It has been reported that the number of listed companies engaging in "reduced dividends" that do not pay a dividend income tax (15.4%) has surged. Reduced dividends refer to paying out dividends after decreasing capital reserves or surplus earnings. Since this structure returns the money invested by shareholders, dividend income tax is not levied.
According to Leaders Index, a corporate analysis research institute, from 2022 to April 25 of this year, the number of cases where listed companies in the KOSPI, KOSDAQ, and KONEX markets reduced capital reserves and transferred them to retained earnings increased from 31 corporations in 2022 to 130 this year, more than quadrupling.
In fact, the number of corporations that paid reduced dividends and the amount of those dividends increased from 1.598 billion won by 6 corporations in 2022 to 8.768 billion won by 41 corporations this year. The total amount of reduced dividends has nearly increased 5.5 times in three years.
The scale of the reduction in capital reserves has also increased. In 2022, the total reduction was 5.4618 trillion won, but it has increased to 11.4416 trillion won this year. Among this, 1.6507 trillion won was used for covering deficits. The remaining amount can be used anytime for reduced dividends.
The corporation that reduced its capital reserves the most is Woori Financial Group. Woori Financial Group approved the "reduction of capital reserves" in order to pursue tax-exempt dividends (reduced dividends) as part of its shareholder return policy during this year's regular shareholders' meeting. It decided to transfer 3 trillion won to surplus earnings to be used as a dividend source.
Meriz Financial Group also reduced its capital reserves by 2.75 trillion won. After reducing capital reserves in 2022 and 2023, Meriz Financial Group paid a total of 689 million won in reduced dividends last year and this year.
KRAFTON, Doosan Bobcat, HYBE, SK Square, and others also reduced their capital reserves by over 1 trillion won. Among these, Doosan Bobcat executed reduced dividends four times, while HYBE did so twice.
However, as there are criticisms that reduced dividends are being abused as a tax avoidance measure, the Ministry of Economy and Finance is reportedly consulting with relevant agencies such as the National Tax Service, the Korea Financial Investment Association, and the Tax Tribunal to determine the taxation status.