From Next Year, Students and Housewives Without Income Can Also Join ISA

[Asia Economy Reporter Kwangho Lee] Starting next year, the entry barrier for Individual Savings Accounts (ISA) is expected to be lowered. The government is reviewing institutional improvement plans that include expanding the eligibility for subscription, shortening the mandatory subscription period, and allowing flexible operation of the annual limit of 20 million KRW.

According to the Ministry of Economy and Finance on the 6th, the tax law amendment to be announced this month will include a revision plan to expand tax benefits for ISA under the Restriction of Special Taxation Act.

ISA, launched in 2016, is a "tax-saving account." It allows investment in various financial products such as deposits, savings, funds, and Equity-Linked Securities (ELS) within a single account, and high-income earners can also subscribe, which initially attracted popularity. However, it has gradually been overlooked due to restrictions such as an annual investment limit of 20 million KRW, a mandatory subscription period of 5 years, and a tax exemption limit of 2 million KRW (4 million KRW for the low-income type).

The government plans to increase ISA tax benefits as it introduces the 'Financial Investment Income Tax,' which taxes combined gains and losses from financial products. Accordingly, the eligibility for ISA subscription will be expanded to all domestic residents aged 19 and above. Previously, income was required to subscribe, but now any adult with a domestic address can subscribe.

The current mandatory subscription period of 5 years is expected to be shortened. Although ISA allows mid-term withdrawal within the principal amount paid, there was criticism that the 5-year account maintenance requirement for tax benefits reduced flexibility in fund management. A reduction to 1-2 years is currently being discussed.

The investment limit, currently set at 20 million KRW per year, is also under consideration for expansion. For example, if only 10 million KRW is deposited in the first year, leaving 10 million KRW unused, the next year’s limit of 20 million KRW could be added to the remaining 10 million KRW, allowing a total of 30 million KRW to be deposited.

Stocks will be included in ISA investment targets, which were previously limited to deposits, savings, and funds. However, the tax exemption limit of 2 million KRW is likely to be maintained as before.

This content was produced with the assistance of AI translation services.