Largest among REIT ETFs eligible for separate taxation

Adjusted payout applies to purchases made by Friday

Dividend income excluded from comprehensive financial income taxation

[Courtesy of Samsung Asset Management]
[Courtesy of Samsung Asset Management]

Samsung Asset Management said Thursday it will adjust dividend payouts for its KODEX Korea Real Estate REIT Infrastructure ETF through the end of the year, reflecting a special dividend from Koramco THE ONE Reit, one of the ETF's holdings.

The adjustment will be carried out four times, from this month through December. Combined with the existing monthly payout, the special dividend is expected to lift the monthly distribution rate to about 1.4 percent — up sharply from the recent rate of 0.6 to 0.7 percent. The actual dividend amount and distribution rate may vary depending on market conditions and the ETF's price on the record date.

The funding for the adjusted dividend comes from Koramco THE ONE Reit's sale of the Hana Securities building, an asset held by the REIT that KODEX Korea Real Estate REIT Infrastructure invests in. Koramco THE ONE Reit completed the sale in June and announced a special dividend of 8,900 won per share, funded by the sale gains — equivalent to a market dividend yield of 81.4 percent.

KODEX Korea Real Estate REIT Infrastructure holds the largest net assets among domestic REIT ETFs eligible for separate taxation benefits. Its net assets stand at 488.8 billion won ($365 million), cementing its position as a leading separately taxed REIT ETF in Korea.

A REIT is an indirect investment vehicle that pools money from multiple investors to invest in real estate and real estate-related securities, then distributes the returns to investors as dividends. A REIT ETF diversifies investments across multiple REITs, allowing investors to receive real estate rental income and other returns in the form of dividends.

KODEX Korea Real Estate REIT Infrastructure also qualifies for separate taxation benefits in a regular brokerage account. Under the current Restriction of Special Taxation Act, investors who meet the requirements and apply for separate taxation are subject to a 9 percent tax rate on dividend income generated over three years from the date of investment, up to a combined investment limit of 50 million won. Including local income tax, the effective rate is 9.9 percent.

That dividend income is not added to the comprehensive income tax base used for financial income taxation, making the product an attractive option in terms of after-tax cash flow for investors with substantial financial income, compared with general REIT ETFs or high-dividend products.

KODEX Korea Real Estate REIT Infrastructure pays dividends monthly. To receive the adjusted payout, investors must purchase shares by Friday, the day before the ex-dividend date.

"We expect that, thanks to Koramco THE ONE Reit's special dividend, investors in KODEX Korea Real Estate REIT Infrastructure will receive higher monthly payouts than before through the end of the year," a Samsung Asset Management official said. "This case shows another attraction of REIT investment and the importance of separate taxation, as it demonstrates that not only regular REIT dividends but also special gains from asset sales can flow through to ETF investors as dividends."


jiyun@heraldcorp.com