Korea Management Federation Addresses Tax Evasion Issues Involving Cha Eunwoo And Kim Seon Ho
Cha Eunwoo is facing controversy as tax evasion issues in K-ent keep heating up. The Korea Management Federation (KMF) dropped a statement on February 12 addressing the tax problems linked to celebrity-owned corporations like those of Cha Eunwoo and actor Kim Seon Ho.
The controversy began with questions around how Hallyu stars set up personal corporations. KMF said the tax system doesn’t match the industry’s reality. They pointed out that artists have turned into corporations managing their brands and intellectual property. But tax authorities treat these corporations as “paper companies” and slap them with big retroactive penalties.
KMF explained that these agencies do way more than handle taxes. They do mental care, career management, IP development, contract responsibilities, office leasing, and more. Courts are starting to see these corporations as real businesses.
“These agencies are not mere ‘shells’ involved only in tax matters. They perform diverse roles on behalf of the artists, such as mental care and long-term career management, IP development and content planning, bearing direct responsibility for penalties and damages related to exclusive and appearance contracts, office leasing, employing full-time managers, operating exclusive vehicles, and other substantive business activities. Courts are increasingly recognizing corporations as substantive entities when they engage in real business, assume contractual responsibilities, and establish independent business models.”
— Korea Management Federation
KMF slammed the tax authority’s retroactive penalties as coming from a lack of clear rules, not because of bad intent by these corporations. They said the National Tax Service’s rulings often get overturned due to inconsistent standards.
“The repeated retroactive penalties are not due to ‘malice’ on the part of these corporations, but rather a lack of clear standards. The reason the National Tax Service’s rulings are frequently overturned in administrative lawsuits and tax appeals is not because the industry uses loopholes, but because no clear and predictable criteria exist. Therefore, it is now essential to move beyond viewing artists solely as ‘individual business operators’ and recognize them as corporate entities operating brands and intellectual property, through a systemic transition.”
— Korea Management Federation
KMF pressed the government to make clearer tax rules recognizing personal corporations’ real business roles. They also want systems that encourage transparency instead of crackdowns and penalties.
“K-culture is no longer just the achievement of a few star individuals but a future industry and national brand for South Korea. Judging its growth structure solely through the lens of tax evasion risks shutting down our own growth engine. We earnestly appeal to the public and government to acknowledge the industry realities and improve systems based on transparent operations.”
— Korea Management Federation
As the situation with Cha Eunwoo and others develops, eyes are on whether authorities will update rules to fit the new entertainment business model.