High-earning professional esports players have begun winding down the practice of receiving their salaries through personal corporate entities. To date, there have been no documented cases of tax assessments or league sanctions resulting from this payment structure. However, as industry rumors circulate that the National Tax Service (NTS) is auditing esports players' tax matters, players are taking proactive steps to clean up their finances before potential issues arise.
According to industry sources on October 15, a significant number of high-earning League of Legends Champions Korea (LCK) players have been receiving their compensation through corporate entities registered under their own names rather than as individuals. Many players on top-tier teams earning over 500 million to 1 billion won have reportedly adopted this method. Under this setup, teams disburse salary compensation to corporations established by the players and receive tax invoices from those entities in return.
Inven has verified at least three such cases. An industry insider noted, "The actual figure is likely far higher."
The primary motivation for choosing a corporate structure is tax rate disparity. For instance, in a simplified calculation for a player with a 500 million won salary, receiving it as individual earned income yields a taxable base of approximately 480 million won after applying the maximum personal earned income deduction of 20 million won, placing it in the 40% tax bracket. Including local income tax, total tax liability comes to around 183 million won—roughly 36% of the salary. By contrast, if that same 500 million won is collected as corporate revenue and retained entirely as profit, corporate tax rates of 10% apply to the first 200 million won and 20% to the remaining 300 million won. Even including local income tax, the liability is only 88 million won, creating a difference of nearly 100 million won.
Of course, as this calculation applies tax rates alone, the actual tax owed may differ once deductions or corporate operating expenses are factored in. It also assumes the funds remain inside the corporation. If a player withdraws money from the entity as salary or dividends, personal income tax is levied at that stage. Tax experts explain that the real financial advantage stems less from tax rates themselves and more from expense processing, income distribution, and controlling the timing of taxation. This is why concerns have persistently lingered within the industry that the structure could one day spark regulatory scrutiny.
Alarm bells rang when a high-profile player underwent a tax audit. Although that specific case was not directly related to receiving salaries through a personal corporate entity, news of the audit prompted numerous agencies to consult tax accountants regarding their players' tax setups. During these consultations, advisors reportedly noted that maintaining the current structure could lead the NTS to view it as tax evasion rather than legal tax avoidance. Separately, two LCK players were reportedly investigated by tax authorities, though it remains unconfirmed whether those probes stemmed from corporate payout structures.
To be clear, no tax evasion charges or penalties have been confirmed or levied against the players who are moving to restructure. Rather, this is a proactive measure to mitigate risk before issues escalate. Representatives for several prominent players have already begun the restructuring process through accounting firms.
■ The core issue is 'substance'... League reviews contracts, payout methods remain subject to mutual agreement
Incorporating a company or receiving payments through a corporate entity is not illegal in itself. The core issue lies in the actual contractual relationships and nature of activities. Under Article 14 of the Framework Act on National Taxes (the principle of substance over form), tax authorities evaluate who ultimately receives the income and the true economic substance of transactions, rather than relying solely on contract language or payment names.
Applying this principle to how LCK players operate creates potential legal vulnerability. Players typically sign exclusive contracts with teams, live in team gaming houses, and undergo structured training and scrims at set hours. They follow instructions from head coaches and coaching staff and participate in official matches and events scheduled by their teams. Tax legal professionals warn that if such players receive their salaries through personal corporate entities, authorities could classify those funds as individual earned income rather than corporate revenue.
Tax complications also overlap with players' eligibility in the league. The official LCK Rulebook stipulates that penalties can be imposed if a player becomes the subject of a criminal investigation or negatively impacts the league, explicitly specifying that this includes ongoing tax authority investigations into alleged violations of tax laws or the Punishment of Tax Offenses Act. Under the Penalty Index, criminal misconduct can carry fines of up to 100 million won along with up to a permanent ban from competition or suspension of LCK eligibility, accompanied by a long statute of limitations of 72 months. If a case is deemed severe, the LCK office can issue temporary suspensions even before official investigation findings are released.
However, the LCK office narrowed its interpretation of this clause in May. The league clarified that sanctions apply primarily to cases involving criminal liability or equivalent major unlawful acts, whereas routine administrative procedures—such as tax reassessments or paying back taxes—are unlikely to trigger league disciplinary action. While an audit resulting merely in additional tax payments will not lead to sanctions, formal indictments or criminal investigations for tax evasion could jeopardize a player's career. Furthermore, the mere public exposure of such matters carrying the risk of triggering league-level inquiries poses a significant burden on players.
The league office is involved starting from the contract phase. To protect player rights and prevent unfair contracts, the LCK reviews agreements between teams and players. According to the rulebook, all player contracts require league approval, allowing the office during this review to verify basic details such as whether the contracting party is an individual or a corporate entity. If contract terms are deemed to violate laws or regulations, the office can request modifications from the team.
However, a distinction must be drawn between the contract approval process and actual salary disbursement/settlement. League review serves as a mechanism to safeguard players and maintain fair league operations; it does not make the league office a party to the contract, nor does it grant authority to oversee or enforce individual contract execution. Decisions regarding how, at what ratio, and to whom salaries are paid remain matters mutually agreed upon and executed by teams and players.
For the league office—which is not a contracting party—to unilaterally dictate or force changes to payment arrangements would constitute an overreach of authority. It is not that the league refuses to intervene, but rather that institutional boundaries constrain the scope of its involvement as a third party.
■ A new variable for the offseason... 'Payment structure' joins 'salary amount' on the negotiation table
This shift is expected to emerge as a key variable in the upcoming offseason. Typically, the transfer window opens immediately after the World Championship. If players switch from corporate to personal payment structures, their net take-home pay could decrease even under the same total contract amount. This is because opportunities for expense deductions and managing tax timing through corporate entities will disappear. Consequently, player representatives may demand post-tax compensation guarantees to match previous net earnings during contract renewals or transfer negotiations.
Teams would then have to spend more money to retain the same players, which in turn elevates calculated expenditure under the Sporting Financial Regulations (SFR) system and increases luxury tax burdens. Observers project that negotiations will enter a new phase where payment structures become as critical as gross salary figures.
The demand for restructuring has also created new business opportunities for player agencies. Some agencies are reportedly partnering with tax firms to assist players concerned about tax risks, earning referral fees in exchange.
Legal experts advise that the industry take this opportunity to fundamentally review corporate payout structures. Attorney Heo Si-won of Yoon & Yang LLC likened the issue to the recent controversy surrounding celebrities' single-person corporate entities. Heo explained, "Setting up a corporation for professional esports players to conduct legitimate business activities is not illegal in itself, and there is no issue as long as the corporate entity provides genuine services while recognizing revenue and expenses."
However, he cautioned, "If a corporate entity performs no actual duties yet channels income to itself, deducts unnecessary expenses, and distributes funds to the individual as dividends or salary whenever desired, such a structure risks being categorized as tax evasion."
Regarding the industry's shift toward restructuring, Heo stated, "It appears players are seeking to dissolve their corporations and return to receiving salaries directly as individuals. While this does not definitively prove wrongdoing, it suggests players themselves assessed that their current setup posed potential legal risks."
Heo added that the actual financial benefit esports players gain through personal corporations is limited. "From a tax standpoint, there is ultimately little difference for players between receiving salaries directly or through a corporate entity," he said. He further explained, "Unlike entertainers who incur substantial personal business expenses, esports players generally have their operating costs covered by their teams, meaning the financial benefit of writing off expenses through a company is minimal."
Ultimately, the primary incentives are income splitting among corporate employees or manipulating the timing of income recognition. However, if family members are hired nominally as employees without performing real work, it clearly constitutes an illegal practice. Heo advised, "There is no compelling reason to set up unnecessary corporations just to receive player salaries. Operating a corporate entity is advisable only when a legitimate organizational structure is required to manage non-gaming activities such as commercial endorsements."
While LCK player salaries have skyrocketed alongside the league's growth, standards surrounding compensation delivery methods have failed to keep pace. Payment structures remain governed by mutual agreement between teams and players, and while the league office can review contract terms, it cannot directly intervene in execution. Primary responsibility for correcting these structures rests with the contracting parties themselves—the teams and players.
With players moving proactively before major controversies erupt, industry observers emphasize that now is the opportune moment for teams and players to review overall contracting and compensation structures, while the league considers measures to support these efforts.
