Tax Evasion Scandals Involving Solo Management Companies, with Focus on Tax Avoidance Through Rate Differences

Scandals related to tax evasion by solo management companies for celebrities are growing in scale. As various entertainers such as Cha Eunwoo and Kim Seon-ho recently became embroiled in allegations of tax evasion tied to solo management companies, the practice of avoiding taxes by exploiting the tax rate disparity between individuals and corporations has come under sharp criticism.

A solo management company is an organization that provides comprehensive management for a single celebrity, and such structures have been promoted to protect artists from the bureaucratic and operational frameworks of large agencies. Following Bae Yong-joon’s initial use of this model for his personal activities in 2005, it gained widespread adoption starting in the 2010s and was viewed positively within the industry as a means to safeguard artists’ rights. Over 99.9% of management companies are small-scale, with solo management companies representing the smallest form among them.

The significant gap between individual income tax and corporate income tax is cited as the primary reason for the abuse of solo management companies. Cultural critic Kim Heon-sik emphasized that while individual income tax rates hover around 40%, corporate income tax rates are only in the 20% range. It is reported that some celebrities establish solo management companies with the explicit aim of reducing their tax burdens due to this rate disparity.

The issues surrounding solo management companies can be categorized into several types. Unlike their original purpose of providing dedicated management for one artist, some cases involve entities that continue operating under previous corporate structures without fully dissolving them, even after changing their affiliated company. In other instances, it is difficult to determine whether transactions exist solely for tax avoidance or actually represent genuine management activities, despite the presence of evidence.

Experts point out that solo management companies are not illegal in themselves, but repeated scandals stem from the lack of clear taxation guidelines set by tax authorities. This situation highlights the difficulty in regulating behaviors aimed at evading taxes by relying solely on formal distinctions between individuals and corporations, prompting calls for systemic reforms.