wins First Trial in Dispute Over 18 Billion Won Capital Gains Tax

Seoul Administrative Court, Seocho-gu, Seoul. / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Daehyun] The LG Group's controlling family won the first trial in an administrative lawsuit challenging the tax authorities' imposition of capital gains tax amounting to approximately 18 billion KRW.

According to the court on the 17th, the Seoul Administrative Court Administrative Division 6 (Presiding Judge Lee Jooyoung) recently ruled in favor of the plaintiffs in the first trial of the lawsuit filed by 10 individuals, including Chairman Koo Bonneung of Heesung Group, CEO Koo Bonwan of LB HUNET, and President Koo Boncheon of LB Investment, seeking cancellation of the capital gains tax imposition by the tax authorities.

Previously, during tax investigations conducted in 2017-2018, the tax authorities detected circumstances where members of the controlling family of LG Group traded approximately 2.87 million shares among themselves by having one member place sell orders and another immediately purchase them, under the leadership of the LG Group's financial management team.

The tax authorities imposed about 18.91 billion KRW in capital gains tax on Chairman Koo and others, arguing that the stock price was evaluated at a premium during the transactions and that additional taxes should be paid on the underreported amount.

Chairman Koo and others filed an appeal lawsuit, claiming, "The stocks were transferred through the Korea Exchange's on-market competitive trading method, and these were not transactions between related parties."

The first trial ruled in favor of the controlling family, stating, "There is no evidence to recognize that the transactions were conducted at unfairly low prices." The court explained, "In principle, competitive trading on the exchange market is difficult to regard as transactions between specific individuals," and added, "There is no evidence to acknowledge that the transactions in this case lost the essence of competitive trading or are difficult to view as competitive trading."

Furthermore, the court stated, "The average price of the transaction orders in this case was always formed between the high and low prices of the stock at the time, and there is no indication that the stock price was distorted by these transactions," and explained, "Even if the plaintiffs had agreed on the transactions in advance, transactions conducted through on-market competitive trading cannot be considered transactions between specific individuals."

Additionally, the court noted, "Transactions with related parties and transactions with third parties were mixed within a single order, which is an incidental result of the exchange system, not the plaintiffs' intention." The tax authorities have appealed the first trial ruling.

This content was produced with the assistance of AI translation services.