Exclusive Account for Public Offering Pooled Investment Funds, Tax Separation Benefits Worth Noting

Year-End 'Last Chance Tax Saving' Products Are

[Asia Economy Reporter Ji-hwan Park] Every year at the end of the year, attention is drawn to tax-saving products that have been forgotten throughout the year.

Among the tax-saving products that investors can consider during the remaining week until the end of the year, the most representative are pension savings and Individual Retirement Pension (IRP), which offer tax credit benefits during year-end tax settlement. For pension savings and IRP, the maximum annual contribution amount eligible for tax credit is up to 7 million KRW, allowing a tax credit benefit of 1,155,000 KRW at a rate of 16.5%. For those aged 50 and above, contributions can be made up to 9 million KRW, enabling a refund of 1,485,000 KRW. Since tax benefits are applied based on the total amount paid in a year, investors can make a lump-sum payment by the end of the year.

It is also worth considering the "Public Offering Investment Trust Exclusive Account," which offers separate taxation benefits if opened by the end of this year. The government is temporarily providing a 15.4% separate tax rate on dividend income generated from investment trust exclusive accounts until next year to promote investment in social overhead capital (SOC) projects. This account can only be opened by individual investors, and each person can open one account across all financial institutions with a maximum subscription of 100 million KRW. Since the account must be held for at least one year to receive the separate tax benefit, the account must be opened by the end of this month. This benefit is especially significant for those subject to comprehensive financial income taxation, whose financial income from interest and dividends exceeds 20 million KRW annually. Comprehensive financial income taxpayers are subject to a maximum tax rate of 49.5% on their total income, including interest, dividends, earned income, and business income. For example, if a taxpayer subject to comprehensive taxation invests 100 million KRW through this account and receives 6 million KRW in dividends, the tax payable according to the tax rate can be reduced from 66,000 KRW to a maximum of 2,046,000 KRW annually.

Regarding the brokerage-type ISA, it is advised to open an account within this year. Even if the annual contribution limit of 20 million KRW is not fully used, the remaining limit can be carried over to the next year. If you join the brokerage-type ISA for the first time in 2023, when the financial investment income tax is introduced, the investment limit eligible for tax exemption on capital gains is limited to 20 million KRW. However, if you open an account by the end of this year, you can secure a total of 60 million KRW (20 million KRW for this year + 20 million KRW for next year + 20 million KRW for 2023).