Advertising withdrawals over Cha Eun-woo, an ASTRO member and actor who faces the largest tax evasion allegations among domestic entertainers, have temporarily stopped, but the advertising industry has entered a state of high tension over a time bomb that could explode at any moment.
Cha Eun-woo is reported to have been notified of an additional income tax assessment exceeding 20 billion won. Last year, the Seoul Regional Tax Service investigation division 4, known as the 'corporate reaper,' carried out a high-intensity investigation into Cha Eun-woo on suspicions of tax evasion through a one-person agency established by his mother. Investigation division 4 of the Seoul Regional Tax Service is known as a special tax investigation unit deployed when tips of tax evasion or allegations of slush fund creation are detected, rather than a regular tax audit, and its involvement is often interpreted to mean there are serious allegations such as intentional tax evasion or embezzlement rather than simple accounting errors.
Cha Eun-woo has worked under an arrangement in which his agency Fantagio and the one-person agency set up by his mother signed service contracts to support his entertainment activities, and the income Cha Eun-woo earned was reportedly divided among Fantagio, the one-person agency and Cha Eun-woo himself. The tax authority viewed the one-person agency established by Cha Eun-woo's mother as a paper company that did not actually provide services. It concluded that Cha Eun-woo and his mother set up a corporation and distributed income to reduce an income tax of about 45%, using a trick that applied a corporate tax rate 20 percentage points lower than the income tax rate.
Cha Eun-woo's side said, This matter is primarily about whether the corporation established by Cha Eun-woo's mother qualifies as a substantive tax object, and it is not a matter that has been finally confirmed and notified. We will actively explain the issues related to the interpretation and application of the law through proper procedures. The artist and tax representatives will cooperate faithfully so that the procedures can be completed promptly.
However, suspicions also arose that Cha Eun-woo used tricks to avoid taxes. The management company's address established by Cha Eun-woo's mother, registered on June 15, 2022, as a popular culture and arts planning business, is in Tongjin-eup, Gimpo-si, Gyeonggi, and the corporation's address is reported to be the building of an eel restaurant his mother operated on Ganghwa Island in Incheon. Because the address recorded in the comprehensive information system for popular culture and arts differed, some raised suspicions that this was a trick to evade taxes. Fantagio declined to comment, saying confirmation was not possible.
Brands that had used Cha Eun-woo, who was a hot star, as their face had no choice but to react sensitively to the major case of tax evasion allegations. In fact, about six hours after the tax evasion allegations surfaced, skincare brand Abib set Cha Eun-woo's videos and posts to private, and then Shinhan Bank removed Cha Eun-woo's image. That the advertising industry moved while the matter remains an 'allegation' was significant.
But further advertising departures have not yet appeared. Fashion companies such as Chaumet, Marithé François Girbaud and The North Face are watching the situation closely, and the education sector, including Daesung Mymax, has kept banners bearing Cha Eun-woo's face, monitoring the situation. Although the feared domino effect of advertising withdrawals has not materialized, given the record-scale tax evasion allegations, concerns that it is a time bomb cannot be dismissed.
Meanwhile, Cha Eun-woo enlisted last year and is currently serving in the military.
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