With the launch of the Public-participation Public Growth Fund a week away, analysts in the securities industry said on the 15th that, given the tax-benefit structure, the investment bracket up to 30 million won offers the highest deduction rate.
The government presented the Public-participation Public Growth Fund as a way to share performance with individual investors while rolling out a 150 trillion won Public Growth Fund over the next five years. Sales of this fund begin on the 22nd, and the current goal is to raise 720 billion won, combining 600 billion won in public offering proceeds with 120 billion won in fiscal funds.
The investment targets of the Public Growth Fund are divided into 60% primary-purpose investments and the remaining 40% discretionary. Primary-purpose investments include advanced strategic industry corporations in 12 fields such as artificial intelligence (AI), semiconductors, robots, and biotech, and their value chains.
Kang Jin-hyeok, a researcher at Shinhan Investment & Securities, said, "Investments in KOSPI corporations within the advanced strategic industry institutional sector are recognized as primary-purpose investments up to 10%, and discretionary investments do not distinguish among KOSPI, KOSDAQ, or unlisted companies, so depending on the manager's discretion, up to 50% can be invested in KOSPI corporations, enhancing stability."
Shinhan Investment & Securities cited as advantages of the Public Growth Fund: ◇ the government covering up to 20% of losses ◇ up to 40% income tax deduction possible ◇ separate taxation on dividend income.
In particular, to receive the income deduction, the investor must not have fallen under the comprehensive taxation on financial income in the past three years and must subscribe to the product through a dedicated account.
Researcher Kang said, "Although not a requirement, for tax benefits, there is an incentive to subscribe only if the overall income deduction cap of 25 million won is not already filled," adding, "Looking at the tax-benefit structure, the investment bracket up to 30 million won has the highest deduction rate."
Therefore, while deposits can be made up to 70 million won to maximize the deduction amount, 30 million won appears optimal to maximize the return from the deduction.
Kang explained, "In particular, from the perspective that the higher the taxable base, the higher the return from the deduction, there is an incentive for high-income earners seeking income deductions to subscribe."
For separate taxation on dividend income, the effect is analyzed to be as powerful in tax savings as with existing Individual Savings Accounts (ISA).
Kang said, "Not only due to a simple tax rate cut, but also because it can avoid health insurance premium increases and avoid comprehensive taxation on financial income, individual preference is high."
In conclusion, popularity is expected to be high among investors with a high taxable base for whom income deductions are more valuable, and among those who have already filled all tax-advantaged accounts such as ISA, individual retirement pensions (IRP), and pension savings but are seeking additional tax benefits.
Kang analyzed, "In particular, the stronger the optimistic view without expecting a 30%–40% or greater correction in the domestic market within the next five years, the more likely investors are to consider subscribing."
There are, however, risk factors. First, the public-participation fund is designed as a closed-end structure with a five-year maturity, making early redemption impossible. Also, because its structure is similar to past New Deal funds, critics note that it has the structural limitations of a policy fund, and with high allocations to unlisted and technology-exception listings, profitability is a concern.