How to Use an ISA Account to Keep Up to KRW 2 Million in Investment Gains Tax-Free
Many people do not pay much attention to the tax withheld when they receive deposit interest or dividend income. In a regular account, interest and dividend income is usually subject to 15.4% withholding tax. An ISA, or Individual Savings Account, is a tax-saving account that lets you hold and manage multiple financial products in one account to reduce that tax. The key point is that the tax calculation changes not only based on “what you buy,” but also on “which account you use to invest.”
| Section | Key summary |
|---|---|
| Introduction | In a regular account, interest and dividend income is usually subject to 15.4% withholding tax |
| An ISA is more like a tax umbrella | Short key point |
| Tax-free limit and tax differences | A general-type ISA applies tax exemption to up to KRW 2 million of net profit |
| Brokerage, trust, or discretionary type: choose your purpose first | Depending on how it is managed, an ISA is divided into brokerage, trust, and discretionary types |
| Risks still differ by product inside an ISA | The ISA account itself does not protect all of your money |
| Conditions to check before opening an account | Each person can hold only one ISA across all financial institutions |
| Who can benefit most from an ISA | Short key point |
An ISA is more like a tax umbrella
An ISA can hold a range of products, including deposits, funds, ETFs, and domestically listed stocks. At maturity, gains and losses generated inside the account are combined, and tax is calculated on the net profit. So if one product produces a loss and another produces a gain, the two are netted together, creating an offsetting effect that looks at the actual remaining profit.
In a regular account, taxation may feel separate for each product, but an ISA is different because it is assessed at the account level. Because of this structure, the tax-saving effect can be greater for people who want to hold volatile ETFs, funds, or dividend products over the long term.
Tax-free limit and tax differences
A general-type ISA applies tax exemption to up to KRW 2 million of net profit. For low-income and farmer/fisher ISA types, the tax-free limit can increase to KRW 4 million if the requirements are met. Net profit above the tax-free limit is subject to separate taxation at 9.9%, rather than the standard 15.4%. In other words, the advantage of an ISA is that it combines “zero tax up to a certain amount” with “a lower tax rate on the excess.”
| Category | Regular account | General-type ISA example |
|---|---|---|
| Assumed gain | KRW 5 million | KRW 5 million |
| Tax-free portion | None | KRW 2 million |
| Taxable amount | Entire KRW 5 million | Excess KRW 3 million |
| Example tax rate | 15.4% | 9.9% |
| Example tax | KRW 770,000 | KRW 297,000 |
Brokerage, trust, or discretionary type: choose your purpose first
Depending on how it is managed, an ISA is divided into brokerage, trust, and discretionary types. If you want to buy and sell ETFs or domestic stocks directly, the brokerage type is appropriate. If you want stable management centered on deposits or predefined products, you can consider the trust type. If you want to leave management to a financial institution, you can choose the discretionary type, but in that case you should check fees and investment performance where possible.
| Type | Best suited for | What to check |
|---|---|---|
| Brokerage type | When you want to choose ETFs, domestic stocks, and similar products yourself | Possibility of investment product losses and your trading habits |
| Trust type | When you want management centered on deposits or predefined products | Range of available products; if subject to depositor protection, the KRW 100 million combined principal and interest limit |
| Discretionary type | When direct management feels burdensome and you want to delegate it | Fees, management method, and performance criteria |
Risks still differ by product inside an ISA
The ISA account itself does not protect all of your money. If a deposit-type product is covered by depositor protection, you can look at the KRW 100 million limit per person and per financial institution, including principal and interest. However, ETFs, funds, and stock-type products are exposed to price fluctuations and the possibility of principal loss.
Conditions to check before opening an account
- Each person can hold only one ISA across all financial institutions.
- Check the annual contribution limit and the total contribution limit.
- If you close the account early before satisfying the mandatory holding period, tax benefits may be reduced or recaptured.
- For deposits, check the protection conditions separately; for funds, ETFs, and stocks, check the possibility of principal loss.
- If you are considering transferring assets to a pension account after maturity, check the transfer deadline and tax credit conditions in advance.
Who can benefit most from an ISA
An ISA is better suited to people who want to manage money they can leave invested for several years or longer within a tax-saving structure, rather than those seeking quick profits through short-term trading. The effect of offsetting gains and losses becomes more meaningful for people who manage products where gains and losses can be mixed, such as ETFs, dividends, and funds, than for people who only receive a small amount of deposit interest.
However, having tax benefits does not mean it is wise to put all your money into an ISA. Liquidity is more important for living expenses, emergency funds, and money you plan to use within 1 year. It is safer to put only surplus funds that you will not need for at least 3 years into an ISA.