[2026 Growth Strategy] New ISA Introduced to Promote Long-Term Domestic Stock Investment... Sovereign Wealth Fund to Launch with 20 Trillion Won

2026 Economic Growth Strategy by the Ministry of Economy and Finance
Launch of Youth-Exclusive ISA: Tax Benefits for Contributions Alone
Long-Term Investment in National Participation Fund
'Double Benefits' for Contributions and Dividends
Kore

The government is set to launch a new type of Individual Savings Account (ISA) with significantly expanded tax benefits, called the "Productive Finance ISA," to encourage long-term domestic stock investment. Additionally, it will introduce the National Growth Fund and Business Development Company (BDC) funds, which offer "double benefits" from contributions to dividends. Furthermore, a "Korean-style sovereign wealth fund," which will actively invest in domestic and global industries and assets to generate returns, will be established with an initial capital of 20 trillion won.

On January 9, the Ministry of Economy and Finance announced its "2026 Economic Growth Strategy," which includes these initiatives. The government plans to create a Productive Finance ISA that provides tax benefits for investments in policy funds such as the 600 billion won National Participation National Growth Fund and BDCs, which primarily invest in ventures and innovative companies.

Tax Benefits for Long-Term Domestic Stock Investment: Introduction of Productive Finance ISA

The Productive Finance ISA will be available in two types. The Youth ISA targets young people with an annual income of 75 million won or less, offering not only special taxation on interest and dividend income but also income tax deductions on contributions. By investing in the fund, individuals receive tax benefits simply by contributing, similar to a pension savings plan. This is designed to support mid- to long-term asset building for young people starting their careers. The National Growth ISA, on the other hand, offers significantly greater tax incentives than the existing ISA (which provides a 2 million won tax exemption and a 9.9% separate tax on the excess), focusing on encouraging the general public to channel long-term funds into the domestic stock market.

Lee Hyungil, Vice Minister of Economy and Finance, stated, "The National Growth ISA will provide much greater tax benefits compared to the existing ISA, and the Youth ISA will allow not only special taxation on interest and dividend income but also income tax deductions for contributions. The eligible assets will include domestic stocks, domestic equity funds, the National Growth Fund, and BDCs, ensuring that funds are directed into productive financial sectors."

Regarding account structure, the general public can subscribe to both the existing ISA and the National Growth ISA simultaneously, but the Youth ISA and the National Growth ISA cannot be held together. The Youth ISA will have an age requirement (up to 34 years old). The specific scale and details of the tax benefits for each account will be finalized and announced at a later date.

National Participation Fund Launch in Q2 or Q3: 'Double' Benefits for Contributions and Dividends

The government will apply a lower, separate tax rate than the current 15.4% to dividend income generated from the National Participation Fund. Long-term investors in the National Participation Fund will receive tax benefits both on the capital contributed and on the dividends earned from investment performance. The fund will focus on advanced industries such as artificial intelligence (AI) and semiconductors, with a total size of 600 billion won. It is scheduled for launch in the second or third quarter of next year. Additionally, the government will provide subordinated fiscal support for up to 20% of losses. Vice Minister Lee explained, "The National Participation Fund is designed to allow individuals to participate directly in policy finance while also providing incentives for long-term investment. The structure mitigates some risk through tax incentives and fiscal support."

Sovereign Wealth Fund to Launch with 20 Trillion Won, Focused on Domestic Advanced Industries

The Korean-style sovereign wealth fund will be established with an initial capital of 20 trillion won. The initial capital will be funded through in-kind contributions of government-held stocks and stocks paid in lieu of taxes, while maintaining a government ownership ratio of at least 50% in public institutions receiving government investment. Vice Minister Lee stated, "Since stocks paid in lieu of taxes cannot be immediately converted into cash, dividends will serve as the main financial resource, and the resulting cash flow will be used as initial investment capital to begin operations."

Vice Minister Lee also noted, "While the Korea Investment Corporation (KIC) focuses on overseas investment based on foreign reserves, the new sovereign wealth fund will invest both domestically and internationally, with a greater emphasis on fostering domestic advanced industries." Unlike the KIC, which is limited to overseas investments with entrusted foreign reserves, the sovereign wealth fund aims to actively generate investment returns by investing in both domestic and global industries and assets.

KOSDAQ Venture Fund Income Deduction Limit Set at 20 Million Won Per Year

Improvements to the KOSDAQ system will also be pursued to revitalize the capital market. The priority allocation ratio for public offerings in KOSDAQ venture funds will be raised from 25% to 30%, and the income deduction limit for investments (10% of the investment amount) will be changed from a cumulative 30 million won per person to 20 million won per year, enhancing the sustainability of the benefits. By shifting from a cumulative to an annual limit, the government aims to encourage repeated inflows of funds into KOSDAQ venture companies each year, rather than eliminating incentives once the limit is reached.

In addition, a customized technology-special listing system will be introduced, and the priority allocation ratio for public offerings in KOSDAQ venture funds will be increased from 25% to 30%. Reflecting criticism that the existing technology-special listing system evaluates bio, IT, and deep tech companies using the same criteria, the government plans to refine the process by varying the composition of review panels and evaluation indicators according to industry sector.

To expand institutional demand, the KOSDAQ index will be incorporated into the benchmark for evaluating pension fund management performance. This addresses the lack of incentive for pension funds to increase their exposure to the more volatile KOSDAQ, given their current focus on KOSPI-based benchmarks. The specific allocation ratio will be announced in January.