Tax planning or tax evasion? Cha Eun-woo’s case centers on shell company

Cha Eun-woo / Xportsnews

Singer and actor Cha Eun-woo’s alleged 20 billion won tax dispute (about $15 million) is now being closely examined through a technical lens to see whether a company from which he derived income had real business substance or existed only on paper.

The issue was discussed on the CBS Radio program “Park Sung-tae’s News Show” on the 27th, where tax accountant Lim Soo-jung looked at core legal questions surrounding the case.

Tax accountant Lim Soo-jung / Courtesy of CBS

According to Lim, the National Tax Service determined that a corporation registered at a restaurant location in Ganghwa Island received income that should have been paid directly to Cha.

“The tax authority’s position is that a corporation was established without real business activity and income belonging to Cha Eun-woo was funneled through this entity,” Lim said, characterizing it as a potential shell company.

“There is no issue if a corporation is properly established with personnel and facilities and actually provides services,” she said. “The central question here is whether the company in question had real substance or existed only on paper.”

“Cha Eun-woo’s side will focus on proving that the company was not a shell company,” Lim said. “At the same time, the National Tax Service would not have issued such an assessment without securing evidence that the entity lacked substance. That is where the legal conflict will arise.”

Cha was subjected to an intensive tax audit last year by the Seoul Regional Tax Office’s Investigation Division 4, which handles high-profile and complex cases. He was later notified of additional tax assessments totaling approximately 20 billion won.

In a statement posted on the 26th, Cha said he would cooperate fully with all tax-related procedures.

“I will sincerely participate in the ongoing tax process,” he said. “I will humbly accept the final judgment reached by the relevant authorities and fulfill my responsibilities accordingly.”

This article from Xportsnews is adapted by a generative AI system and edited by The Korea Times.