This article was published on May 2, 2025, at 10:19 a.m. on the ChosunBiz MoneyMove site.
Honestly, it’s a hassle to look at the different types of fractional investments and find the appropriate tax methods individually. Before it was legislated, we conveyed our opinions to the industry like that, and now, with this blanket imposition of dividends tax, it feels frustrating. We haven't even grown properly yet, and the investment attractiveness is falling, meaning we need to look for other options.A representative of a fractional investment corporations
The government has decided to uniformly impose dividends tax on the revenue from fractional investment products, which previously lacked clear tax standards, starting in July. However, to be precise, revenue from fractional investments is not dividends. Since it distributes revenue after the disposal of the underlying asset, it has been subject to other income tax until now, but with the introduction of dividends tax, fractional investors in artworks, Korean beef, and others are expected to face a heavier tax burden.
According to the investment banking (IB) industry on the 2nd, the subsidiary of YES24 that entered the fractional investment market for artworks this year, Artipio, has made significant corrections to its registration statement twice while pushing for securities issuance. The content corrected in February, just before obtaining final approval, was related to business risks, mainly concerning the tightening of tax regulations on artworks. Another fractional investment platform, Yeolmae Company, also corrected its securities registration statement in February, specifically incorporating the investment risk related to the tax law changes. These art fractional investment firms have been indicating in their subsequent securities registration statements that the strengthening of tax regulations on artworks is a business risk.
Until now, there was no tax if the transfer price of art fractional investment products was less than 60 million won. In cases where a work of art worth over 60 million won was transferred after the artist's death, 22% other income tax was imposed after a deduction of 80-90%. This was based on the principle that it should be taxed in the same way as the underlying asset, artworks. Fractional investment platforms for real estate, such as Casa Korea, and music copyright fractional investment companies, such as Music Cow, have been reporting income as dividends for tax calculations.
The Ministry of Economy and Finance incorporated the profits from securities investment contracts obtained from artworks and Korean beef into the dividends (15.4%) range in the tax reform proposal prepared last year for 2024, along with profits from non-monetary trust securities related to real estate and music copyrights. With the transition to dividends tax, even amounts under 60 million won will be taxed. These firms and financial authorities see this change as potentially having a negative impact on corporate profitability and investment returns.
In particular, the industry is concerned that the investment attractiveness will decrease due to the application of comprehensive financial income taxation. With this tax law change, if an investor's financial income exceeds 20 million won, it will be subject to comprehensive financial income tax along with other interest and dividend income. In this case, a maximum progressive tax rate of 49.5% will apply. This means that higher-value investors face greater tax risks.
An industry insider noted, “In fact, inquiries from investors regarding the change in tax methods have increased,” and added, “Previously, because paintings were taxed separately, there was investment attractiveness, but now, wealthy investors cannot help but think that ‘it’s better to buy the painting as a whole’ rather than fractional investment.”
The legislation to bring security tokens (STOs) into the regulatory framework is also delayed indefinitely. In February 2023, the Financial Services Commission announced guidelines allowing the issuance and distribution of security tokens, but the bill did not make it past the thresholds of the National Assembly and was discarded. In this situation, starting with the taxation measures that reduce investment attractiveness, voices of frustration are emerging from the industry.
A representative from a fractional investment company said, “The government claims this measure was taken considering tax equity and that the taxation method for fractional investments has gained consistency, but it seems they are unaware that each platform has different structures and show no interest in addressing that,” and added, “There are no associations, and as small corporations, we are looking for alternative paths within the changed tax law.”
There is a feeling in the industry that there are no appropriate response measures. A representative from another fractional investment company commented, “Before it was legislated, all corporations met several times with the Ministry of Economy and Finance and the Ministry of Culture, Sports and Tourism for discussions. However, even after hearing everything, they decided to apply dividends tax uniformly,” and added, “Moreover, with specific practical procedures not being confirmed, it is difficult to provide accurate tax guidance to investors.”
The performance of the art fractional investment market this year is not good. There has been a shortfall in subscriptions to the extent that the issuing company directly acquires the shortfall. According to the performance reports for securities issuance from fractional investment companies this year, the subscription rates for art investment contract securities were ▲Together Art No. 7 at 53.82% ▲Yeolmae Company No. 4-1 at 50% ▲Yeolmae Company No. 4-2 at 37% ▲Yeolmae Company No. 4-3 at 45% ▲Artipio at 39.34%, among others.