U.S. private equity firm Lone Star Fund is reviewing measures to challenge a 391.5 billion won ($348 million) withholding tax on its sale of Korea Exchange Bank to Hana Financial Group Inc., a source said Wednesday.

The amount equal to 10 percent of Lone Star’s KEB sale proceeds was paid to the National Tax Service on Monday as a withholding tax, a Hana Financial Group official said.

“Hana Financial and Lone Star agreed to the fact that the tax must be paid so we paid the withholding tax as scheduled,” an official at the Korean banking group said.

Another financial industry source said that Lone Star is reviewing legal procedures to retrieve a part of the withholding tax or to get a tax exemption on its sale of a 51 percent stake in South Korea’s fifth-largest commercial bank.

Since Belgium-based LSF-KEB Holdings, Lone Star’s subsidiary, was the seller in the deal, the U.S. buyout fund may argue the tax rate should be determined based on the rate in Belgium, which is lower than the rate in South Korea, according to the source.

To get a full tax refund, Lone Star needs to file a complaint with the state tax agency by Friday. It has to file a complaint by early May to protest the tax rate. As of Wednesday, the NTS has not received a claim from Lone Star, an official said.

Lone Star is entangled in a separate legal row with the National Tax Service over a 119.2 billion won corporate tax imposed on the block sale of a 13.6-percent stake in KEB in 2007.

The Texas-based firm pocketed more than 4 trillion won in profit from its investment in the South Korean lender in 2003 in the wake of the 1997-1998 Asian financial crisis. 

(Yonhap News)