Nikko Asset Management Asia Limited has announced a dividend distribution of S\$0.0116 per unit for its NikkoAM-StraitsTrading Asia ex Japan REIT ETF, covering the period from August 1, 2024, to October 31, 2024. This announcement, made on November 29, 2024, may have implications for fund holders’ income and tax reporting, as well as potential impacts on the ETF’s valuation.

Key Details of the Dividend Breakdown

The S\$0.0116 dividend per unit is broken down as follows:

• Taxable income component: S\$0.0079948 per unit from qualifying S-REIT distributions.
• Tax-exempt income: S\$0.0011464 per unit, which does not need to be declared in Singapore tax returns.
• Other income and gains: S\$0.0024588 per unit from the disposal of securities.
• Capital component: No capital distribution was included for this period.

Tax Implications for Investors

Investors should be aware of the following tax treatments:

• Qualifying Individuals: These investors are exempt from tax on this distribution, provided the income is not derived from trade, business, or profession.
• Non-Qualifying Holders: Non-qualifying holders must report the gross income distribution as taxable income in their Year of Assessment 2026 tax returns unless exempt due to specific circumstances.
• Foreign Non-Individual Investors: Distributions are taxed at 10% if the investor does not have a permanent establishment in Singapore.
• Other Investors: Distributions are taxed at 17% for non-qualifying investors, excluding certain exempt entities such as charities, statutory boards, and trade unions.

Notably, the tax-exempt income of S\$0.0011464 per unit does not need to be declared, and no tax is deducted from this portion.

Impact on Shareholders

Shareholders holding units as trading or business assets should note that capital distributions reduce the cost base of units for tax purposes. If the capital distribution exceeds the unit cost, the excess is taxable as trading income. Additionally, any future sale proceeds of these units will be fully taxable.

The Fund retains its Designated Unit Trust (DUT) status, provided it meets the specified conditions and submits annual declarations. However, the DUT scheme officially expired on March 31, 2019, which may impact the tax treatment of certain distributions.

Potential Market Impact

This dividend announcement, combined with its tax implications, could influence investor sentiment and potentially affect the ETF’s unit price. Investors are advised to assess these factors carefully, especially given the breakdown of taxable and tax-exempt components. The clarity around tax treatments for different investor groups also adds transparency, which may impact trading activity.

Important Notice

This announcement serves as a reminder for investors to evaluate their tax positions and consult financial advisers if necessary. The ETF’s performance on the Singapore Exchange Securities Trading Limited (SGX-ST) may differ from its net asset value per unit, and the ETF is subject to suspension or delisting risks. Investors should also note the risks of investing in financial derivatives and the potential for the value of units to fluctuate.