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HOME  >  Recent Developments  > Deals & Cases

Cancellation of Corporate Income Tax due to Spin-Off

2019-06-28

Lee & Ko prevailed in the Seoul High Court to cancel the corporate income tax from a spin-off of the gas supplying sector of the client’s business as a separate subsidiary. In this case, the Korean tax authority made assessment of corporate income tax by arguing that the split-off did not satisfy all the requirements for a tax-free spin-off, and therefore the deferred tax cannot apply for the purposes of corporate income tax on SeAH Holding Corp.

 

In that regard, Lee & Ko examined legal principles on a spin-off, presented the facts and circumstances concerning the spin-off by the client at issue, and thoroughly explained why the spin-off satisfied the two requirements for a tax-free spin-off under the relevant tax law including (i) spin-off of a business sector which can be operated as an independent business, and (ii) transfer of assets and liabilities falling within the eligible business sectors. As a result, both the lower court and appellate court ruled in favour of the client, and cancelled the corporate income tax assessment by the Korean tax authority.

 

This case is the first case where the court made detailed legal analysis regarding the requirements to apply deferred tax to an appropriate spin-off. Based on the success it obtained from this case, Lee & Ko will be able to provide valuable advice and representation to clients with similar tax issues of an appropriate split-off in the future.

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