"Amid Tax Evasion Controversy Involving Cha Eunwoo and Kim Seonho, Call for Clear Taxation Guidelines"

Korea Management Federation Calls for Guidelines
"Celebrity Personal Corporations Regarded as 'Paper Companies'"
"Not Mere 'Shells'... Performing Diverse Roles"

As controversy continues over alleged tax evasion surrounding personal corporations established by famous celebrities such as actors Cha Eunwoo and Kim Seonho, the Korea Management Federation (KM Federation), a non-profit corporation, has called for the introduction of relevant guidelines.

The organization argued that the recurring controversy stems from the absence of clear standards, and that it is necessary to move beyond a tax-evasion frame and establish clear guidelines that reflect the structure of the industry.

On this day, the KM Federation stated in its position paper titled "The Korea Management Federation's Statement on Celebrity Corporation Establishment and Taxation Issues" that "under the current taxation method, celebrity personal corporations are uniformly regarded as 'paper companies.'"

It went on to say, "Individuals have effectively become corporatized entities that generate astronomical levels of income, but no system or policy has understood this structure or provided support for it," adding, "In order for artists to manage their own careers, intellectual property (IP), and long-term brand value, they began establishing and managing so-called 'personalized corporations.'"

"However, current tax administration uniformly treats these corporations as 'conduits (paper companies)' established to avoid progressive income tax rates, and, under the banner of the principle of substance-over-form taxation, repeatedly conducts wide-ranging ex post tax assessments," it claimed.

It added, "This approach clearly shows that the system and administrative practices are failing to keep pace with the changing structure of the industry, while turning a blind eye to the realities of the sector."

The KM Federation stated, "These management companies are not mere so-called 'shells' that are involved only in tax matters. They function as companies that perform various roles and exercise part of the celebrity's authority on their behalf."

It also noted that such personal corporations are responsible for roles including: providing mental care for artists and managing their long-term careers; developing IP and planning content; directly bearing penalties and damages arising from exclusive contracts and appearance contracts; and carrying out substantive business operations such as office leasing, hiring full-time managers, and operating dedicated vehicles.