Stock and Fund Income Through ISA Accounts Fully Tax-Exempt

MoEF, Announcement of '2021 Tax Law Amendment' on the 26th

[Asia Economy Reporter Jang Sehee] From January 2023, all profits generated from investments in listed stocks and public stock-type funds through Individual Savings Accounts (ISA) will be completely tax-exempt.

This was included in the '2021 Tax Law Amendment' announced by the government on the 26th. As investments through brokerage-type (securities-type) ISAs become more advantageous from a tax perspective, it is expected that the use of ISAs for asset management will increase.

An ISA is a system that allows various financial products such as deposits, funds, and DLS (Derivative Linked Securities) to be managed together in a single account. The annual contribution limit is 20 million KRW, with a total maximum of 100 million KRW. The mandatory subscription period is three years, and it can include deposits, savings, ETFs (Exchange Traded Funds), and funds.

According to this amendment, from 2023, taxation will begin on financial investment income exceeding 50 million KRW, but if investments are made through an ISA account, no tax will be imposed on profits from transferring domestic listed stocks or redeeming domestic stock-type public funds.

All gains and losses generated within the ISA account are aggregated only within the ISA account and are not combined with other financial income for taxation. The tax-exempt and separate taxation benefits of the ISA account are applied separately from the basic deduction for financial investment income.

Other income such as deposits, savings, derivative-linked securities, bond-type funds, and dividends from listed stocks remain tax-exempt up to a net profit of 2 million KRW (4 million KRW for the basic livelihood security and farming/fishing types), and amounts exceeding the tax-exempt limit are subject to separate taxation at 9%.

Meanwhile, the financial investment industry is actively welcoming this amendment.

The Korea Financial Investment Association explained, "Recently, the domestic capital market has been experiencing growth, with stock indices reaching all-time highs," and added, "With 10 million individual investors, investment is becoming a common financial management tool for the public."