K-Pop Star Cha Eun-woo Faces $15 Million Tax Evasion Allegations: Experts Weigh In

K-pop idol and actor Cha Eun-woo is under scrutiny for alleged tax evasion amounting to approximately $15 million. Industry experts have analyzed why the National Tax Service (NTS) views this as a case of 'tax evasion.'

Cha Eun-woo was subjected to an intensive investigation by the Seoul Regional Tax Office's Investigation Bureau 4 last spring. Kim Myung-kyu, a lawyer from Hankyung/MK Partners and a former certified public accountant, commented on social media, "The involvement of 'Investigation Bureau 4' indicates that the NTS suspects 'intentional tax evasion' rather than a mere oversight." The core of the allegations revolves around the use of 'one-person agencies' to avoid taxes. High-income celebrities often establish corporations with lower tax rates (10-20%) to evade the maximum 45% income tax, but these are often 'shell companies' with no real substance.

Former Seoul Regional Tax Office investigator Moon Bora, now a tax accountant, likened Investigation Bureau 4 to the 'grim reaper' of the business world on her YouTube channel 'Sebora TV,' describing it as "a very intimidating entity." She added, "If they determine that tax evasion is evident, they act swiftly and without prior notice. The fact that Bureau 4 imposed a $15 million penalty suggests confidence in their tax logic."

Kim further explained, "If a corporation is set up under a family member's name, but the office is registered at a family-run restaurant or personal residence, the NTS considers this a 'false front' to exploit corporate benefits, leading to combined income tax assessments."

He continued, "The greed to enjoy benefits without incurring the costs of establishing a legitimate business structure has backfired, resulting in a $15 million boomerang. This issue could escalate to a criminal prosecution depending on the 'intent to conceal.'"

Moon also pointed out, "It's questionable how a major star like Cha Eun-woo could be managed from an eel restaurant. The discrepancy between the business type and location is significant. Typically, management agencies are located in areas like Gangnam or Nonhyeon in Seoul. Having a business registered at an eel restaurant in Ganghwa-do is suspicious."

Additionally, reports have surfaced that the NTS delayed notifying Cha Eun-woo of the tax investigation results until his military enlistment in July last year, sparking 'military run' controversy.

In response to the ongoing reports, Cha Eun-woo's agency, Fantagio, stated, "The main issue is whether the corporation established by Cha Eun-woo's mother is subject to actual taxation. The matter is not yet finalized, and we plan to actively clarify the legal interpretation and application through proper procedures."

Currently, Cha Eun-woo is serving in the military. He recently returned to his unit after a regular leave. Given the ongoing $15 million tax evasion controversy, industry insiders suggest that despite the constraints, Cha Eun-woo should make a personal statement.

By Yoo Ye-ji, TenAsia Reporter ryuperstar@tenasia.co.kr