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| yna@yna.co.kr 2026-02-05 15:08:47
SEOUL, Feb. 5 (Yonhap) -- Concerns are growing over tax-saving practices in the entertainment industry that tread a fine line between legality and illegality, after singer and actor Cha Eun-woo was notified of a massive tax assessment.
Cha recently received notice of additional taxes amounting to hundreds of billions of won from the Seoul Regional Tax Office’s Investigation Division 4. The tax authorities cited the fact that he had received payments for his entertainment activities through a corporation established under his mother’s name, thereby benefiting from a lower corporate tax rate instead of the higher personal income tax rate.
His agency, Fantagio, said the matter has not been “finally confirmed or officially notified,” and Cha, who is currently serving in the military, issued a public apology via social media. The controversy, however, has yet to subside.
Actor Kim Seon-ho, who is also signed with Fantagio, was likewise embroiled in controversy after it emerged that he had operated a one-person corporation with family members listed as executives for tax-saving purposes. Kim’s side acknowledged that he had received settlements from his former agency through the corporation for about a year after its establishment in January 2024, and said he has since shut down the company and paid additional personal income tax on top of previously paid corporate taxes.
The primary reason entertainers set up one-person agencies or corporations is the difference in tax rates.
Under current tax law, the top marginal personal income tax rate for high earners stands at 45 percent, or 49.5 percent including local taxes, while the top corporate tax rate is 25 percent, or 27.5 percent including local taxes. For freelancers, converting appearance fees or endorsement income into corporate revenue can nearly halve their tax burden.
As a result, such practices have long been regarded in the entertainment industry as a form of “legal tax planning.”
However, as tax authorities step up scrutiny, more cases involving entertainers’ corporations have been flagged. Last year, actors Lee Ha-nui and Yoo Yeon-seok were each notified of tens of billions of won in additional taxes, while Jo Jin-woong and Lee Joon-gi faced assessments of around 1 billion won each.
All of them denied intentional tax evasion, arguing the issue stemmed from differences in legal interpretation. In fact, Yoo reportedly received a substantial reduction during a pre-assessment review process that determines the appropriateness of taxation.
Setting up a corporation itself is not the problem, industry experts say. The key issue is whether the company has real operational substance.
If a corporation cannot demonstrate actual business activities — such as having a physical office or full-time staff — it may be deemed a vehicle for tax avoidance. Tax authorities reportedly classified Cha’s corporation, registered at the address of a restaurant run by his parents in Ganghwa, Incheon, as a paper company with no real substance.
Registering family members who do not participate in actual work as employees and paying them large salaries, or purchasing luxury cars and high-end homes as corporate assets, can also be viewed as attempts at tax evasion or embezzlement.
Attorney Park Ji-won of law firm Apex, a former certified public accountant, said the most important factor is whether the corporation has genuine substance. “What matters is whether services were actually provided as stipulated in the service contracts and whether compensation was paid at a reasonable level,” he said. “If revenue is generated without real business activity, it could even lead to criminal charges for issuing false tax invoices.”
Not all tax-saving efforts by entertainers can be faulted. Still, critics note that those who have built their wealth on public trust should fulfill their tax obligations transparently, rather than exploiting loopholes in the law.
“Given the nature of their profession, entertainers can suffer irreparable damage to their image by trying to save a relatively small amount in taxes,” Park said. “Even if they have sought advice from tax agents, they need to take extra steps to ensure there are no legal risks and choose the right path.”
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