ISA Account: How to Grow Investment Profits Up to 2 Million KRW Tax-Free
Have you ever paid attention to the tax on your deposit interest or fund returns? In a regular account, interest and dividends are subject to a 15.4% withholding (14% income tax + 1.4% local tax). But if you run those same products inside an 'ISA (Individual Savings Account),' profits are taxed at zero up to a certain amount. Today, we'll break down exactly what an ISA is and how much you can save, in concrete numbers. (This is for reference only and is not a recommendation to invest in any specific product.)
What is an ISA? One 'tax umbrella' holding multiple products
An ISA is a tax-saving account that lets you hold and manage multiple financial products together in one account, including deposits, funds (including ETFs), and domestic listed stocks. The key is that 'the profits earned within the account' are bundled together when calculating tax. At maturity, gains and losses are combined (netted), and the net profit is tax-free up to a certain amount, with the excess subject to 9.9% separate taxation. The tax rate itself is also lower than the 15.4% of a regular account.
Tax-free limit: 2 million KRW for the standard type, 4 million KRW for the low-income/farmer-fisher type
At ISA maturity, the net profit within the account (gains minus losses) is completely tax-free up to 2 million KRW for the standard type and up to 4 million KRW for the low-income type and farmer-fisher type. The excess is taxed at only 9.9% (separate taxation), not 15.4%. Because it is separately taxed, a big advantage is that it is also excluded from the aggregate taxation of financial income.
- Standard type: anyone aged 19 or older (or aged 15-19 with earned income in the previous year) → 2 million KRW tax-free
- Low-income type: total salary of 50 million KRW or less, or comprehensive income of 38 million KRW or less → 4 million KRW tax-free
- Farmer-fisher type: farmers/fishers with comprehensive income of 38 million KRW or less → 4 million KRW tax-free
- Common limits: contributions of 20 million KRW per year (unused allowance can be carried over), up to 100 million KRW total / mandatory 3-year holding period
By the numbers: the same 5 million KRW profit, this much difference in tax
Suppose you grew your money in a regular account over 3 years and earned 5 million KRW in interest and dividends. The tax would be 5 million KRW × 15.4% = 770,000 KRW. What if you earned the same profit in an ISA (standard type)? First, 2 million KRW is tax-free, and only the remaining 3 million KRW is taxed at 9.9%, so 3 million KRW × 9.9% = 297,000 KRW. The tax drops from 770,000 KRW to about 297,000 KRW, saving you more than 470,000 KRW. With the low-income type, 4 million KRW is tax-free, so the tax falls to just 1 million KRW × 9.9% = 99,000 KRW.
Brokerage type, trust type, discretionary type: what's the difference?
ISAs are divided into three kinds depending on how they're managed. If you want to buy and sell ETFs and domestic stocks yourself, choose the 'brokerage type'; if you want to grow your money safely with deposits, choose the 'trust type'; and if you want it managed for you, choose the 'discretionary type,' which charges a fee. Each person can open only one ISA across all financial companies combined, so choose according to your purpose.
- Decide your investment style: direct trading (brokerage type) vs. deposit-focused (trust type) vs. delegation (discretionary type)
- Choose the type: check the total-salary/income requirements to see whether you qualify for the low-income/farmer-fisher type (documentation required)
- Open the account: open one account per person via a securities firm or bank app (if you already hold another ISA, you must close it first)
- Contribute and manage: diversify within the 20 million KRW annual limit — don't concentrate in one product
- Manage maturity: tax exemption applies after the mandatory 3-year holding period is met; also consider transferring maturity funds to a pension account
Move maturity funds to a pension account and get a 'tax credit' too
If you move the amount received after ISA maturity into a pension savings account or IRP within 60 days, you can receive an additional tax credit on 10% of the transferred amount (up to 3 million KRW). This benefit is given separately from the general tax-credit limit for pension accounts (a combined 9 million KRW per year for pension savings + IRP, at a credit rate of 13.2-16.5%). The structure lets you grow money tax-free and then claim a tax credit once more at maturity.
In summary, the ISA is a tax-saving account that lets you grow deposits, ETFs, and domestic stocks together under a 'tax umbrella,' with profits tax-free up to 2 million KRW (4 million for the low-income type), 9.9% separate taxation on the excess, and gain-loss netting on top. There are conditions—one account per person and a mandatory 3-year holding period—so start with spare money you can leave untouched for 3 years or more, using diversified investing. This article is intended to provide general information; be sure to verify the detailed requirements and tax rates with your financial company and the National Tax Service at the time you sign up.