From Pham Bang Bang, Trinh Sang in China to Cha Eun Woo in Korea, along with many famous artists in Hollywood, many top stars have faced tax arrears of up to tens, even hundreds of millions of USD.
Behind these shocking incidents are loopholes in tax regulations, the model of individual companies and the income accounting methods that the entertainment industry around the world has taken advantage of for many years, leading to many tax arrears and "sentences" that shocked public opinion.
In 2018, actress Pham Bang Bang's tax evasion shocked the Chinese entertainment industry and became one of the biggest tax scandals in Asian showbiz history.
The beauty born in 1981 was discovered to be using "yin-yang contracts", which means making 2 contracts with different values to reduce the declared income.
The trick was exposed in May 2018, when TV MC Cui Yongyuan suddenly posted 2 copies of Pham Bang Bang's contract for the upcoming movie "Cell phone 2": one copy recorded her salary as 7.8 million USD, while the other copy only recorded 1.5 million USD.
This move prompted the Chinese Tax Administration to open an investigation into Pham Bang Bang's entire financial and tax activities.
Later, according to the official conclusion, during her participation in the movie "The bombing", Pham Bang Bang evaded about 7.3 million CNY in personal income tax and business tax.
She was also identified as concealing her actual income through contract separation and transferring part of the income through a studio/company account instead of receiving it directly as an individual, thereby evading taxes.
Investigators also determined that Pham Bang Bang and the companies she legally represented still owed a total of 248 million CNY in taxes, of which 134 million CNY were identified as tax evasion.
In October 2018, Pham Bang Bang was fined a total of about 884 million CNY (about 130 million USD), including tax arrears, late payment interest and fines, becoming one of the largest tax evasion cases in the history of the Chinese entertainment industry.
In 2021, actress Trinh Sang also became the focus of public opinion, with a similar tax evasion method to Pham Bang Bang.
The tax authorities concluded that she used "yin-yang contracts", and at the same time established a "shell company" to support contract separation and commit tax evasion.
Finally, Trinh Sang was fined a total of 299 million CNY (about 44 million USD).
If in China, the form of tax evasion by "yin-yang contracts" is quite common, then in the Korean entertainment industry, cases of tax arrears for artists mainly revolve around controversies about how to declare income and the use of the one-person company model to manage income.
Most recently, actor Cha Eun Woo was retroactively taxed 13 billion won (about 9 million USD) in April this year.
Previously, he was inspected by the Korean National Tax Service for suspected income tax evasion through a one-member company founded by Cha Eun Woo's mother, in which he was the only artist.
This company was identified as not actually providing services to support artistic activities, so it was considered a "shell company"; thereby possibly helping the actor apply corporate income tax lower by 20% compared to personal income tax of up to 45%.
Initially, Cha Eun Woo was notified of a refund of 20 billion won, but after adjusting issues such as duplicate taxation, the final refund amount was reduced to about 13 billion won, and he paid the full amount.
However, recently, Cha Eun Woo filed an appeal, claiming that the recovery decision was unreasonable.
In addition to Cha Eun Woo, some other Korean stars were also retroactively taxed related to the one-person company model such as Honey Lee (6 billion won), Yoo Yeon Seok (3 billion won), Jo Jin Woong (1.1 billion won), Lee Jun Ki (900 million won)...
However, most Korean stars who are asked to collect tax arrears deny tax evasion and argue that this is "a problem arising from differences in views on the interpretation and application of tax laws".
Meanwhile, in the European - American market, artists being retroactively taxed mainly related to acts of concealing income, falsely declaring expenses or not paying taxes in accordance with regulations.
The common measure is to use companies in "tax havens", that is, to establish companies in countries or territories with very low or zero tax rates to conceal income, enjoy tax incentives or evade tax obligations.
Famous singer Shakira, or top players such as Lionel Messi, Cristiano Ronaldo have been retroactively taxed from several million to more than ten million USD.
