MoEF to Abolish Financial Investment Tax and Increase ISA Tax-Free Limit 2.5 Times...Pursued Through Legislator Bill

The government will abolish the Financial Investment Income Tax (hereinafter referred to as Fin-Invest Tax) and double the contribution limit of the Individual Savings Account (ISA), while increasing the tax-exempt limit by 2.5 times. Those subject to comprehensive financial income taxation will also be allowed to subscribe to ISA.

The Ministry of Economy and Finance announced on the 31st that it will promote amendments to the Restriction of Special Taxation Act and the Income Tax Act, including these measures, as follow-up actions to the '2024 Economic Policy Direction' and the public discussion forum on livelihood issues.

This amendment bill will be proposed as a member's bill and discussed at the February extraordinary session of the National Assembly.

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First, the Financial Investment Income Tax will be abolished while maintaining the current capital gains tax system.

Also, the ISA contribution limit will be expanded from KRW 20 million per year (total KRW 100 million) to KRW 40 million per year (total KRW 200 million), and the tax-exempt limit will be increased from KRW 2 million (KRW 4 million for low-income and farming/fishing households) to KRW 5 million (KRW 10 million for low-income and farming/fishing households).

A 'Domestic Investment ISA' investing in domestic stocks and domestic stock-type funds will be newly established, and those subject to comprehensive financial income taxation, who had been restricted from subscribing to ISA, will be allowed to join. Accordingly, even those whose annual interest and dividend income exceeds KRW 20 million will be able to subscribe to ISA.

Reflecting opinions raised by national representatives and others at the public discussion forum, a tax-exempt limit of KRW 10 million (KRW 20 million for low-income and farming/fishing households), which is twice that of the general ISA, will be applied to the Domestic Investment ISA.

In addition, through legal amendments, measures included in this year's Economic Policy Direction and the 'Housing Supply Expansion and Construction Industry Support Plan' such as ▲one-year extension of the temporary investment tax credit application period ▲temporary increase in the tax credit rate for increased general R&D investment ▲expansion of credit card income deduction ▲individual consumption tax reduction when replacing old vehicles ▲expansion of tax support for unsold houses in non-capital regions will also be pursued.