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Photo courtesy of the National Tax Service |
[Alpha Biz= Kim Jisun] The National Tax Service (NTS) has reportedly begun a tax investigation into global private equity firm Affinity Equity Partners (Affinity), following a similar probe into MBK Partners.
According to an exclusive report by Maekyung (Maeil Business Newspaper) on Wednesday, over 30 NTS employees are currently conducting a tax audit of Affinity.
This marks the first investigation into Affinity by the NTS in 10 years, with the previous investigation taking place in 2015.
At that time, the NTS conducted an audit of Affinity’s $4 billion capital gains from the sale of OB Beer, finding that the firm had paid taxes on the gains but had underpaid. As a result, the NTS initiated a tax investigation.
Recently, South Korean regulatory agencies, including the NTS, the Fair Trade Commission, and the Financial Supervisory Service, have increased their scrutiny of private equity firms in light of the Homeplus scandal.
Following the NTS’s investigation into MBK Partners, the main shareholder of Homeplus, an investigation has now been launched into Affinity.
In a related development, Shinsegae Group, which failed to meet conditions with investors last year, paid a total of KRW 11.5 trillion to investors Affinity and BRV Capital, including the principal investment of KRW 10 trillion and a settlement of KRW 1.5 trillion.
Shinsegae Group made the payment to Affinity through a TRS (Total Return Swap) agreement, where the financial institution acquires the shares through an SPC (Special Purpose Company) but earns only fees, while Shinsegae bears the profit and loss.
Affinity and BRV Capital made a KRW 1.5 trillion profit under the TRS structure, which could attract closer inspection from the NTS.
Additionally, Affinity, as a major shareholder of Burger King, is suspected of having paid approximately KRW 1.5 trillion to itself in the form of a capital reduction since 2017, which may have been taxed at a lower rate than dividends, even though the payment was essentially a dividend.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
