The government said on the 3rd it will scrap the "carryover of annual contribution limits" for individual savings accounts (ISAs) starting next year. ISAs are used as tax-saving accounts when investing in U.S. Standard & Poor's (S&P) 500 and Nasdaq 100 exchange-traded funds (ETFs). You can contribute up to 20 million won a year for up to five years.
The Ministry of Finance and Economy announced a "2026 tax reform plan" that includes these measures. For ISAs, revenue from investments is tax-free up to 2 million won (4 million won for low-income accounts), and gains above that are taxed separately at a low 9.9%, making them a key tax-saving account.
Another advantage of ISAs is the carryover of contribution limits. For example, if you contributed 5 million won this year, next year you could contribute 35 million won by adding the 15 million won unpaid portion from this year (20 million minus 5 million) to the newly granted 20 million won limit. This lets investors flexibly time their contributions, but the government plans to remove this feature. On the reason for abolishing the carryover, an official at the ministry said it was "to encourage the original purpose of ISAs, which is long-term, installment-based investing." The plan would apply to new ISAs as well as existing ones.
At the same time, the ministry plans to introduce a productive finance ISA. Unlike ISAs that can invest in domestically listed overseas ETFs, it will be limited to domestic stocks, domestic equity funds, the Public Growth Fund, and business development companies (BDC). You can invest up to 20 million won a year for a total of 10 years, and the annual contribution limit cannot be carried over. Interest and dividends are fully tax-exempt.
Because domestic stocks pay small dividends, most revenue comes from capital gains, which are tax-exempt even in a regular account, leading to expectations that the tax benefits will not be large. If a person age 34 or younger with a total salary of 75 million won or less signs up for a productive finance ISA, interest and dividends are fully tax-exempt, and 10% of deposits are deductible from income.