Singer-actor Cha Eun-woo, who is serving in the military, is embroiled in allegations of tax evasion worth hundreds of billions of won, and experts noted that if intent is proven, the case could be referred to prosecutors.
Attorney and accountant Kim Myung-gyu said on social media on the 25th, "There's a stir over the recent news of 20 billion won in additional tax, and I will explain what this figure means from an expert's perspective."
Kim explained, "The entire 20 billion won is not the original tax due (principal tax)." If the National Tax Service deems the filing to be unjustly understated, a penalty of up to 40% of the principal tax and interest for late payment are added. He said, "Of the 20 billion won, about 6 billion to 10 billion won can be seen as 'the price of a false filing.'"
He also noted that the Investigation Bureau 4 of the Seoul Regional Tax Service was assigned to this case. Comparing Investigation Bureau 4 to the "grim reaper," Kim said it was "a signal that authorities strongly suspect intentional tax evasion rather than a simple mistake."
He explained that actors often set up one-person agencies to reduce taxes. That's because they can be subject to the corporate tax rate (10%–20%) instead of the top personal income tax rate (45%). However, he said, "To be recognized as a corporation, it must be a substantive company with employees and an office," and added, "If you set up a corporation under a family member's name and list the address as a parent's eel restaurant or a home, the National Tax Service sees it as a shell corporation and cancels tax benefits."
Kim added, "Investigation Bureau 4 is not always right," noting, "There have been cases that ended with no charges without any suspicion of tax evasion." He continued, "In Cha Eun-woo's case as well, if intent is not proven by the investigation, it could end with a simple additional collection. It is still at the allegation stage."
However, he pointed out that "the trail is too clear." Regarding the switch to a limited liability company to avoid external audits and registering the corporate address not in Gangnam but at an eel restaurant in Ganghwa-do, he said, "There is room to see this not as a simple mistake but as an organized, planned design involving a professional."
Kim said, "The key in this case is not 'how much more tax to pay' but whether 'intent to conceal is proven,'" adding, "If it is recognized as intentional tax evasion, it could lead to a record-high additional collection as well as a referral to prosecutors." He went on, "Tax savings are possible, but if you try to take only the benefits without substance, that is tax evasion," emphasizing, "Even famous entertainers are not exceptions before taxes."
Earlier, reports said Cha Eun-woo received a notice from the National Tax Service to pay more than 20 billion won in additional income tax. The allegation is that Cha signed a management service contract with a corporation established by his mother and received the lower corporate tax rate instead of the personal income tax rate.
In response, agency Fantagio said on the 22nd, "We plan to actively explain, in accordance with due procedures, the issues surrounding the interpretation and application of the law," adding, "The key issue is whether the corporation established by his mother falls under substantive taxation, and nothing has been finalized yet."