"Terminated My Account at a Loss… Feeling Fooled for Trusting It" Public Backlash Grows

The government's initial plan to scale back tax benefits for Individual Savings Accounts (ISAs), followed by a sudden decision to completely reexamine the plan amid mounting backlash, is causing deep confusion among investors.

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

Major securities firms and banks have been flooded with inquiries regarding the cancellation and re-enrollment of ISA accounts.

The tax revision plan announced by the government on the 3rd previously included measures to curtail certain tax benefits for ISAs.

Currently, after the mandatory 3-year subscription period passes, account holders can continuously extend their maturity dates while receiving tax exemptions and tax-deferral benefits. However, the revision plan sought to limit ISA maturities to a maximum of 5 years, allowing only a 2-year extension on top of the initial 3-year term.

The rule was set to apply to accounts newly joined or extended starting next year, while excluding existing subscribers who had already set long-term maturities.

The plan also decided to abolish the carryover of annual contribution limits.

Currently, if subscribers fail to fill the 20 million won annual limit, they can carry the remaining limit over to the next year and contribute extra. Under the proposal, unused limits would have expired at the end of the year.

As investor backlash over the reduced benefits intensified, President Lee Jae-myung ordered a complete reexamination of the revision plan, turning the situation around.

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

To avoid having their maturities capped at 5 years starting next year, they canceled their existing accounts in advance with plans to open new ones within this year and lock in long-term maturities.

To qualify for tax benefits under an ISA, subscribers must fulfill a minimum mandatory subscription period of 3 years. Terminating the account early before fulfilling the 3 years means losing the tax-exempt benefits they would have otherwise received.

ISAs allow investment gains and losses to be combined. General accounts receive tax exemptions of up to 2 million won, and community-type accounts up to 4 million won, with a separate 9.9% taxation rate applied to amounts exceeding those limits.

In particular, ISAs have been extremely popular for tax-saving purposes because overseas index ETFs listed domestically can be subject to a 15.4% tax on trading profits in regular accounts.

With the ISA revision plan now under total reexamination, confusion among investors 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 Sumin | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.