Cido Shipping founder Hyuk Kwon has pledged five overseas-registered ships as collateral to settle KRW393.8bn ($277m) in personal tax arrears in South Korea, closing a 15-year dispute with the country's tax authorities.

Kwon has already paid KRW100bn ($70m) in cash in July, according to South Korea's National Tax Service (NTS), which said a preliminary valuation showed the five pledged vessels are worth more than the remaining balance. The ships have not been identified.

It is the first time the Korean tax agency has accepted overseas vessels as collateral in such a case.

Why did the dispute last 15 years?

Kwon, who built Cido into one of Asia's larger privately controlled diversified shipping groups, has been fighting the assessment since 2011. The case centred on whether he should have been treated as a Korean resident for tax purposes while running shipping interests overseas.

Kwon maintained he was a foreign resident and that his shipping companies were foreign entities. Korean tax authorities took the opposite view. The dispute moved through the courts before the tax liability was finalised following Supreme Court proceedings.

The NTS said Kwon's personal arrears stand at KRW393.8bn, including accumulated penalties and interest. Authorities have also recorded secondary liabilities against three related companies, taking the book value of associated arrears to KRW790.2bn ($556m). Those secondary claims will disappear once the underlying personal debt is settled.

How did Korean authorities ramp up pressure?

The five-ship pledge follows a more aggressive push by Korean authorities to trace Kwon's overseas assets. The NTS established a special unit this year and sought cooperation from foreign tax authorities and registries, including in Liberia and Panama, where many internationally trading vessels are registered.

Commissioner Lim Kwang-hyun said the agency had also stepped up information exchange with the UK and other jurisdictions.

International taxation chief Ryu Chung-sun said the move towards overseas assets appears to have increased the pressure on Kwon to reach a settlement.

What is at stake for Cido's fleet?

Kwon founded his shipping business around 1990 and moved Cido's headquarters to Hong Kong in 2004, with the company retaining shipmanagement activities in South Korea and Japan. Cido has since developed into a diversified owner with interests spanning tankers, car carriers, bulkers and containerships.

The group has been particularly aggressive in the newbuilding market. Splash reported in June that Cido had been linked to four 300,000 dwt VLCCs at HD Hyundai's Subic yard for 2029 and 2030 delivery, following earlier orders for suezmaxes and product tankers.

Cido is also in the middle of a major car carrier renewal programme. Last month it signed up Avikus autonomous navigation technology for 20 LNG dual-fuel 7,600 ceu PCTCs under construction in China, with a framework covering a further 12 ships.

Korean authorities have not disclosed which part of Kwon's shipping portfolio sits behind the five vessels pledged as security, leaving open the question of whether pledged tonnage touches the tanker, car carrier, bulker or boxship segments.

With the KRW100bn cash payment already banked and ship collateral covering the remainder, the settlement signals that Korean tax authorities now have the cross-border reach — through registry cooperation in Liberia and Panama and information exchange with the UK — to pursue shipping fortunes held offshore, a precedent that will not be lost on other Hong Kong-based owners with Korean roots.