Intermediated ISA Attracts 300 Billion KRW Monthly

39x Increase in Subscribers Since Launch
Rising Demand for Direct Stock Investment
Attractive Tax Exemption Benefits Highlighted

[Asia Economy Reporter Park Ji-hwan] Subscribers and investment funds are rapidly flocking to brokerage-type ISA (Individual Savings Account) products managed by securities firms. The popularity is attributed to the ability to invest in stocks and simultaneously enjoy tax exemption benefits.

According to the Korea Financial Investment Association on the 31st, as of the end of April, the number of customers subscribed to brokerage-type ISA products from seven securities companies reached 582,197, an increase of 352,054 (151%) compared to 231,943 in the previous month. Compared to 14,950 subscribers at the end of February when the products were first launched by Samsung Securities and NH Investment & Securities, the number of subscribers increased 38.9 times in two months. During the same period, the amount of investment also surged sharply. From about 6.2 billion KRW at the end of February, it rose to 314.6 billion KRW at the end of March and 688.8 billion KRW at the end of April, with more than 300 billion KRW flowing in each month.

The explosive growth of brokerage-type ISA products is interpreted as due to the recent stock market boom, which has increased demand from general investors to directly invest in stocks, along with the availability of tax exemption benefits. Brokerage-type ISA is characterized by allowing direct investment in domestic listed stocks in addition to funds (including ETFs), derivative-linked securities (ELS, DLS), and REITs.

Direct stock investment is not possible in existing discretionary or trust-type ISAs. Brokerage-type ISA offers the same tax exemption benefits as existing ISAs, providing up to 2 million KRW of tax-free income on taxable income such as overseas fund profits and dividends during the subscription period. Gains exceeding the tax-free limit are subject to a lower tax rate (9.9%) than the existing dividend income tax (15.4%).

In particular, brokerage-type ISA calculates taxable income by offsetting losses and gains from various financial products, so if losses are incurred from stock investments, the tax burden is reduced compared to general securities accounts.

The securities industry has entered a marketing war to attract brokerage-type ISA subscribers. Shinhan Financial Investment is currently running an event offering lifetime free online commission fees until the end of next month to commemorate the launch of brokerage-type ISA. NH Investment & Securities has announced an event offering full exemption of securities brokerage commissions and related institution fees for one year if subscribed by the end of the year.

It is expected that the brokerage-type ISA market will grow further when small and medium-sized securities firms join in the second half of the year. Yuanta Securities is planning to launch a brokerage-type ISA product targeting July. Hanwha Investment & Securities and Kiwoom Securities also plan to launch theirs in August and the second half of the year, respectively.

However, there are precautions when opening an account, especially when switching from existing ISA accounts such as discretionary types. A financial industry official said, "Only one ISA account can be opened at all financial institutions, so when subscribing to a brokerage-type ISA, the existing account must be closed," adding, "In this case, if the account is terminated early before maturity, the tax benefits received so far may have to be returned."

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