A pro gamer who was selected for the national team with top-tier skills in Korea and won a gold medal at the Asian Games, receiving an exemption from military service, was belatedly revealed to have been investigated by the National Tax Service on suspicion of tax evasion. The pro gamer filed a petition with the Tax Tribunal, saying the National Tax Service's disposition was excessive, but the tribunal sided with the National Tax Service. The pro gamer is Ruler (Park Jae-hyuk) of Gen.G Esports' League of Legends (LOL) team.
According to the Tax Tribunal's decision on the 31st, Ruler placed his father, identified as A, as his manager and paid him labor costs from 2018 to 2021. A also invested Ruler's salary and prize money in stocks and other instruments, generating trading gains and dividend revenue.
After reviewing the fund records, the National Tax Service determined that the amounts Ruler paid his father were unrelated to business and could not be included as necessary expenses. It also concluded that placing assets in a borrowed name, even though he could manage the asset himself, had a tax avoidance purpose.
However, Ruler's side said the father effectively served as a manager, including handling team contract signings before the introduction of a certified agency, and that the stock title trust was done to manage the asset, arguing that the imposition of gift tax was unlawful, and filed an appeal with the tribunal.
During the tax adjudication process, the National Tax Service denied the need for a manager for a pro gamer. The reason was that "a pro gamer signs an exclusive contract with a team, and the affiliated team exclusively manages all activities and bears the related expense." It also said, "There is no corroborating material to prove that the father worked as a manager."
Accordingly, the National Tax Service treated the money Ruler paid his father under the pretext of labor costs as "non-business expenses," excluded it from necessary expenses, and imposed comprehensive income tax on Ruler.
The National Tax Service also drew a line that the taxes avoided through the borrowed-name arrangement were "not a trivial tax reduction." Ruler's father claimed to the National Tax Service that it was a title trust for asset management, but the National Tax Service focused on the fact that the trading gains and dividend income generated in the stock transactions were not deposited to the son but were transferred to the father's own account and reported as the father's dividend income.
By filing income under the father's name, who had relatively less income, income tax and gift tax were avoided, and the National Tax Service's position is that it is hard to see this as a trivial tax reduction. "A review of how the asset formed through the borrowed-name stock was used shows it was transferred to the father's account and used to pay the father's comprehensive income tax or credit card bills," the National Tax Service explained.
Supergent, Ruler's agency, issued a statement the same day saying, "This matter is a case of 'tax imposed due to administrative shortcomings' that arose in the process of managing the asset," adding, "There was no substantive intent to make a gift (in the title trust), but a gift tax in the nature of fines due to the title trust was incurred and has already been paid in full."
Supergent highlighted that the player was administratively inexperienced and that the suspicion of tax evasion was not significant, but the National Tax Service took a different view. A National Tax Service official said, "We do not use the phrase 'gift tax in the nature of fines.' Gift tax was imposed by applying the deemed gift provision to a title trust for the purpose of tax avoidance."
The tribunal also said, "It appears insufficient to recognize that there was any other clear reason for the title trust besides the purpose of tax avoidance," adding, "We find no other fault in the disposition imposing gift tax on the petitioner by applying the deemed gift provision for title trusts."
ChosunBiz emailed additional questions related to the statement to the agent in charge at Supergent but received no reply.