From This Year, Subscription Conditions Greatly Relaxed
Maturity Shortened from 5 Years to 3 Years
Eligibility Set at 19 Years and Older
General Type Tax-Free Up to 2 Million Won
First Launch of Securities Firms and Brokerage-Type ISA
[Asia Economy Reporter Park Jihwan] Starting this year, the subscription conditions for Individual Savings Accounts (ISA) have been significantly relaxed. The maturity period has been shortened from the previous 5 years to 3 years, and the eligibility criteria have been lowered from those with income to anyone aged 19 or older. From the 25th, it will also be possible to trade individual stocks through the investment brokerage-type ISA, drawing attention to how much participation from investors aiming for both stock investment and tax benefits will increase.
According to the financial investment industry on the 23rd, from this year, the eligibility for opening an ISA account has been expanded from farmers, fishermen, and those with income to domestic residents aged 19 or older. Previously, having income was a mandatory requirement for subscription, but now even university students or full-time homemakers who do not earn money can subscribe. Those aged 15 to 18 can also subscribe if they have earned income. ISA is called a ‘universal account’ because it allows investment in various products such as savings deposits, funds, Exchange-Traded Funds (ETF), and Equity-Linked Securities (ELS) with a single account. Up to 20 million KRW can be deposited annually, and tax benefits are provided on interest, dividends, and capital gains up to 2 million KRW for the general type (4 million KRW for the low-income/farmer-fisherman type).
The maturity period has also been reduced from the previous 5 years or more to 3 years or more. The mandatory subscription period to receive tax benefits has decreased by 2 years, partially resolving the disadvantage of funds being locked in for a long time. The annual deposit limit of 20 million KRW can now be carried over. For example, if only 10 million KRW was deposited this year, the remaining 10 million KRW can be added next year, allowing a total deposit of up to 30 million KRW.
Especially notable this year is that domestic listed stocks have been allowed as investment targets for ISA. Until now, only financial products such as funds and deposits could be invested in through ISA accounts, but with the soon-to-be-launched brokerage-type ISA, trading of individual domestic stock items will also be possible. Samsung Securities and NH Investment & Securities plan to be the first in the industry to launch the investment brokerage-type ISA product on the 25th, and Mirae Asset Daewoo, KB Securities, Hana Financial Investment, and Korea Investment & Securities are preparing to launch next month.
Currently, capital gains from domestic stock trading are tax-exempt, and profits are not combined with gains or losses from other financial products within the account. However, capital losses from stocks are combined with gains or losses from other financial products, and combined gains up to 2 million KRW are tax-exempt. For example, if there is a 3 million KRW gain from other financial products and a 1 million KRW loss from stock trading, the combined profit is 2 million KRW, so no tax is due. Gains exceeding the tax-exempt limit are subject to a lower tax rate (9.9%) than the existing dividend income tax (15.4%), making ISA highly useful from a tax-saving perspective. By placing individual stocks for long-term investment in an ISA account, investors can enjoy both profits from stock price appreciation and tax benefits simultaneously.
The investment method is also simple. The method of investing in stocks through an ISA account is the same as the existing stock trading method. The ISA account is used like a general stock brokerage account. A financial investment industry official said, "You can think of the ISA account as the deposit account needed for stock trading," adding, "Since there is no difference from the existing stock trading method and tax benefits are added through product subscription, we expect investor interest to increase significantly."
Securities firms are also actively working behind the scenes to attract subscribers. Samsung Securities is conducting an event called ‘The New ISA, The Tough Guy is Coming!’ offering a cash reward worth 20,000 KRW to the first 1,000 people before the launch of the brokerage-type ISA. Participants must apply for the event by the 24th, open a ‘non-face-to-face brokerage-type ISA’ online by the 31st of next month, and maintain a balance by purchasing domestic stocks worth at least 100,000 KRW. NH Investment & Securities will also provide free stock trading commissions for domestic listed stocks traded through brokerage-type ISA accounts subscribed from the 25th until the end of this year.
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