How to Collect a Korean ADR Dividend Without Overpaying Tax

A Korean company declares a dividend in won. Some time later, a smaller number in dollars shows up in your US brokerage account. Between those two points sit the Korean withholding tax, a currency conversion, and a depositary bank’s fee, and the rules for each sit in Korean tax law, the tax treaty, and the depositary’s agreement.

Here’s the short version for a US resident. Korea withholds 22.0%, including local income tax, or a treaty rate of 16.5%, or 11.0% only for a US corporation holding at least 10% of the voting stock and meeting further conditions, but only if your residence is documented by the time of payment. The depositary converts the won and deducts its fee, which runs from no dividend fee at KT to up to $5.00 per 100 ADRs at SK Hynix, before any separate service fee or conversion expenses. And if 22.0% is taken and you do not reclaim the difference, the IRS, under its 2025 instructions, will not let you credit the excess.

This explainer follows one dividend from Seoul to your account. Our guide to how Korean ADRs work covers the wider mechanics, and our guide to collecting Korean dividends covers holders of the shares themselves.

Key Takeaways

• The money starts in won. The company pays the depositary’s custodian in Korea, and the depositary converts to dollars only if that is practicable and the dollars can be sent to the US.
• The treaty rate is not automatic. Korea withholds 22.0% unless evidence of your tax residence is in place by the time of payment. US residents can qualify for 16.5%, including local income tax; 11.0% applies only to US corporations holding at least 10% of the voting stock, and further conditions apply.
• Fees differ by issuer. SK Hynix’s agreement allows up to $5.00 per 100 ADRs on a cash distribution, KB Financial’s up to $0.02 per ADR, and KT’s annual report lists no dividend fee.
• Unclaimed excess tax can be lost on both sides. Under the 2025 IRS instructions, foreign tax you could have had refunded isn’t creditable, whether or not you apply for the refund.

Contents

1. The route, step by step
2. Korean withholding: 22.0% or the treaty rate
3. The depositary’s cut
4. When the won cannot be converted
5. The US side
6. What to check before the next dividend
7. Frequently asked questions

1. The route, step by step

Dividends on shares of Korean companies are paid in won. When the company behind an ADR pays one, it does not pay you. It pays the depositary’s custodian in Korea, and the depositary takes it from there.

Step	What happens	Where it’s set out
1	The company deposits the cash dividend with the custodian, in won	SK hynix prospectus
2	Korean withholding tax applies: 22.0% or a treaty rate	SK hynix prospectus
3	The depositary converts the won into dollars, subject to Korean law	SK hynix prospectus
4	Fees, expenses and taxes come out of the cash distributed	SK hynix prospectus
5	Distribution fees are charged to holders as of the ADS record date	SK hynix prospectus, KB Financial annual report

The dates matter. The company’s board sets the Korean record date, and SK Hynix’s July 9, 2026, prospectus says it does so with at least two weeks’ public notice. The depositary then works with its own ADS record date for the distribution. Our explainer on Korea’s dividend record date covers how the Seoul side changed after 2023.

2. Korean withholding: 22.0% or the treaty rate

Korea taxes ADR dividends the same way it taxes the shares. The SK Hynix prospectus says dividends on the common shares or ADSs paid to a non-resident are subject to withholding at 22.0%, including local income tax, or a lower treaty rate for the holder’s country of tax residence.

For US residents, KB Financial’s annual report gives the treaty rates as 16.5% or 11.0%, including the local income surtax. Under the treaty itself, the lower rate is only for a corporation that holds at least 10% of the paying company’s voting stock and the paying company passes a test on its own interest and dividend income, so individual holders are looking at 16.5%. If you’re a resident of another country, your own treaty sets the rate, and whether it includes local tax differs by treaty.

The catch is timing. The prospectus puts the burden on the person claiming the treaty: evidence of tax residence has to reach the payer, or its agent, “prior to or at the time of payment.” If it doesn’t, 22.0% is the default.

That’s not the end of it. Korean law generally lets the person who was over-withheld recover the difference from the government, with evidence that a lower rate applied and subject to conditions. Our guide to Korean dividend withholding tax covers how a reclaim works. For an ADR, the practical first question is who collects residence documents for your position: ask your broker, and if they don’t know, the depositary named in the company’s annual report.

3. The depositary’s cut

Each of these companies publishes its ADR fee schedule in its own SEC filings. On a cash dividend, three companies show three different answers.

Company	Fee on a cash dividend	Source
SK hynix	Up to $5.00 per 100 ADSs; a separate ADS service fee of up to the same amount may also apply	Prospectus, July 9, 2026
KB Financial	Up to $0.02 per ADS held	Annual report, April 2026
KT	None	Annual report, April 2026

Two details in SK Hynix’s agreement are worth knowing. The fee is “deducted from the funds being distributed,” so you never see a bill, only a smaller payment. And its schedule notes that some fees “may be cumulative.”

The fee is charged to holders as of the ADS record date. KB Financial’s filing says the same: distribution fees go to the holders of record of ADSs on that date.

Per ADR, the difference looks small. On a large position paid every year, it adds up, and it is one of the costs the ADR adds that the Seoul share does not have.

4. When the won cannot be converted

The prospectus says conversion into dollars “will take place only if practicable and if the U.S. dollars are transferable to the United States.” If converting is impractical or unlawful, the depositary can convert what it can, pay out the won to holders where that’s possible, or hold the money without interest.

Cash that cannot be distributed sits in a non-interest-bearing account until it can be paid. If it is never claimed, the agreement allows it to be escheated as unclaimed property under the laws of the relevant US states.

This is the part of the contract that decides who carries the problem if the plumbing fails, and the answer is the holder.

5. The US side

Your dividend income is the gross amount, not what lands in your account. The SK hynix prospectus says the full distribution, including any amount withheld for Korean taxes, is generally includible in your taxable income as ordinary dividend income.

Qualified dividends. The preferential rate can apply if the shares are readily tradable on an established US market, the company is eligible for the US-Korea treaty, and the company is not a passive foreign investment company. SK Hynix says its ADSs qualify as readily tradable for as long as they are listed on Nasdaq.

The foreign tax credit. You can generally credit the Korean tax, or deduct it instead. Dividends usually fall in the passive category for credit purposes. Korea’s securities transaction tax is not creditable.

The excess you didn’t reclaim. This is where an unclaimed refund costs you. The 2025 Instructions for Form 1116 say you can’t credit foreign tax you do not legally owe, including amounts eligible for refund. The IRS example: if $25 is withheld and the treaty limit is $15, “Only $15 is eligible for the foreign tax credit (whether or not you apply for a refund).” For a Korean ADR, that means the gap between 22.0% and 16.5% can be lost on both sides if nobody reclaims it.

The small-holder shortcut. The same instructions let you claim the credit without filing Form 1116 if your foreign income is passive, it is reported on a statement such as Form 1099-DIV, and your total creditable foreign taxes are no more than $300, or $600 on a joint return. Those thresholds are from the 2025 edition, so check the current year’s before you file.

Our guide to buying Korean stocks from the US, tax included, covers the rest of the US filing picture.

6. What to check before the next dividend

1. Your withholding rate. If a Korean dividend was taxed at 22.0% and you’re a US resident, the treaty rate was not applied. Find out why before the next payment, while documents can still arrive in time.
2. Your fee schedule. Open the company’s latest annual report or prospectus and search for “Fees and Charges.” That’s where the cash-distribution fee is.
3. Your reclaim. If 22.0% was taken, decide whether the difference is worth reclaiming. If you don’t, don’t expect to credit it in the US.
4. Your record date. The ADS record date decides who’s charged the distribution fee.

That’s a checklist, not tax advice. A tax professional can tell you whether a reclaim is worth the effort for your position.

7. Frequently asked questions

What tax does Korea take from an ADR dividend?

22.0%, including local income tax, or the treaty rate for your country of residence. For US residents, KB Financial’s annual report gives 16.5% or 11.0%, including local income surtax, and the treaty reserves the lower rate for corporations holding at least 10% of the voting stock.

Why was my Korean ADR dividend taxed at 22%?

Usually because evidence of your tax residence was not in place by the time of payment. Korean law generally allows a refund of the excess if you can show a lower rate applied, subject to conditions.

Does the depositary charge a fee on Korean ADR dividends?

It depends on the company. SK Hynix’s agreement allows up to $5.00 per 100 ADSs, KB Financial’s up to $0.02 per ADS, and KT’s annual report lists none.

Can I claim a US credit for the full 22%?

Not if part of it was refundable. Under the 2025 IRS instructions, only the amount you legally owe under the treaty is creditable, whether or not you apply for the refund.

Are Korean ADR dividends qualified dividends?

They can be. SK hynix says its ADSs count as readily tradable on an established US market while they’re listed on Nasdaq, and the company must also not be a passive foreign investment company.

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Disclaimer: This article is for general informational purposes only and does not constitute investment, legal or tax advice. It draws on SK hynix’s prospectus dated July 9, 2026, annual reports on Form 20-F filed by KB Financial and KT in April 2026, and the IRS Instructions for Form 1116 (2025). Treaty rates, fees and IRS thresholds change, and individual circumstances differ. Confirm the current terms and consult a qualified tax professional before you act.

Last updated: November 6, 2026