Korea Management Federation Speaks Up Amid Cha Eunwoo And Kim Seon Ho’s Tax Evasion Scandals

As tax evasion issues involving celebrities continue to emerge, including cases against ASTRO’s Cha Eunwoo and actor Kim Seon Ho, the Korea Management Federation (KMF) has also spoken out.

Amid growing concerns across the entertainment industry due to tax issues surrounding celebrities establishing corporations, the KMF released a statement on February 12 addressing this matter.

KMF first pointed out, “As K-content rises to a leading role in the global market, there are reactions that the structure of the Korean entertainment industry is becoming distorted. In particular, with the recent tax avoidance suspicions tied to the establishment of corporations by Hallyu stars, there is a significant difference in perspective between tax authorities and the industry.”

KMF further noted that problems began to arise as the industry rapidly grew and Hallyu’s global popularity surged, alongside the so-called one-stop system whereby celebrities enter into exclusive contracts with agencies that manage everything from the initial stages to their official debut.

KMF explained, “Individuals have essentially become corporations generating astronomical profits. However, no system or policy has adequately understood or supported this structure, which has triggered a rapid transformation of the entertainment industry itself. Artists have started to establish and manage ‘personalized corporations’ to oversee their careers, intellectual property (IP), and long-term brand value.” It added, “However, current tax administration uniformly regards these corporations as ‘paper companies’ used to avoid progressive income tax, repeatedly imposing broad retroactive penalties in the name of true tax principles. This approach clearly shows that administrative systems are unable to keep pace with the evolving structure, ignoring industry realities.”

So how should celebrity-owned corporations be viewed? KMF explained, “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.”

Regarding future changes, KMF stated, “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.”

At the same time, KMF urged the government to establish clear tax guidelines that recognize the industrial substance of personal corporations, develop predictable tax standards reflecting the corporations’ actual roles, risk-bearing, and business structures, improve systems to encourage transparent operations rather than focusing on crackdowns and retroactive penalties, and adopt forward-looking administrative interpretations and policy decisions that do not undermine the global competitiveness of the K-culture industry.

In conclusion, KMF emphasized, “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.”