Same covered-call strategy, different tax treatment: Tax bases surge for 7 ETFs, while one remains at 0 won

[Financial News] Although October distributions from KOSPI 200 covered-call exchange-traded funds (ETFs) all declined, the tax base—the amount used to calculate taxes—rose for most of them. As Samsung Electronics’ dividends were reflected in the funds’ distribution sources, the tax base for some products increased more than 50-fold in a month. By contrast, products using a strategy that avoids receiving dividends from certain stocks, including Samsung Electronics, kept their tax base at 0 won for four consecutive months.
According to Korea Fund Ratings’ Fund Square on the 10th, the average per-share distribution for eight KOSPI 200 covered-call ETFs fell by 26 won (15.3%) in October, while the tax base for seven of them rose from the previous month.
The divergence between distributions and tax bases came from changes in both the size of distributions and the composition of their funding sources. The decline in the KOSPI 200 lowered net asset value (NAV), reducing per-share distributions from products that target a certain distribution rate. Meanwhile, Samsung Electronics’ dividends increased the share of taxable dividend income in the funds’ distribution sources. Samsung Electronics has a weighting of 21% to 34% in the ETFs being compared.
By contrast, PLUS 200 Covered Call Active is the only one of the eight ETFs being compared whose tax base on distributions has remained at 0 won for four consecutive months. The product applied a “dividend avoidance” strategy to six stocks, including Samsung Electronics and KT. It sells the stocks before the ex-dividend date and buys them back afterward. Rather than directly receiving dividends from those stocks, the strategy seeks capital gains from trading domestic stocks, thereby reducing the share of taxable dividend income in the distribution sources.
Differences in tax bases mean that investors can take home different amounts even when they receive the same distribution. Assuming the per-share distribution is 114 won in both cases, an investor receives the full 114 won when the tax base is 0 won. With a tax base of 101 won, however, the amount received after applying the 15.4% tax rate is about 98.4 won—a difference of 15.6 won per share.

[email protected] Bae Han-geul Reporter