REITs Association: "Abolish Current Benefits and Apply Separate Taxation on Dividend Income Instead"

"Why Are REITs, Which Are Legally Required to Pay Dividends, Excluded?"
Industry Submits Proposal to Democratic Party Policy Committee Chair

The Korea REITs Association announced on August 5 that it had delivered a written proposal to Han Jeongae, the Policy Committee Chair of the Democratic Party of Korea, conveying the industry's opinion that Real Estate Investment Trusts (REITs) should be included as eligible for separate taxation on dividend income.

The "2025 Tax Reform Plan" announced by the Ministry of Economy and Finance at the end of last month includes a benefit for certain high-dividend listed companies that meet specific requirements, lowering the maximum tax rate on dividend income to 35% through separate taxation. However, REITs were excluded from this benefit.

The association stated, "Under the Real Estate Investment Company Act, REITs are required to distribute at least 90% of their profits as dividends, which means that they essentially return all actual earnings to investors," and argued, "The same tax benefits should be applied to REITs, which return most of their profits to shareholders."

Unlike the government's intention to incentivize "companies that voluntarily increase dividends," REITs are legally obligated to pay dividends. If they do not distribute dividends, they do not meet the requirements for corporate tax exemption. Even though REITs qualify as high-dividend companies, they were excluded simply because they do not fit the government's criteria.

The association further stated, "Looking at overseas cases such as Singapore, the United States, and Japan, the REIT markets have been vitalized through comprehensive policy support," adding, "There is no discriminatory taxation on REITs; in fact, more tax benefits such as acquisition tax reductions are provided." The association continued, "Imposing tax disadvantages on REITs is a policy that brings more harm than good and needs to be reconsidered."

The association also emphasized the role of REITs in an aging society. It stated, "REITs can help address policy issues such as revitalizing housing supply and stabilizing the real estate market, and with the obligation to distribute over 90% of profits as dividends, they provide stable dividend income to the public, making them suitable products for retirement planning." The association added, "The importance of REITs as a stable source of retirement income for retirees and as contributors to the revitalization of rental housing supply will become even more pronounced."

If the government's reason for excluding REITs is "overlap with existing separate taxation benefits," the association argued that it would be more desirable to abolish the current system and include REITs in the new reform plan. The association stated, "If the reason for excluding REITs is the overlap with the current separate taxation benefits, it would be better to abolish the less effective current tax benefits for REITs and include REITs in the government's tax reform plan."

This content was produced with the assistance of AI translation services.