According to Sports Seoul, in the case of actor Cha Eun Woo (real name Lee Dong Min) being accused of tax evasion of 20 billion won through a "ghost company" (called company A), due to the large amount of money, whether to apply the Law on Increased Penalties for Special Crimes or not is the focus of attention.
According to this law, if the amount of tax evasion is 10 billion won or more, the violator may be sentenced to life imprisonment or at least 5 years in prison. This happens when the act of "proactively deceiving" is proven.
If it is like the previous case of Song Hye Kyo - that is, being identified as "declaring tax arrears" due to cost handling issues or different interpretations of tax law - then it is likely that the case will end at the level of returning the missing tax amount along with additional fines, not criminally handled.
Conversely, if the investigation shows that company A paid salaries to relatives who did not work, or showed signs of forging/correcting books, then the situation will be completely different. At that time, the case will be considered a clear tax evasion, and it is very difficult to avoid criminal prosecution, like the case of Jang Geun Suk's mother (2 years and 6 months in prison, 4 years suspended sentence).
The South Korean National Tax Department considers this an act of "organized tax evasion through a ghost company".
The reason the Tax Department took strong action lies in the "intentional" factor. Cha Eun Woo put hundreds of billions of won in income into company A - a legal entity registered at an eel restaurant on Ganghwa Island operated by his parents. The tax authorities said that this is a "ghost company", without real activities.
According to a Dispatch investigation, in 2019, Cha Eun Woo established Chas Gallery Joint Stock Company. The business purpose is up to about 34 categories, including music production, album sales, artist management, event organization, advertising planning, performance organization, character production, cosmetic distribution, food business, IP management...
A year later, Cha Eun Woo's mother - Ms. Choi - became CEO of Chas Gallery. After that, the company moved its headquarters from Gimpo to Ganghwa district - known as the eel restaurant run by Cha Eun Woo's parents.
In 2022, Ms. Choi founded the limited liability company "L&C", the purpose is still to manage artists. In 2024, another limited liability company named "The Annie" was established, with the aim of managing Cha Eun Woo's real estate and assets.
Chas Gallery became an "empty shell" and ceased operations in 2024.
Sports Seoul emphasized that the transition from the form of a joint-stock company to limited liability, while avoiding areas under tight tax control in the capital, are clear signs of "tax evasion".
According to Dispatch, the form of a limited liability company allows the company to operate freely without external supervision.
The amount Cha Eun Woo is suspected of tax evasion is about 20 billion won. If corporate tax is calculated at 20%, the minimum taxable profit must be over 100 billion won (excluding labor costs, premise rental, operating costs...). The actual revenue may be much higher.
However, Cha Eun Woo's family companies have no obligation to disclose information, nor do they need external audits. As long as members (mother, father, younger brother) agree on their own, important decisions can be made. asset transactions such as real estate and housing trading can also be carried out without publicity.
When establishing a family company, Cha Eun Woo also benefits greatly. Because the highest personal income tax rate is 49.5%. While corporate tax has a maximum efficiency of about 26.4%. For high-income people, establishing a company can help reduce the tax burden by about 20%.
