Distribution tax treatment

What is it?

The Distribution tax treatment defines how distributions made by an ETF are taxed. This is important for investors, as different income categories may have varying tax rates and regulations depending on the jurisdiction.

Possible values:

• Eligible dividends – dividends that meet specific criteria and may be taxed at a reduced rate (relevant in countries like Canada).
• Qualified dividends – dividends that qualify for lower tax rates in the U.S. compared to ordinary income.
• Ordinary income – distributions taxed as regular income, typically at a higher rate.
• Return of capital – a return of invested capital, which is not considered taxable income but reduces the investment's cost basis.
• No distributions – the ETF does not distribute any payments to investors.

Why is it important?

The tax treatment of distributions impacts:

• Investor returns – taxes can significantly affect net profits.
• ETF selection – investors may prefer funds with tax advantages.
• Tax planning strategy – understanding tax treatment allows optimization of investments.