ISA is a retail investment arrangement with tax benefits. Deposit, installment savings, fund, and a broad range of investments can be held within the arrangement. In other words, it is similar to a fund product financial companies sell only that its portfolio is arranged and managed by financial consumers themselves.
Main purpose of the introduction of ISA is to help financial consumers to accumulate wealth and savings by enabling them to easily manage assets all at once with a single account. Moreover, ISA is an efficient savings instrument at a time of low interest rate and aging society just like now.
ISA has relatively higher deposit limit compared to other savings products (KRW 20 million per year). It is a highly attractive investment instrument in a sense that tax is levied only on net earnings unlike other products.
Anyone with earned income in the previous year is applicable for ISA. However, those with large amount of financial asset who paid aggregate taxation on financing income are not qualified to open an ISA.
Assuming yearly yield rate at 4%, those who deposited KRW 20 million every year will reap net earning of KRW 12 million after 5 years. In such case, he or she is subject to 46.4% tax benefit and will have his or her tax deducted by KRW 780,000 won. You must hold the account for at least 5 years to receive tax benefits.
The MOSF is scheduled to submit the revised tax law to the National Assembly within September. If the bill passed the assembly within the latter half of this year, ISA will be available for financial consumers early next year.