Between tax saving and tax evasion… Why did top star Cha Eun-woo set up a ‘one-person agency at an eel restaurant in Ganghwa County’? - 경향신문

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Lee Ha-nee 6 billion KRW, Yoo Yeon-seok 3 billion KRW, Cho Jin-woong 1.1 billion KRW, etc.

Cha Eun-woo, change from corporation→limited liability company, etc.

Actor Cha Eun-woo. Provided by TVING

Singer and actor Cha Eun-woo has been engulfed in allegations that he evaded taxes in the 20 billion KRW range through a one-person agency, putting such agencies used by entertainers back under scrutiny. High-earning entertainers have become embroiled in suspicions that they create one-person agencies or family corporations and, under the banner of tax saving, actually evade taxes. Beyond Cha Eun-woo, several actors, including Lee Ha-nee, Lee Joon-gi, and Yoo Yeon-seok, have been assessed large amounts of back taxes by the tax authorities. They have explained that these are merely differences in legal interpretation rather than tax evasion, but the controversy is growing.

The biggest reason high-income entertainers establish one-person agencies is professional tax management. For example, when an entertainer sets up a one-person agency, the contract is signed between the main agency and the one-person agency, not between the agency and the entertainer as an individual. In that case, revenue is booked as corporate sales rather than personal income and becomes subject to corporate tax, and the corporate tax rate (up to 25%) is lower than the personal income tax rate (up to 45%).

The scope and breadth of what can be treated as expenses (losses) also expand. Salaries and bonuses paid to the entertainer and family members as executives, vehicle maintenance costs, wardrobe costs, and meal expenses can be recognized as corporate expenses.

Of course, reducing taxes through a one-person agency in itself is not illegal. There is no issue if a one-person agency independently performs management functions separate from contracts with large agencies. The problem arises when one-person agencies operate less like corporate entities that support entertainer activities and more as empty shells, that is, as ‘paper companies’.

For tax authorities, which adhere to ‘substance-over-form taxation’ that imposes tax on the actual income earner, if they determine that the one-person agency is not a substantive corporation, they reimpose normal income tax. Last year, the National Tax Service sought back taxes of about 6 billion KRW from Lee Ha-nee, about 3 billion KRW from Yoo Yeon-seok, about 1.1 billion KRW from Cho Jin-woong, and about 900 million KRW from Lee Joon-gi, concluding that their one-person agencies did not conduct ordinary corporate activities such as providing support for their affiliated entertainers.

Cha Eun-woo assessed 20 billion KRW··· traces of organized structuring?

Actor Cha Eun-woo hosts the welcome banquet for the 2025 Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting at Lahan Select Hotel in Gyeongju, North Gyeongsang Province, on October 31 last year. Yonhap News

In particular, Cha Eun-woo, who was assessed 20 billion KRW, is more serious. The amount is unprecedented. Although Cha Eun-woo operated under a method in which Fantagio, his agency, and a one-person agency established by his mother entered into a contract for support services for his entertainment activities, the National Tax Service regarded his one-person agency as a paper company that did not perform substantive functions. It is also reported that this company did not complete the registration procedures for the popular culture and arts planning business.

Some analysis suggests signs of organized structuring, with experts involved, visible from the establishment location and the corporate form. Cha Eun-woo’s one-person agency is registered at an eel restaurant in Ganghwa County that his parents operated, and Ganghwa County is classified as a growth management area under the Capital Region Readjustment Planning Act. In such a case, one can avoid heavy taxation on acquisition and registration taxes (three times the base rate) when acquiring real estate in the capital region or Seoul, raising suspicions that the side of Cha Eun-woo aimed for this. Above all, one may question whether it makes any sense to manage a mega-star like Cha Eun-woo from an eel restaurant.

Another point at issue is the change from a stock company to a limited liability company (LLC). A stock company must, once it reaches a certain size, undergo external audits and disclose its books, whereas a limited liability company has no obligation to disclose or to undergo external audits.

Attorney and accountant Kim Myoung-gyu pointed out via social media on the 25th that “this case goes beyond simply paying additional taxes and could develop into a serious matter that leads to a complaint to prosecutors, depending on whether there was ‘intent to conceal’.” A tax accountant identified as A, a former National Tax Service official, told the Kyunghyang Shinmun on the 28th, “To determine whether it is a paper company, one must examine whether there are human and physical resources for work and whether the agency had a role,” while adding, “Since the National Tax Service itself came forward and made an announcement, it is highly likely that, internally, it strongly concluded there were fraud or other wrongful acts.”

Cha Eun-woo, who is serving his military duty, and Fantagio stated that they will faithfully cooperate with the tax authorities’ investigation. On the 26th, Cha Eun-woo wrote on his social media, “As a citizen of the Republic of Korea, I am deeply reflecting on whether my attitude toward my duty to pay taxes has been sufficiently rigorous,” and “I will humbly accept the outcome in accordance with the final determination of the relevant authorities and will take all corresponding responsibility.”

In a statement on the 27th, Fantagio said, “The matter currently raised is at a stage where the facts are being verified in accordance with procedures of the tax authorities, and the agency and the artist are faithfully cooperating with the investigation within their respective necessary scopes. If legal and administrative determinations become clear in the future, we will responsibly carry out the necessary measures in accordance with the results.”