"Catch the Delinquency King"... National Tax Service to Seize Even 'Overseas Paper Company Ships'

When the real delinquent hiding behind an SPC is confirmed
Domestic enforcement without a court judgment under review

Going forward, even if a ship is registered under the name of an overseas special purpose company (SPC), if the actual owner is confirmed to be a high-value, habitual delinquent, the National Tax Service is expected to seize it directly under the National Tax Collection Act. This is interpreted as targeting the hidden assets of Kwon Hyuk, chairman of Sido Shipping, who once fell from being a "ship king" to the top-ranked "delinquency king" in national tax arrears.

The National Tax Service recently commissioned Daeryun LLC to prepare a legal opinion on "measures for compulsory collection against ships registered under overseas SPCs and equity in foreign corporations." According to the opinion obtained by the Korea Economic Daily on the 21st, Daeryun determined that even if a delinquent holds a ship under the name of an SPC established in a flag-of-convenience country such as Panama or Liberia (countries with lax taxes and regulations where many ships are registered), if the substantive control relationship is proven, it can be seized under the National Tax Collection Act. It presented the opinion that a ship registered under an overseas SPC that is substantively controlled by a delinquent can also be subject to delinquency disposition under the National Tax Collection Act.

The background of this review lies in past cases of asset concealment repeated in the shipping industry. Some shipowners have managed their assets by using a "single-ship company" structure, in which one SPC is established for each ship, changing the nominal owner to an overseas corporation and controlling it through corporations in Hong Kong and Japan. This is a structure that separates the nominal owner from the actual owner, making delinquency disposition and compulsory execution difficult.

The National Tax Service also reviewed a plan to request collection cooperation from the relevant country by utilizing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCAA, an international treaty that helps collect taxes between countries) when a ship is located overseas. Cooperating with Hong Kong and Japan, rather than Panama and Liberia where cooperation is difficult, was presented as a realistic alternative.

The opinion suggested that "without a court's enforcement title, under the compulsory collection procedure of the National Tax Collection Act, a tax official can directly carry out compulsory collection by the method of seizing movable property." This review is interpreted as the National Tax Service seeking to expand the scope of tracking high-value, habitual delinquents' hidden overseas assets from deposits, real estate, and stocks to ships.

National Tax Service Commissioner Im Kwang-hyun said at a cabinet meeting that day that he would soon launch a tax investigation into offshore tax evasion by companies that hold large amounts of dollars overseas without converting them. Commissioner Im said, "The high exchange rate is becoming a cause of high prices," adding, "We are closely examining whether dollars are being funneled into paper companies in tax havens, or leaked to owner families overseas." This means the National Tax Service will lend its support to the foreign exchange authorities' policy of stabilizing the exchange rate by inducing exporting companies to sell dollars.

Reporter Kwak Yong-hee kyh@hankyung.com

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"Catch the Delinquency King"... National Tax Service to Seize Even 'Overseas Paper Company Ships' (Go to Link)