Lessons from the celebrity tax evasion issues

Recently, repeated cases of tax evasion have come to light in the entertainment and influencer industries, particularly involving the misuse of single‑person agency corporations. While individual income tax rates can reach as high as 49.5% (including local income tax), the top corporate tax rate is significantly lower at about 27.5%. This gap has led some people to view incorporation, based solely on the difference in tax rates, as a clever tax‑saving tactic.

The problem is that, in doing so, many individuals register family members as corporate employees and pay them inflated salaries, or claim expenses that never actually occurred—effectively and improperly reducing their tax burden.

The tax rule that regulates this type of behavior is the Principle of substance-over-form. Rather than simply determining whether a corporation exists on paper, tax authorities assess whether the entity genuinely operates as an independent business—with its own workforce, assets, and responsibilities—and whether income is properly attributable to it. In other words, if a corporation exists in name only and is used merely to shift an individual’s income into a lower‑taxed corporate shell, the National Tax Service (NTS) can disregard the arrangement and reclassify the income as personal income.

Setting aside the legal debates over how this principle is applied, the so‑called tax‑saving methods involving single‑person agency corporations that have sparked controversy lately are, in reality, rudimentary when viewed against the NTS’s analytical capabilities. The NTS uses advanced tax‑filing management tools, including AI‑based big‑data analysis, to detect irregular income patterns early and, when needed, conduct targeted tax audits. Simple schemes that exploit tax‑rate differences no longer hold up.

In short, the message is clear: incorporating solely to take advantage of lower corporate tax rates is risky and runs directly counter to the substance‑over‑form principle. By contrast, transparently reporting income and recognizing only legitimate, actual expenses within the bounds of the law remains the safest and most effective long‑term tax strategy. With tax‑analysis technologies becoming ever more sophisticated and public sentiment toward tax evasion growing increasingly strict, these are points well worth keeping in mind.