[2026 Growth Strategy] New 'Productive Finance ISA' Introduced with Increased Tax Benefits to Promote Long-Term Stock Investment

2026 Economic Growth Strategy Unveiled
Transforming Capital Flows Through 'Productive Finance'

The Lee Jaemyung administration, which has emphasized productive finance, will introduce the "Productive Finance Individual Savings Account (ISA)" to encourage long-term investment in the stock market. In addition to the "Youth ISA" targeting young people with incomes below a certain threshold, the government will also launch the "National Growth ISA," which offers significantly expanded tax benefits compared to the existing ISA, which provides a 2 million won tax exemption.

On the afternoon of January 9, the Ministry of Economy and Finance, the Financial Services Commission, and other relevant ministries released the "2026 Economic Growth Strategy," which includes these measures. Under the banner of productive finance, the government aims to fundamentally transform capital flows and expand global demand by increasing support for advanced industries and promoting long-term domestic stock investment.

Launch of the National Growth Fund... 30 Trillion Won This Year

First, the government will provide support for the National Growth Fund, focusing on artificial intelligence (AI), semiconductors, and other advanced industries, with a total scale of 30 trillion won this year. The previously announced 600 billion won National Participation Fund is scheduled to launch in the second or third quarter. The government will provide subordinated financial reinforcement covering up to 20% of losses, as well as income tax deductions for long-term investments and reduced tax rates on dividend income.

For corporate venture capital, the proportion of external funds allowed per fund will be raised from the current 40% to 50%, and the cap on overseas investments will be increased from 20% to 30% of total assets, thereby enhancing operational autonomy. In addition, when financial institutions provide loans to venture companies or policy funds in productive sectors, the allowable limit for recognizing loan loss reserves as deductible expenses will also be raised.

"Realizing the Korea Premium" - Enhanced Tax Benefits for ISA

Measures have also been prepared to encourage long-term investment in the stock market. The goal is to shed the long-standing "Korea Discount" label and achieve what is known as the "Korea Premium." The newly established Productive Finance ISA will focus on strengthening tax benefits for investments in domestic stocks and funds, the National Growth Fund, and Business Development Companies (BDC). An ISA is a tax-advantaged financial product that allows individuals to manage deposits, funds, and stocks in a single account.

Youth with total annual income of 75 million won or less will be eligible to open a Youth ISA, which offers special tax treatment on interest and dividend income, as well as income tax deductions on contributions. However, duplicate enrollment in the Youth Future Savings, National Growth ISA, and Youth ISA is not permitted. The newly introduced National Growth ISA offers significantly expanded tax benefits compared to the existing ISA, providing a 2 million won tax exemption and a 9.9% separate tax rate on amounts exceeding that threshold.

In addition, the government will prepare tax rationalization measures in the first half of the year in connection with amendments to the Commercial Act. The acquisition, cancellation, and disposal of treasury shares will be unified as capital transactions rather than asset transactions, thereby enhancing the legal consistency of regulations related to the cancellation and disposal of treasury shares by corporations. Currently, gains from the disposal of treasury shares are recognized as taxable income, but this will change so that they are no longer included. The government will also revise related laws, such as the Income Tax Act and the Inheritance and Gift Tax Act, regarding the acquisition and disposal of treasury shares. Furthermore, the government is considering extending the "Joint Response Team for the Eradication of Stock Price Manipulation," which was launched last year, and will continue to pursue swift investigations into unfair trading practices.

Pursuing Inclusion in the MSCI Developed Markets Index... 'Korean Won Internationalization Roadmap' to Be Prepared in the First Half

This year's economic growth strategy also includes detailed plans to achieve the long-held goal of Korea's stock market being included in the Morgan Stanley Capital International (MSCI) Developed Markets Index, such as opening the foreign exchange market 24 hours a day. The government plans to dramatically improve foreign investors' access to the Korean won and prepare a "Korean Won Internationalization Roadmap" in the first half of the year to expand demand for offshore won-denominated financial products.

This is also a measure to fulfill President Lee Jaemyung's campaign pledge to achieve inclusion in the MSCI Developed Markets Index. The MSCI Developed Markets Index is significant because it serves as a benchmark for asset allocation by global institutional investors, pension funds, and passive funds. However, despite Korea's stock market size and corporate competitiveness being on par with developed countries, it is currently included in the Emerging Markets (EM) Index alongside Taiwan and India. Previous administrations have repeatedly failed in their attempts to achieve inclusion due to institutional shortcomings and the closed nature of the foreign exchange market.

Accordingly, the current plan includes not only extending domestic foreign exchange market hours to 24 hours, but also introducing a global settlement structure that allows global custodian banks to open and manage settlement accounts on behalf of individual funds under certain conditions, transitioning to an LEI identification system and streamlining document submission in the LEI issuance process, providing incentives to promote the expansion of dividend procedures, allowing additional post-trade reporting of conditional stock transfer agreements (RSUs) in over-the-counter transactions, and listing FTSE Korea Index futures on ICE Futures, among other detailed measures.