Dividends for exchange-traded funds (ETFs) tracking the Standard and Poor's 500 Index (S&P 500) and the Nasdaq 100 by Mirae Asset Global Investments have seen a sharp decline. Mirae Asset Global Investments noted that this is due to changes in the taxation method for foreign withholding tax starting this year; however, the difference compared to other asset management companies' ETFs tracking the same indices has caused investor backlash.
According to the financial investment industry on the 4th, Mirae Asset Global Investments' TIGER U.S. S&P 500 paid a dividend of 45 won per share on the same day. This is a 30.7% decrease from the 65 won in dividends paid in the fourth quarter of last year (payment date: Nov. 4).
TIGER U.S. Nasdaq 100 also paid a dividend of 70 won per share on the same day, down 61.2% from the 180 won distributed in the fourth quarter of last year (payment date: Nov. 4). Compared to the first quarter of last year (payment date: Feb. 2), TIGER U.S. S&P 500's dividends were cut in half, while TIGER U.S. Nasdaq 100 saw a reduction to one-third.
Mirae Asset Global Investments explained that the reason for the reduction in dividends for TIGER U.S. S&P 500 and TIGER U.S. Nasdaq 100 is due to the impact of the reform in the taxation of foreign withholding tax effective from January 1 of this year.
Previously, when a fund incurred tax liabilities to a foreign entity, it would first pay the tax and then receive a refund from the National Tax Service. Starting January 1 of this year, the fund will not receive a refund. Instead, when the selling party (the withholding tax agent), such as a brokerage, pays dividends to investors, they will withhold the amount based on the domestic tax rate minus the foreign withholding tax.
For example, suppose a fund invested in stocks of Country A earns 1 million won in dividends. Until last year, if Country A collected 100,000 won as dividend income tax, the fund would pay this, and then receive a 100,000 won refund from the Korean National Tax Service. After that, when the fund gives 1 million won back to the investors as dividends, the investors would receive 860,000 won, after deducting the 14% domestic tax rate.
In the future, since the fund will no longer follow the refund process, it will distribute 900,000 won to investors after deducting the 100,000 won in foreign tax paid. Then, after additionally subtracting the 40,000 won that differs from the domestic tax rate, the investors will end up with 860,000 won.
While only the intermediate process changes and the amount of money investors receive after tax remains the same, the size of the fund's dividend disclosure will differ. Looking at the previous example, the dividends paid by the fund would have been 1 million won, whereas under the new method introduced this year, it would be 900,000 won.
The problem is that, unlike Mirae Asset Global Investments, other asset management companies' ETFs that track the same index have not seen any reduction in dividends. Korea Investment Trust Management's ACE U.S. Nasdaq 100 paid a dividend of 35 won per share on the same day, the same as the fourth quarter of last year (payment date: Nov. 4). Shinhan Asset Management's SOL U.S. Nasdaq 100 also paid 25 won in dividends the previous day, consistent with the fourth quarter of last year (payment date: Nov. 1). The same goes for S&P 500-indexed ETFs.
As a result, the quarterly distribution rate (total dividends ÷ net worth) for Mirae Asset Global Investments' ETFs has significantly decreased. Considering the payment date and settlement date, the distribution rate for this quarter for TIGER U.S. Nasdaq 100 is 0.05%, while ACE U.S. Nasdaq 100 stands at 0.15% and SOL U.S. Nasdaq 100 at 0.19%, showing a significant gap.
Industry insiders believe that the difference in dividends cannot be entirely explained by the reform in the foreign withholding tax method. An ETF manager from another asset management company said, 'While the dividends from other ETFs remain the same, the dividends from Mirae Asset Global Investments' ETFs have decreased significantly compared to the U.S. dividend income tax rate (15%), so there may be other cost issues at play.'
There are opinions suggesting that Mirae Asset Global Investments may have paid out higher dividends last year to attract more clients. Mirae Asset Global Investments ranks as the second largest by market share, just behind Samsung Asset Management, with a market share gap of about 2 percentage points between the two firms.
An ETF manager from another asset management company remarked, 'ETFs that track the S&P 500 Index or the Nasdaq 100 Index trade mechanically, so there should be no reason for differences in performance or dividends. I suspect that overestimating dividends previously has affected this situation.'
Investors in the TIGER U.S. S&P 500 and TIGER U.S. Nasdaq 100 are upset. They have posted comments online indicating their intention to shift to other asset management companies. While the U.S. stock indices have been on a steady rise, the importance of stock price increases and exposure to currency fluctuations seem to have made them sensitive to dividends, especially amid recent challenges like the 'deep-seek shock' and 'tariff wars.'
Mirae Asset Global Investments insists that dividends should be evaluated on an annual, rather than quarterly, basis. A representative from Mirae Asset Global Investments stated, 'This product has distributed according to the dividend rate of the underlying index, in line with principles, and the fund distributes in four installments using an efficient method, so the average distribution rate across the four quarters should be considered.'
The representative from Mirae Asset Global Investments also stated, 'Excessive distribution of ETFs that do not align with principles can have negative implications for long-term revenue, thus requiring investor caution.'
The TIGER U.S. S&P 500 and TIGER U.S. Nasdaq 100 are core ETF products of Mirae Asset Global Investments. Both ETFs have the largest net worth among domestic ETFs following the same indices. As of the previous day, the net worth of TIGER U.S. S&P 500 stands at 7.897 trillion won, while that of TIGER U.S. Nasdaq 100 is 4.077 trillion won.