"Terminated at a Loss… Only Those Who Trusted Look Like Fools" Public Backlash Grows

Confusion is mounting among investors as the government backpedals and decides to completely reexamine its plan to reduce tax benefits for Individual Savings Accounts (ISAs) following a strong backlash.

Some investors who trusted the government's announcement and terminated their existing ISAs are voicing anger, stating they have even lost their tax-exempt benefits.

Inquiries regarding the termination and re-enrollment of ISA accounts have been flooding major securities firms and banks recently.

The tax code revision proposals announced by the government on the 3rd previously included measures to partially scale back tax benefits for ISAs.

Currently, once the mandatory 3-year subscription period passes, account holders can continuously extend the maturity while receiving tax exemptions and tax-deferral benefits. However, the revision plan proposed capping the maximum maturity of ISAs at 5 years by allowing only a maximum 2-year extension on top of the basic 3-year maturity.

The regulation was set to apply to accounts newly joined or extended starting next year, while excluding existing subscribers who had already set their maturities for a long period.

The carryover of annual contribution limits was also set to be abolished.

Currently, if an account holder fails to fill the annual limit of 20 million won, the remaining limit can be carried over to the following year for additional contributions. Under the proposed changes, unused limits would have expired at the end of each year.

As investor backlash grew over the reduced benefits, President Lee Jae-myung ordered a complete reexamination of the revision plan, changing the situation once again.

The problem is that some investors had already terminated their ISAs in the meantime.

To avoid the 5-year maturity limit taking effect next year, they terminated their existing accounts in advance and intended to create new accounts within this year to secure long-term maturities.

ISAs require fulfilling a minimum 3-year mandatory subscription period to receive tax benefits, and premature termination before meeting the 3 years can result in losing the tax-exempt benefits they would have otherwise received.

ISAs allow profits and losses from investment products to be aggregated, providing tax exemptions of up to 2 million won for the general type and up to 400 million won for the low-income type, with a 9.9% separate taxation applied to amounts exceeding those thresholds.

ISAs have been particularly popular for their significant tax-saving effects because overseas index ETFs listed domestically can be subject to a 15.4% tax on trading gains in regular accounts.

With the ISA revision plan entering a full reexamination, investor confusion is expected to persist until the final direction of the tax code revision is confirmed.

(Reported by Kim Minjeong | Video by Seo Byeong-wook | Graphics by Lee Su-min | Produced by SBS Digital News)
※ Please note: This article was translated by AI and may contain errors.