Focus on Tax Errors and Regulatory Attention in Covered Call ETFs
With KF Securities and regulatory authorities focusing on various ETFs, especially covered call ETFs, issues related to taxation on trading gains from these products have also come to light. Covered call ETFs provide regular dividends to investors by selling call options and are popular among those seeking high yields. While financial authorities are granting tax incentives to promote these products, they also highlight weaknesses such as the difficulty of successful stock selections.
Notably, it has been discovered that some brokerages have excessively taxed trading gains from covered call ETFs. For instance, Samsung Securities is attempting to resolve system issues and assess the status of previously over-collected taxes. This problem arose as tax systems failed to adapt to changes in the ETF holding period taxation framework implemented in 2010. Consequently, investors are facing potential additional financial burdens due to comprehensive financial income taxation and health insurance premiums.
Over the past 15 years, several leading brokerages have encountered issues with ETF taxation, increasing the risk of significant economic burden on investors. Many cases of taxing non-taxable income have accumulated investor dissatisfaction. There is growing criticism towards responsible parties, with investors worried about assessing their incurred damages and navigating complicated relief processes.
Samsung Securities has been the first to address the problem, working on system corrections to rectify the tax errors. The Korea Financial Investment Association is investigating the root causes, which could incentivize more brokerages to upgrade their systems in the future.
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The Rise of Covered Call Active... Becoming 'Chief's Corn'? [Daily Money-Visible Habit M+] - Maeil Business NewspaperThe derivatives strategy dealing with futures and options, not stocks, is a high-risk skill. Investing in an exchange-traded fund (ETF) to diversify across multiple stocks and beat inflation over the medium to long term is a relatively stable strategy. However, the ETF industry is actively entering the derivatives market in pursuit of higher returns. Domestic asset managers, who have enjoyed success by launching various ETFs targeting retail investors involved in international trading ('Seohak Ants'), are seeing this as an opportunity.