On 10 July 2014, the South Korean Supreme Court issued its decision on whether a Dutch BV is the beneficial owner of capital gains on the sale of shares of its Korean subsidiary, or the Dutch BV's French parent company.
South Korea has tax treaties with both the Netherlands and France. However, only the Netherlands treaty provides exemption from taxation of capital gains in South Korea. When the capital gains were realized, the Korean tax authorities assessed tax on the gains, asserting that the Dutch BV was a conduit and the French parent was the beneficial owner.
On appeal, the courts sided with the taxpayer, from the lower courts up to the Supreme Court. The courts held that the French parent is not the beneficial owner because, although the French parent company did exercise influence over the Dutch BV's decision-making process, it did not have control/management/disposal rights for the capital gains in question.
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