Impact of Tax Changes on Overseas TR ETFs
Impact of Tax Changes on Overseas TR ETFs
The government's announcement of new tax policy has decreased the attractiveness of overseas stock-based Total Return (TR) Exchange Traded Funds (ETFs). This is due to the application of annual taxes on interest and dividends, which undermines the compound interest effect. As a result, there is a noticeable shift of funds by investors towards overseas ETFs and high-dividend covered call products. This tax change does not apply to domestic stock-based ETFs aimed at revitalizing the Korean stock market, which requires strategic adjustments from investors. TR ETF managers are expected to adapt their operational strategies, especially with products like 'KODEX 미국S&P500TR' and 'TIGER 미국 나스닥100TR(H)'. These policy changes are scheduled to take effect in the latter half of 2025.
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연합인포맥스2025 3月 06
[Financial Terminology] Total Return (TR) - Yonhap Infomax◆Total Return (TR) is a type of Exchange-Traded Fund (ETF). Even if interest and dividend income is accrued during the holding period, it is not distributed but fully reinvested. It is distinguished from Price Return (PR), which pays dividends immediately. TR ETFs automatically reinvest interest and dividend income, allowing investors to benefit from compound interest. Additionally, taxation occurs at the point of redemption or transfer, providing a deferral effect on dividend income tax. The Ministry of Strategy and Finance has decided to amend the tax law enforcement ordinance to allow the benefits of deferred distribution of interest and dividend income only for domestic stock-type TR ETFs. The operation of overseas stock-type TR ETFs is virtually prohibited.
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If You Invested in Foreign Stocks This Way, You Could Face a Health Insurance Bomb - Chosun IlboIf You Invested in Foreign Stocks This Way, You Could Face a Health Insurance Bomb: The cessation of foreign stock-type TR ETFs may affect you as the government has announced a plan to tax the interest and dividends of foreign stock-type Total Return (TR) ETFs annually, making it difficult to expect compound interest effects on dividends.