"Kim Seonho's Explanation Backfires... Could Be Interpreted as Embezzlement and Breach of Trust"

Attorney: "If there was no business activity, there should have been no business expenses"
Agency counters: "It was absolutely not established for the purpose of intentional tax evasion"

While actor Kim Seonho has been embroiled in tax evasion allegations, an expert pointed out that his agency's explanation could instead fuel controversy over embezzlement and breach of trust.

Actor Kim Seonho. Fantagio

Attorney and certified public accountant Kim Myungkyu wrote on his social media on the 2nd, "Even before the 20 billion won additional tax issue involving Cha Eunwoo has cooled down, suspicions have now emerged about Kim Seonho, who is in the same agency," adding, "Since this case also involves a one-person corporation and a family corporation, it seems a warning will be issued in the entertainment industry for the time being regarding one-person and family corporations."

Attorney Kim said, "To summarize the (Kim Seonho tax evasion allegations), an entity was established with his parents as executives, a corporate card was used for living expenses, and fake salaries were paid to his parents," and added, "The agency's explanation that 'it is not tax evasion and it was created for theater activities, but it is currently in the process of closure because there has been no business activity' is dangerous." He then commented, "It seems like a self-defeating move."

He explained, "If there was no business activity, then there should normally have been no business-related expenditure," and continued, "If the corporate card continued to be used and salaries were paid to his parents during the one year in which the business was suspended, that money would be classified under tax law as non-business-related expenses (temporary payments)." He went on to say, "The agency has effectively opened the door for this to be interpreted as embezzlement or breach of trust, by suggesting that corporate funds were diverted for private use."

He also said, "Temporary payments do not simply end at the level of 'you borrowed the money, so pay it back,'" and added, "If money went out without any substantial business activity, the National Tax Service issues a bonus disposition, treating it as if the representative (such as Kim Seonho) received a bonus."

Attorney Kim stated, "The data and records held by the National Tax Service do not disappear just because a business is closed," and continued, "Rather, the point of closure can become a good opportunity for the tax authorities to comprehensively review and examine the flow of funds. The explanation that 'we are shutting down because there is no work' can actually become an invitation saying 'come in and investigate'."

He further added, "They must provide a clear explanation as to whether they genuinely planned theater productions and whether his parents actually worked," and warned, "If they fail to properly substantiate this, the current explanation could become a spark that escalates 'tax evasion allegations' into 'embezzlement and breach of trust controversy'."

Kim Seonho is facing allegations that he operated a family corporation for the purpose of avoiding taxes. The suspicion is that, like his agency-mate Cha Eunwoo, Kim Seonho operated a family corporation and may have routed his income through this entity. It is known that Kim Seonho recently received a notice from the National Tax Service imposing a large additional assessment of income tax.

Fantagio immediately refuted the tax evasion allegations. The agency stated on the 1st, "Kim Seonho is currently active under an exclusive contract signed in his personal name with Fantagio, and he is faithfully complying with all legal and tax procedures related to his current contractual relationship and activities," and added, "There is no problem whatsoever regarding the contract and activities between Kim Seonho and his agency Fantagio."

The agency went on to say, "The former one-person corporation mentioned in the reports was established for theater production and theater-related activities," and added, "It was absolutely not established for the purpose of intentional tax saving or tax evasion."