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Photo = Korea’s National Tax Service (NTS) |
[Alpha Biz= Paul Lee] Seoul, April 22, 2025 — South Korea’s National Tax Service (NTS) has launched a high-level investigation into private equity firm MBK Partners, focusing on the alleged underreporting of taxes related to a 2022 stake sale involving key executives.
According to industry sources, the Seoul Regional Tax Office’s Investigation Bureau IV is currently scrutinizing MBK’s transaction structure involving the sale of a 12.5% stake to U.S.-based Dyal Capital, valued at KRW 1.4 trillion (USD 1.18 billion).
The deal was structured with new share issuance by MBK’s Korean entity and existing share transfers from its overseas affiliates. The NTS is examining whether this dual structure was intentionally designed to reduce tax liability, particularly concerning distributions made to Dyal Capital.
Between January 2023 and March 2024, Dyal Capital reportedly received KRW 31.1 billion in proceeds from MBK’s Korean entity. These payments were classified as capital reductions rather than dividends. Under Korean tax law and the U.S.-Korea tax treaty, dividend income is subject to a 16.5% withholding tax, whereas capital reductions are not taxed as income, a distinction now under scrutiny by tax authorities.
The NTS is said to be considering treating the payments as de facto dividends, which could result in retroactive taxation.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
