Swiss Asset Manager-Engaged Korea Investment Corporation Loses Tax Appeal Lawsuit in Second Trial

Korea Investment Corporation filed a lawsuit against the tax authorities after being imposed with a tax amounting to over 100 million won during the process of entrusting an alternative investment worth 100 million dollars (approximately 133 billion won) to a Swiss asset management firm, but lost the case in both the first and second trials.

According to the legal community on the 26th, the Administrative Division 8-1 of the Seoul High Court (Presiding Judges Jeong Chong-ryeong, Jo Jin-gu, and Shin Yong-ho) ruled on the 17th to dismiss the plaintiff's claim, just as in the first trial, in the case where Korea Investment Corporation sued the Namdaemun Tax Office chief to cancel the imposition of value-added tax.

In 2009, Korea Investment Corporation selected asset management firm A, headquartered in Zug, Switzerland, as the entrusted institution for alternative investments. In August 2014, A established a private equity fund in the form of a joint investment to invest in a U.S. for-profit educational institution corporation. Korea Investment Corporation decided to invest 100 million dollars in this fund in 2015 and transferred 1 million dollars, which is 1% of the committed investment amount, as a fee.

Regarding this, the tax authorities determined and announced a tax amounting to about 13 million won, stating that Korea Investment Corporation, having received services domestically from a foreign corporation without a domestic business place, used them for tax-exempt business and therefore must pay value-added tax on behalf of the service provider.

In response, Korea Investment Corporation filed a lawsuit requesting the cancellation of the tax imposition, arguing that it only paid for asset management services and that the important and essential parts of the services were performed overseas. However, the first trial court dismissed all of the plaintiff's claims, judging that the money paid by Korea Investment Corporation was not a fee for asset management services but a commission for the successful overseas investment transaction, and that the place of service supply was domestic.

The appellate court also found no problem with the first trial's judgment. The court stated, "It appears that the asset management firm attracted investors on the condition of receiving only transaction fees (deal commissions) for successful investments without receiving asset management fees (management and performance fees) while recruiting additional investors to raise acquisition funds," and ruled, "It is difficult to consider the 1 million dollars paid as transaction fees as compensation for asset management services."

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