Separate Taxation ETF Investment Guide for Salary Workers (2025 Edition)
When investing in ETFs, there's a lot that gets confusing when it comes to taxes. Lately, I've seen so many questions and people around me asking about this, so I've organized and shared what I know. I'm not a tax accountant—just did research at a layman's level—so for major decisions, please consult a tax professional.
1. What is a separate taxation ETF?
- It's a product where you pay only 15.4% on profits whether you hold to maturity or sell before maturity, and it's excluded from comprehensive taxation.
- The most frequently mentioned ones are domestic listed covered call, bond-type, and certain derivative-type ETFs.
2. Why are they good?
- For regular ETFs, capital gains from selling are classified as other income / dividend income, and as the amount grows, it affects health insurance premiums and comprehensive income tax.
- With separate taxation, it just ends at 15.4%, so you can worry less about taxes.
3. Things to note
- Separate taxation doesn't automatically mean it's good. There are more things to check: management fees, the quality of the underlying index, and for covered calls, even the dividend growth rate.
- Don't pile everything into one product. It's better to split across several and align with your own risk tolerance.
4. My investment strategy
- Right now, I'm putting overseas ETFs into a pension savings account, and in my regular account, I'm slowly accumulating separate taxation domestic bond-type ETFs.
- My goal is to cover my phone bill with dividends, though that's still a long way off.
If you spot anything wrong, please point it out—I'd appreciate it.
4 answers
Oh, this is really well organized lol. I read the concept of separately taxed ETFs three times, but now I finally get it a bit.
I also got into covered call ETFs last year and had a tough time with taxes, so now I see why separate taxation is important. But the management fee is really crucial. The one I held had a 0.8% fee, while another ETF with similar returns had 0.3%. Over the long term, that difference is huge, so make sure to compare.
Well, I don't think separate taxation is always a good thing. With covered calls, the dividends can actually end up having more tax withheld, and even with separate taxation, I believe losses aren't deductible, right? It's a shame that part wasn't addressed. Also, tax laws could change next year, so for long-term investing, we should probably look at other variables too.
I actually didn't know bond ETFs are subject to separate taxation, whoa. Then do I need to do something extra when filing taxes? Does anyone know? This post alone is a bit lacking, so it'd be great if you could post a more detailed write-up later.