Cha Eun-woo, a singer and actor, has been embroiled in allegations of tax evasion amounting to around 20 billion won, and legal circles warn that it could be dangerous if the company is judged to be a shell corporation.
Cha Eun-woo reportedly underwent an intensive tax investigation by the Seoul Regional Tax Service's Investigation Division 4 last July before his enlistment, and was notified of a tax reassessment exceeding 20 billion won. This is the largest reassessment imposed on an individual entertainer to date.
The National Tax Service reported that company A, established by Cha Eun-woo's mother, signed a management service contract with his agency Fantagio but provided no substantive services, and determined that it was, in effect, a paper company. In response, Cha Eun-woo's side has appealed the National Tax Service's decision by filing a "pre-assessment review" and is awaiting the result.
However, it should be made clear that the allegations are not at a confirmed stage. Currently the National Tax Service has signaled additional tax assessment at the pre-assessment stage, and Cha Eun-woo's side is contesting the National Tax Service's determination through a pre-assessment review.
The issue is the "substance over form" principle. If the company established by his mother is judged to be a shell company without substance, various tax benefits could be revoked. In other words, Cha Eun-woo and his mother must "definitely" prove that actual business activities took place. Employee payroll records, office lease contracts, schedule management records, and work-related emails and messenger communications could be key evidence.
However, criminal risks cannot be ruled out. If it is a simple tax calculation error, it may end with a reassessment, but if intentional tax avoidance is proven, it could lead to a prosecution. In particular, if proactive deception such as issuing false tax invoices or manipulating books is confirmed, violations of the "Act on the Aggravated Punishment of Specific Crimes" could result in imprisonment or heavy sentences. On the Jan. 30 YTN radio program "Lawyer Lee Won-hwa's case X-file," appearing attorney Kim Jeong-gi said in this regard, "If the amount of tax evaded exceeds 1 billion won, the Act on the Aggravated Punishment of Specific Crimes is applied, and life imprisonment or imprisonment of five years or more is possible."
The mother-run company in question was reportedly registered at the address of an eel restaurant located on Ganghwa Island, sparking controversy. Legal circles say it will be difficult to overturn the National Tax Service's finding of a paper company if there are no staff at the registered address and the company only received commissions without substantive work.
On the other hand, Cha Eun-woo's side maintains that the company in question was a properly registered management company that performed substantive functions and roles. His agency Fantagio said, "The matter is currently at a stage where the facts are being verified according to tax authorities' procedures," and "If legal and administrative judgments become clear in the future, we will responsibly carry out necessary measures according to the results."
Cha Eun-woo also said, "I will sincerely comply with tax-related procedures," and "I will humbly accept the final judgment of the relevant authorities and fulfill my responsibilities."
Meanwhile, the Korea Taxpayers Association said of the controversy, "The presumption of innocence must be upheld," and pointed out, "Tax avoidance is a taxpayer's right: if it succeeds it becomes tax planning, and if it fails it becomes tax evasion." It added, "Reporting that a company is a paper company while appeals and litigation procedures are ongoing may violate the presumption of innocence," and stressed, "Labeling someone a tax evader based solely on a reassessment may harm their reputation."
[photo] OSEN DB
[OSEN]