‘Tax-evasion genius’ Cha Eun-woo resorts to ploys to avoid audits - 스포츠경향

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Cha Eun-woo, a member of Astro, who faces allegations of tax evasion of about 20 billion KRW. Kyunghyang Shinmun file photo

The tax-evasion strategy of ‘tax-evasion genius’ Cha Eun-woo was meticulous.

It was confirmed on the 23rd that Chas Gallery, founded by his mother Ms. A, where Cha Eun-woo serves as an internal director, changed in September 2024 its organizational form, corporate nature, and even its corporate name to Di-Aeni Limited Liability Company.

The existing one-person agency (a stock company) had its address in Gimpo, but around the same time it was changed to a limited company and its address was moved to an eel restaurant in Buleon-myeon, Ganghwa-do, known to be run by his parents.

Avoidance of external audits is being pointed to as the background for Cha Eun-woo and his mother changing the stock company to a limited liability company. Stock companies must undergo external accounting audits if they reach a certain size, but limited liability companies sit in a blind spot for external audits.

Another issue is that limited liability companies have no obligation to disclose financial statements, allowing matters such as tax-evasion details to be concealed so that outsiders can hardly know them.

In particular, moving the address to Ganghwa-do is analyzed as a ‘masterstroke’ for tax avoidance. Ganghwa County is classified under the Capital Region Readjustment Planning Act as a growth management area, among others, and serves as a kind of ‘tax haven’ that allows corporations to avoid a heavy acquisition-registration tax (three times the basic rate) when acquiring real estate.

In fact, the corporation added ‘real estate rental business’ to its business purposes, and indications were detected that it was aiming for tax benefits.

The restaurant run by the parents of Cha Eun-woo and the one-person agency of Cha Eun-woo effectively share the same address, which appears to be a circumstance corroborating that it is a paper company that borrows only an address rather than being an actual workspace.

Based on this as well, the National Tax Service determined that Cha Eun-woo diverted income to a family corporation with a lower corporate tax rate to avoid the top marginal income tax rate (45%), and notified him of a back-tax assessment of around 20 billion KRW.

This is the largest scale in the domestic entertainment industry and is also top-class globally. It has proven to be the sixth largest in the world, following Fan Bingbing (about 144 billion KRW), Zheng Shuang (about 54 billion KRW), Ronaldo (about 28 billion KRW), Willie Nelson (about 22 billion KRW), and Shakira (about 21 billion KRW).

Fantagio, the agency of Cha Eun-woo, released a statement on the 22nd, saying, “The key issue is whether the corporation established by the mother of Cha Eun-woo falls under the actual tax liability, and it is not a matter that has been finally confirmed and notified at present; we plan to actively clarify, in accordance with due procedures, the issues related to the interpretation and application of the law.”

Cha Eun-woo enlisted in July of last year and is serving in the Army band. The Netflix series ‘The Wonderfuls’ featuring him is about to be released.

Attorney Noh Jong-eon of Law Firm Jonjae said, “The corporate registry states that the company changed its organization to a limited liability company and also changed its name on September 11, 2024,” and added, “In particular, limited liability companies are excluded from external audit disclosure requirements under the External Audit Act, so when it was expected to become a disclosure target as a stock company, it appears they changed it to the form of a limited liability company to avoid that burden.”

He also said, “If it were disclosed, this situation would be posted on the Financial Supervisory Service disclosure site, and avoiding that burden appears to have been important under the circumstances at the time,” and added, “Such practices are in fact often used to avoid detection of tax evasion.”