Korean Actors Face Tax Audits Amid Controversy

Recently, several prominent South Korean actors, including Lee Ha-nee (이하늬), Yoo Yeon-seok (유연석), Lee Joon-gi (이준기), and Jo Jin-woong (조진웅), have come under scrutiny for tax audits. All of these actors share a commonality: they established corporations through which they have been paying taxes. However, tax authorities are now questioning this practice.

On March 22, Jo Jin-woong's agency, Saram Entertainment (사람엔터테인먼트), released a statement revealing that the tax authorities imposed a tax of approximately 1.1 billion KRW (around $1 million) during a routine audit. The agency stated, "We have cautiously filed for a review with the Tax Tribunal to seek a legal judgment on the tax authority's decision, and the hearing is currently in progress."

According to the agency, Jo Jin-woong has been reporting and paying corporate taxes on the income generated by his corporation, but the tax authorities have classified this income as personal income tax.

Similarly, Lee Ha-nee faced a tax audit amounting to about 6 billion KRW, while Yoo Yeon-seok was audited for approximately 7 billion KRW, and Lee Joon-gi for around 900 million KRW. All of these actors have been paying taxes through their corporations before facing these audits.

For instance, Lee Joon-gi established JG Entertainment (제이지엔터테인먼트) in January 2014 and signed an exclusive contract with Namoo Actors (나무엑터스) the same year. Subsequently, Namoo Actors paid his appearance fees to JG Entertainment instead of directly to Lee Joon-gi, allowing the corporation to report his personal income as corporate revenue for tax purposes.

The personal income tax rates range from 6% to 45%, while corporate tax rates are between 9% and 24%, with the highest corporate rate being lower. The tax authorities view this as a potential tax evasion strategy.

Like Jo Jin-woong, Lee Joon-gi has also filed for a review with the Tax Tribunal regarding his tax audit, which is currently ongoing. Meanwhile, Yoo Yeon-seok requested a pre-assessment review in January, a process that allows taxpayers to contest the actions of tax authorities.

As these cases unfold, attention is focused on the outcomes of the Tax Tribunal's decisions and the results of the pre-assessment reviews.