(※ As of September 2026 · Last updated 2026-09-02 · The government draft was finalised at the Cabinet meeting on 1 September 2026 and still has to clear the National Assembly)
Update, 2 September 2026 The bill this article originally covered, announced on 3 August, tightened the existing general ISA in three places: no more carry-forward of unused annual room, a five-year cap on the total contract period, and a sign-up deadline of end-2029. All three were dropped from the final government draft confirmed at the Cabinet meeting on 1 September. The general ISA keeps its contract terms, its carry-forward and its open-ended availability. The text below has been rewritten to reflect that outcome.
When the Korean government released its 2026 Tax Reform Bill on 3 August 2026, most headlines focused on the brand-new account it creates, the Productive Finance ISA. But for anyone already holding an ISA in Korea, the bigger news was elsewhere: the rules on the existing general ISA were to get tighter in three places. A month later, the government withdrew all three before the bill even reached the National Assembly.
Here is the bottom line: the final government draft concentrates benefits on domestic investment while leaving the existing general ISA alone. The end of carry-forward, the five-year cap and the end-2029 deadline flagged in August have all been withdrawn, so the general ISA works exactly as it does today. The new Productive Finance ISA would exempt interest and dividend income from tax entirely, with no cap, and its investments are locked to domestic assets. Its terms actually improved from the draft: the maximum contract period cap and the sunset date were both removed. All of this is still a draft the government has sent to the National Assembly, not settled law.
Where this stands: an announcement is not a government draft
When you read Korean tax news, the first thing to check is not the numbers but the stage. Korean tax law normally moves through these steps.
- Government announcement: the Ministry of Finance and Economy publishes the bill after the Tax Development Deliberation Committee. That was 3 August.
- Public notice and inter-ministry consultation: comments are collected during the legislative notice period, 4 to 20 August, and the bill gets amended. The three ISA restrictions disappeared at this stage.
- Cabinet approval (government draft finalised): the final government draft was confirmed at the Cabinet meeting on 1 September. This is where we are now.
- National Assembly review: eleven tax law amendment bills go to the Assembly by 3 September for review in the regular session. Bills are frequently amended again, or passed only in part.
- Enforcement Decree, then in force: the details left as “and others” in the statute get fixed here, and only then can you actually open the account.
This ISA reform is a case of a bill changing substantially at stage two. The general ISA restrictions in the Ministry of Finance and Economy 2026 Tax Reform Bill of 3 August are absent from the finalised government draft of 1 September. Such reversals are not unusual: the “Domestic Investment ISA” in the 2024 tax bill never cleared the Assembly and simply disappeared. The Super ISA reform direction we covered in May was, at that point, an idea without a confirmed name, and it has narrowed into its current shape through the announcement and the government draft.
Every figure below therefore describes the government draft now before the Assembly, not settled law. It can change again during review.
If you already hold an ISA: three things to check
What the August bill went after was never the tax-free allowance or the eligibility rules, but how you use the allowance and how long you can keep the account. All three items were dropped from the final draft, so what existing holders need to check now is not what changes but what stays.
1. Carry-forward of unused room stays
The general ISA’s annual limit is calculated as KRW 20 million × (1 + years since opening) − cumulative contributions, where the years-since-opening term is capped at four. In plain terms, if you do not use this year’s KRW 20 million, the unused room rolls into next year. That is why someone in their third year can put in up to KRW 60 million at once.
The August bill would have deleted that formula and left a flat KRW 20 million per year. For anyone who uses their ISA by dropping in lump sums whenever cash appears, that was the change that stung most. The provision is absent from the government draft, so carry-forward continues as before. There is no need to rebuild your contribution schedule.
2. The contract period stays uncapped
A general ISA only requires a three-year minimum, and there is no limit on renewals, so effectively you can run the account indefinitely. The August bill would have kept the initial three-year term but allowed renewal only up to a five-year total. That unsettled anyone treating the ISA as a ten- or twenty-year tax-free wrapper. The government draft imposes no maximum contract period, so long-term plans can continue unchanged.
3. No sign-up deadline appears
The current general ISA has no sign-up deadline. The August bill would have added one: accounts opened through 31 December 2029. The government draft attaches no sunset date to the general ISA. The identical deadline that had been placed on the new Productive Finance ISA was deleted as well.
Side by side, the three items look like this.
| Item | Bill of 3 August | Government draft of 1 September | What it means if you already hold one |
|---|---|---|---|
| Annual carry-forward | Abolished (from 2027 contributions) | Carry-forward retained as today | Contribute exactly as you do now |
| Total contract period | Capped at five years | Minimum three years, no maximum | No need to revise renewal plans |
| Sign-up deadline | 31 December 2029 added | No sunset date | No calendar pressure to open one |
In short, the three items that kept existing holders on edge through August were settled before the bill even reached the Assembly. The general ISA retains its tax-free allowance (KRW 2 million for the general type, KRW 4 million for the low-income and farming/fishing type), its eligibility rules, its contribution mechanics and its contract terms.
What the new Productive Finance ISA actually is
The Productive Finance ISA is a dedicated account designed to steer money into Korea’s domestic capital market, and the reward for that is substantial. Where the general ISA exempts only KRW 2 million (KRW 4 million for the low-income type) and taxes the excess at 9% separately (9.9% once local income tax is added), the Productive Finance ISA would make interest and dividend income entirely tax-free, with no cap.
Its terms were reworked on the way to the government draft. The ten-year maximum contract period in the August bill was removed, leaving it uncapped like the general ISA; carry-forward of unused annual room was allowed; and the end-2029 sunset date was deleted. For the youth type, dual enrolment with the Youth Future Savings account is now permitted, where the August bill forced a choice between the two.
Set side by side, the three accounts differ sharply.
| Item | General ISA (unchanged) | Productive Finance ISA (new) | Youth type (new) |
|---|---|---|---|
| Eligibility | Residents 19+ (employees 15+) | Residents 19+ (employees 15+) | Youth aged 15 to 34 (military service counted back, up to 6 years) (gross salary ≤ KRW 75m) |
| Tax benefit | Interest/dividends tax-free within cap (9% on the excess) Cap: KRW 2m general, KRW 4m low-income | Interest/dividends fully tax-free | Fully tax-free + 10% income deduction on contributions |
| Eligible investments | Deposits, domestic stocks, funds, etc. | Domestic stocks, domestic equity funds, National Growth Fund, BDCs, etc. | Same as Productive Finance ISA |
| Contribution limit | KRW 20m/year, KRW 100m total (carry-forward allowed) | KRW 20m/year, KRW 200m total (carry-forward allowed) | Same as Productive Finance ISA |
| Contract period | Minimum 3 years (no maximum) | Minimum 3 years (no maximum) | Same as Productive Finance ISA |
| Available until | No sunset date | No sunset date | No sunset date |
For all three, anyone who was subject to comprehensive financial income taxation even once in the previous three tax years is excluded. People often shorten this to “you must not exceed KRW 20 million a year,” but the actual test is whether you were caught in any one of the last three years.
The “Youth ISA” is not a separate account either. Its tax exemption, eligible investments and contribution limits are identical to the Productive Finance ISA, with a youth perk on top: a 10% income deduction on contributions. The age range is 15 to 34, and up to six years of military service is deducted from your age for this test. That deduction applies where gross salary is KRW 75 million or less (comprehensive income KRW 63 million or less), and is disallowed at year-end settlement for any year in which gross salary exceeds KRW 85 million (comprehensive income KRW 70 million).
The conditions attached are strict. If you withdraw more than your principal within three years, the account is treated as terminated and income tax is clawed back on the interest and dividends you received tax-free. For youth subscribers, withdrawing principal also triggers recovery of the income deduction. Discretionary, trust and brokerage types are all permitted, and unlike the general ISA, which is one account per person, you may hold several Productive Finance ISAs across those three types. In addition, maturing funds from products such as the general ISA, the Youth Leap Account and the Youth Future Savings can be moved into a Productive Finance ISA in one lump sum, up to KRW 200 million.
The link to pension accounts widens too. Today, rolling matured ISA funds into a pension account earns an extra tax-credit allowance of 10% of the transferred amount (capped at KRW 3 million); the amendment adds 10% of any Productive Finance ISA transfer on top. If you are already running a pension savings account alongside an IRP, it is worth sketching out where maturing money would go.
What to do right now
Since none of this has passed, it is not the moment to move or close accounts. There are still things worth checking.
If you invest mainly in Korean stocks
The gap is significant. If you have already blown past the KRW 2 million exemption in your general ISA and are paying 9% separate taxation, the Productive Finance ISA (fully tax-free, KRW 200 million total, no maximum contract period) would be the better home. Whether a general ISA and a Productive Finance ISA can be held at the same time is not addressed in the published materials. Holding several Productive Finance ISAs is allowed, but stacking the two schemes is a separate question left to the Enforcement Decree. If it is allowed, the two together would take KRW 40 million a year. Either way, actual sign-ups only become possible once the law is in force.
If you invest mainly in overseas ETFs listed in Korea
The Productive Finance ISA’s eligible investments are domestic assets: Korean listed stocks, domestic equity funds, the National Growth Fund and BDCs. Products holding overseas assets, such as a US index ETF listed on the Korean exchange, appear to fall outside that list. If you have been filling your ISA with those, you can simply carry on with your general ISA. Neither carry-forward nor the contract period is being touched, so the contingency plan you drew up in August can be shelved. That said, the final boundary will be set by the Enforcement Decree.
If you are still deciding whether to open one
With the sign-up deadline gone, there is no calendar forcing your hand. Opening early still helps, though, because the ISA contribution limit grows with each year the account has been open. If you have not settled on an account type yet, start by working through the differences between brokerage, trust and discretionary ISAs.
What changed over the course of a month
The August bill was built on a trade: an unusually generous exemption for money parked long-term in domestic assets, paid for by pulling in the slack in the general ISA that people actually used flexibly. The government draft removed the second half. Only the expansion is left.
- The general ISA is unchanged, from its exemption cap and eligibility through to carry-forward, contract length and the absence of a sunset date.
- The Productive Finance ISA offers full exemption, KRW 200 million, no maximum contract period and no sunset date, but is domestic-assets only.
- The youth type is not a separate account, just the same account with an income deduction attached, and it can now be held alongside the Youth Future Savings account.
- All of it is a government draft awaiting National Assembly review, with the Productive Finance ISA targeted to take effect on 1 January 2027 if it passes.
As the 2024 Domestic Investment ISA showed, proposals becoming law unchanged is the exception rather than the rule. This time half of it changed at the government stage, before the Assembly saw it at all. The job right now is not to move accounts, but to keep contributing as you have been until the Assembly finishes its review.
What I make of this bill
The intent was clear enough from the start: channelling money into the domestic market through the Productive Finance ISA. What disappointed me was the price attached to it, namely trimming the general ISA’s benefits, above all the renewal period, and that part is now gone. Watching a bill shift this much in a month reinforces the same lesson: reacting to announcement-day numbers by rearranging your accounts is rarely worth it.
Related reading
- ISA Account Types: 3 Essential Differences
- Korea Super ISA 2026 Reform Proposals: the discussion this reform grew out of
This article is for informational purposes only and does not constitute investment advice or tax consultation. Its contents reflect the government tax reform draft confirmed at the Cabinet meeting on 1 September 2026, which may be amended during National Assembly review or may not take effect at all. Please confirm the final rules with the Ministry of Finance and Economy and the National Tax Service before making any decision.
