The government is revising the Individual Savings Account (ISA) system to attract funds to the domestic stock market, which will also reduce benefits for existing account holders. This change, along with alterations to real estate tax policies, has led to growing dissatisfaction among taxpayers who invested and disposed of assets based on government announcements.
According to the Ministry of Finance, the proposed '2026 Tax Reform Plan' includes the introduction of a 'Productive Finance ISA' that focuses benefits on domestic stock market investments.
The Productive Finance ISA will offer tax exemptions on interest and dividend income and long-term management benefits, but it will eliminate the carryover of unused contribution limits from the general ISA and limit the contract period to a maximum of five years.
Currently, the general ISA allows for an annual contribution limit of 20 million won, with unused amounts carried over to the following year. This flexibility allows account holders to save up limits for future use when they have available funds. However, under the new plan, any unused limits will expire each year, reducing the operational flexibility previously enjoyed by existing account holders.
The policy regarding the capital gains tax on multiple home owners has also been revised. The government had emphasized that there would be no further extensions after the suspension of the tax increase in May, but just three months later, it has decided to lower the tax rate again to increase housing supply.
This reform does not completely eliminate the tax increase as in the past. A certain level of additional tax rates will still apply, making it more favorable for those who sold homes before May 9. However, for taxpayers who rushed to sell or decided to hold based on the government's previous termination announcement, the change in policy just months later alters the basis for their decision-making.
The capital gains tax affects not only the decision to sell a home but also the timing of the sale, the price, loan repayments, and future financial planning. Even if the tax rates are not identical, the government's reversal on its commitment to not ease the burden has raised concerns about the predictability of its policies.
More important than the tax reform itself is how well it protects the choices of existing account holders and taxpayers. Sufficient transitional measures should be established to recognize existing products and asset disposals made under previous government policies to minimize confusion arising from these policy changes.
* This article has been translated by AI.
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