This month, a large amount of tax has been imposed on the distributions paid to investors by domestic stock covered call exchange-traded funds (ETFs). Contrary to the claim of being tax-exempt, not all distributions are free from taxes.
In particular, when distributions are filled with dividends subject to taxation, it appears that a dividend income tax of 15.4% may be levied on the entire amount of the distribution.
According to the financial investment industry on the 16th, tax has been imposed on the distributions paid to investors by 'KODEX High Dividend TOP 10 Target Weekly Covered Call' on the 2nd. The entire amount of 123 won per share has been counted as subject to dividend income tax (15.4%).
The distribution for 'PLUS High Dividend Weekly Covered Call' (138 won per share) has also been found to be fully taxable. It is anticipated that some of the distributions for 'KODEX 200 Target Weekly Covered Call,' which is set to pay out distributions, will also incur taxes.
This contrasts with asset management companies' assertions that most of the distributions from domestic stock covered call ETFs are tax-exempt. However, tax-exempt distributions are limited to domestic stock trading profits and domestic stock options premiums.
A source from the securities industry noted, 'If the funds are from dividends, it is subject to taxation, while revenue from on-exchange derivatives is tax-exempt,' adding, 'The reason for the taxation on distributions is that the monthly distribution was fully covered just from the dividend revenue in March and April.'