The government has withdrawn its proposed revision to the ISA (Individual Comprehensive Asset Management Account), which had sparked widespread dissatisfaction among retail investors by reducing existing benefits. The original benefits have been restored as before.
On the 1st, the government finalized its legislative proposal for tax law revisions concerning the ISA and other matters during a State Council meeting. As a result, the ISA will retain all its original benefits. This follows President Lee Jae-myung's directive to re-examine the ISA revision plan amid growing investor backlash.
Previously, the government had announced in its tax reform proposal that it would introduce a new "Productive Finance ISA" while simultaneously limiting the maturity of existing ISAs to five years and eliminating the feature allowing unused portions of the annual 20 million won contribution limit to be carried over to the following year.
Launched in 2016 to help ordinary citizens build assets, the ISA gained popularity by enabling investments in various financial products such as time deposits, savings accounts, funds, and stocks within a single account. The general ISA type offered tax exemption on investment profits up to 2 million won, while the citizen-focused type allowed up to 4 million won in tax-exempt profits. Profits exceeding these limits were taxed at a low rate of 9.9%, earning it the nickname "all-purpose tax-saving account."
However, following the announcement of the revision plan, investors who had enjoyed tax benefits faced continuous criticism over the reduction of ISA perks. The two most significant concerns were the removal of unlimited maturity extensions and the elimination of the contribution limit carryover feature.
Previously, once the mandatory three-year participation period was completed, investors could extend the ISA maturity indefinitely. This allowed them to continuously defer tax payments by extending maturities, thereby enjoying the benefit of deferred taxation.
Under the revision plan, however, the ISA maturity would be limited to a maximum of five years (three years base plus up to two additional years). Starting next year, taxes would need to be settled every five years, and accounts would have to be re-established.
The feature allowing unused contribution limits to be carried over to the following year was also eliminated. Previously, if investors failed to fully utilize their annual 20 million won limit, they could carry forward the remaining amount to the next year, providing an advantage for adding larger sums when funds became available.
The government's alternative proposal, the Productive Finance ISA, also failed to attract investor interest. Although it offered full tax exemption on interest and dividends and allowed maturity extensions up to a total of ten years, investment targets were restricted to domestic stocks, domestic stock-type funds, and National Growth Funds.
The withdrawal of the ISA revision plan was intended to simultaneously achieve two goals: revitalizing the domestic stock market and increasing national assets. However, due to rising investor dissatisfaction, the government reportedly made a sudden decision to restore the original benefits.
Nevertheless, the Productive Finance ISA will proceed as planned with expanded benefits. The maximum contract period limit (previously 10 years) has been removed, and the carryover of unused contribution limits is now permitted. Additionally, the sunset clause originally set for December 31, 2029, has been deleted.
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