“Dividual Income Tax” Investment to Pay…Increasing Industry Confusion

Dividend income tax will be imposed on fragmented investments from July next year
Including real estate, music, art, Korean beef sculpture investment, etc
“Investor tax burden grows”…There are concerns

This article has been translated into English through AI.

[Edaily Marketin Reporter Kim Yeon-seo] The government has decided to impose dividend income tax on profits earned from investing in sculptural investment products from July next year. Profits from investment contract securities such as art and Korean beef, which are sculptural investment products, have also been added to the dividend income range. The confusion in the market seems to be aggravating as the tax burden on art sculptural investors is expected to increase. Some say that it is positive in that uniformity is given to the taxation method of sculptural investment products, which were different.

The Ministry of Strategy and Finance announced on Monday a revised tax law in 2024, which calls for levying dividend income tax on fragmented investment products. Under the revised bill, profits including redemption, sale, termination, and dissolution from investment contract securities (art and Korean beef) and non-monetary trust beneficiary securities (real estate and music copyrights) will be classified as dividend income. The revised bill will be applied to those who receive payment after July 1, 2025. The specific scope will be defined by a presidential decree in the future.

The government expects that the taxation methods for sculptural investment, which were different in consideration of taxation equity, will have uniformity. Currently, in the case of sculptural investment, the tax rate is applied differently because each asset has a different taxation method. In the case of real estate and music copyrights, dividend income tax is levied, and in the case of art, it is classified as redemption profit and regarded as other income. In the market, there was a discussion about whether the return on sculptural investment should be viewed as dividends, transfer, or other income under the tax law.

The controversial part is the taxation method for investment contract securities such as art and Korean beef. In the case of investment in real estate and music sculptures, dividends are paid to investors at regular cycles such as one month and three months. On the other hand, investment contract securities such as art and Korean beef differ from beneficiary securities in that they do not pay dividends and generate profits after the sale of underlying assets. Taxes such as other income taxes and business income taxes are already levied on investors.

In the fragmented investment industry, there are concerns that investors may increase their tax burden in the case of investment contract securities. The dividend income tax rate is 15.4%, and the opinion is that if dividend income tax is applied to fragmented investment products according to the revision of the Ministry of Economy and Finance, the burden will be greater than that of existing taxes paid by investors. Currently, art and Korean beef are receiving tax benefits such as tax exemption within a certain limit, but some point out that if they use fragmented investment, they will have to pay dividend income tax, which will increase the tax burden.

“In the case of art sculpture investment, we were following the existing tax law by imposing only other income taxes,” said an official in the sculpture investment industry. “On the surface, it may seem unfavorable to investors, but only when the amendment is implemented will we know whether it will be good or bad for sculpture investors and investors.” He added, “We don’t know whether the amendment is specifically better than before, but from the perspective of general consumers (investors), the amount of tax accepted may be higher than before.”