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Tax authorities take aim at entertainers' independent agencies as debate swirls over standards

Published: 16 Mar. 2026, 19:28

The National Tax Service's headquarters in Sejong [NEWS1]

Korea’s tax authorities have imposed about 69 billion won ($46 million) in penalties on entertainment agencies over the past five years as officials step up their scrutiny of celebrities who have set up independent companies to manage their income and expenses.

The figures come as several high-profile entertainers have recently faced tax controversies tied to their one-person agencies. Singer-actor Cha Eun-woo and actor Lee Ha-nee are among those accused of exploiting the system to evade taxes, raising concerns that the practice may extend beyond these isolated cases.

Authorities conducted 104 tax investigations between 2020 and 2024 into companies registered as “popular culture production businesses,” a category under which entertainment management companies are legally required to register. Those probes resulted in 69 billion won in additional taxes, according to data the National Tax Service (NTS) submitted to Rep. Park Min-kyu of the Democratic Party.

The scale of the penalties has grown sharply. Back taxes collected through investigations rose from 3.9 billion won in 2020 to 30.3 billion won in 2024, a nearly eightfold increase in just four years.

“Tax disputes tied to celebrities using one-person agencies to reduce their tax burden appear to have driven the increase in back taxes,” an official from Rep. Park’s office said.

Tax authorities have recently investigated several entertainers who operate their own agencies. In 2024 officials examined actor Lee Ha-nee, and last year they investigated actors Yoo Yeon-seok, Cho Jin-woong and Lee Joon-gi. This year, singer-actor Kim Seon-ho and Cha have also faced tax-related controversy. Kim has denied wrongdoing while Cha said he would “cooperate fully” with tax authorities.

Actor Kim Seon-ho poses for the cameras at Bottega Veneta's press event at Seongdong District, eastern Seoul, on Jan. 28. [NEWS1]

Tax advantages

The number of entertainers establishing one-person agencies has steadily increased, largely because their structure can offer substantial tax advantages.

The share of artists affiliated with such companies rose from 2.5 percent in 2020 to 4.1 percent in 2022 and 4.3 percent in 2024.

Operating through such a company allows entertainers to pay corporate tax rates that are generally much lower than the top personal income tax rate. Expenses such as makeup services, stylists, training and managers’ salaries can also be treated as corporate costs.

Creating an independent agency itself is not illegal. But problems arise when companies list family members as nominal executives or employees, pay them salaries or record inflated expenses without real business activity. In such cases, tax authorities may deem the company a shell corporation used to evade taxes.

Singer and actor Cha Eun-woo poses for a photo at luxury watch brand Audemars Piguetmedia's media event in Seongdong District, eastern Seoul, on Nov. 22, 2024. [NEWS1]

A recent controversy involving Cha and his agency, Fantagio, illustrates the issue. Authorities suspect that part of Cha’s earnings was paid as service fees to a corporation registered under his mother’s name and recorded as corporate revenue.

Shifting income into a corporation taxed at about 20 percent can significantly reduce tax owed for entertainers, especially when compared with Korea’s top comprehensive income tax rate of 49.5 percent which includes local tax.

NTS officials concluded that the company lacked substantive operations and viewed it as a paper company. Reports that the company’s registered address corresponded to an eel restaurant in Ganghwa County, Incheon, further fueled the controversy.

Industry vs. tax authorities

Entertainment industry insiders argue that the disputes partly reflect unclear taxation standards for the sector’s unique expenses.

Costs such as overseas fashion show appearances or hiring specialized trainers are often considered necessary to maintain an artist’s marketability. However, industry officials say tax rules do not clearly define whether such spending qualifies as legitimate business expenses.

As a result, agencies sometimes face accusations of tax evasion even when they consider the costs part of normal “activities.”

Challenges to tax rulings have increased in recent years, suggesting a trend in the growing tension between the entertainment industry and tax authorities over how tax law should apply to celebrity-run companies.

The number of appeals rose from four in 2020 to 19 in 2024. Over the same period, the total amount contested in appeals grew from about 8.12 billion won to 30.39 billion won.

Actor Lee Ha-nee speaks at a press conference for ″The People Upstairs″ (2025) at Megabox's Coex branch in Gangnam District, southern Seoul, on Nov. 25, 2025. [YONHAP]

Calls for clearer standards

Some experts say authorities should address the structural issues behind the disputes.

“If employees who do not actually work receive salaries and unnecessary expenses are recorded, the entity may look like a corporation but functionally remain an individual,” said Lee Jeon-oh, an emeritus professor at Sungkyunkwan University. “In such cases, administrative and legislative measures are necessary.”

Lee suggested adopting a system of additional corporate taxation targeting companies that effectively operate as individuals by imposing higher tax rates or additional levies to discourage tax avoidance.

Industry representatives, however, argue that clearer guidelines are equally important.

“The NTS and the entertainment industry should work together to establish detailed tax guidelines that recognize industry-specific expenses as necessary business costs [for an artist],” said Lee Nam-kyung, secretary general of the Korea Management Association.

Rep. Park also called for clearer policy direction.

“Rather than relying only on tax investigations and back-tax assessments, authorities should establish clear taxation standards that reflect the characteristics of the industry to encourage voluntary compliance,” Park said. “The government is also considering imposing additional corporate taxes on certain one-person corporations that exploit the gap between personal income tax and corporate tax rates.”

BY KIM YEON-JOO [[email protected]]