Zheng Shuang Photo:VCG

More than 75 Chinese stars closed the private companies they had registered in their name after Zheng Shuang, an actress who was recently involved in a surrogacy dispute scandal, and the company she registered came under investigation for the same tax evasion trouble that Chinese actress Fan Bingbing was charged with in 2018. 

On Wednesday, CCTV reported that the Shanghai Municipal Tax Service and State Taxation Administration are investigating and verifying Zheng's case in accordance with tax laws and regulations. Prior to that, on Monday afternoon, her ex-husband alleged that Zheng is suspected of evading tax connected to the high payment of 160 million yuan ($24.62 million) she earned for a television role. 

CCTV also reported that the Beijing Municipal Radio and Television Bureau had also launched an investigation into the production costs of TV dramas and actor's salaries. The report noted that Chinese authorities will resolutely investigate and rectify issues such as "yin-yang contracts," "extraordinary high costs" and tax evasion.

Wu Xiaolin, a lawyer based in Shenzhen, South China's Guangdong Province told the Global Times on Thursday that "yin-yang contracts" refer to the illegal practice when studios draw up two contracts - one to be disclosed to the tax authorities and the other that goes unreported - in order to avoid taxes. 

Fan ran into legal troubles due to the "yin-yang contracts" as well as other illegal troubles, and was forced to pay a huge fine of around 890 million yuan. 

According to Zheng's ex-husband, Zheng and her mother are also under suspicion of trying to evade taxes by separating payments into different accounts including a company that was registered under her mother's name. 

"Evading taxes by opening a work studio company in the name of a star or their family members is very common in the Chinese entertainment industry because tax rates can be lower when stars get paid through their private companies instead of through individuals," said Wu.

According to Tian Yancha.com, a website for searching companies, more than 75 Chinese stars, including Deng Chao and Zhao Benshan, have closed private companies they had registered, and the number is still on the rise after Zheng's case hit the news.