Cha Eun-woo Faces $13.65 Million Tax Controversy Amid Rising Celebrity Tax Audits

The South Korean entertainment industry is abuzz with news that Cha Eun-woo has been notified of a tax imposition amounting to approximately 20 billion won (around $13.65 million). This revelation comes amidst a series of high-profile tax audits involving celebrities, sparking renewed interest in the tax practices within the entertainment sector.

On the 22nd, a media outlet reported that Cha Eun-woo received a tax notice from the National Tax Service (NTS) for income tax and other dues totaling around 20 billion won. The report suggests that the NTS took issue with the income distribution structure between Cha Eun-woo's agency, Fantagio, and a corporation established by his mother, referred to as Company A. The NTS reportedly deemed this corporation to be a 'paper company' that did not perform substantial services.

The NTS believes that Cha Eun-woo benefited from a lower corporate tax rate compared to the personal income tax rate. Additionally, the corporation's location on Ganghwa Island, which is not conducive to entertainment-related activities, was also considered in their assessment.

Amidst these developments, Cha Eun-woo is currently serving in the military band after enlisting in July last year. There are speculations that the NTS delayed the tax notification until after his enlistment, leading to suspicions of 'military enlistment as a means of evasion.' In response, Fantagio stated, "The main issue is whether the corporation established by his mother is subject to substantial taxation. The matter is not yet finalized, and we plan to actively clarify the legal interpretation and application through proper procedures." They added, "Cha Eun-woo will fulfill his tax reporting and legal obligations as a responsible citizen."

Cha Eun-woo's case aligns with the ongoing trend of celebrity tax audits. Last year, actress Lee Ha-nee faced a hefty tax imposition of approximately 60 billion won, and Yoo Yeon-seok received a notice for around 70 billion won. Both cited differences in interpretation regarding the application of corporate tax on their income structures.

Many recent high-profile tax cases involving celebrities stem from income structures utilizing personal corporations, making it challenging to label them as tax evasion solely based on the amounts involved. Several celebrities have pointed out that practices not previously flagged during regular tax audits are now becoming contentious issues.

However, the series of high-value tax controversies is undeniably shaking public trust. In Cha Eun-woo's case, the unprecedented scale of the tax imposition has amplified the impact. The outcome of the tax tribunal and the NTS's final decision will be closely watched to see how it influences tax practices across the entertainment industry.

Lee So-jung, TenAsia Reporter forusojung@tenasia.co.kr