Guides to Korea's ISA usually stop at one line: tax-free up to 4m won or 2m won, then 9.9% on the rest. True enough — but those two numbers do not tell you what you save. What the statute counts is not the profit in the account but interest and dividends after losses and fees have come off.
1. The tax is not levied on the profit. Losses in the same account come off first (Decree art. 93-4(10)), and so do fees and charges (art. 93-4(11)).
2. Nothing at all is paid up to the cap. Only the excess is taxed, at 9.9% against 15.4% in an ordinary account — 5.5 points lower.
3. And it stays out of global income. In a year of large financial income that can matter more than the rate.
4. The annual allowance is not "20m won a year". The statute writes it cumulatively, so skipping a year loses nothing.
Enter the cap that applies to you and the profit the account earned. Add losses and fees and those are applied too.
It counts what the statute counts. Losses in the same account come off the interest and dividends in the order the Decree sets (art. 93-4(10)), then fees and charges (art. 93-4(11)), and only then is the tax-free cap applied. The excess is taxed at 9.9% and stays out of global income (Act art. 91-18(1)). The ordinary account it is compared against allows neither losses nor fees, so 15.4% falls on the whole profit. How each product is taxed, when the account closes, and the provider's own fees are not included. An estimate.
What gets taxed is different in the first place
An ordinary account taxes each product separately: 15.4% on deposit interest, 15.4% on fund income. A loss elsewhere in the same year is simply not seen.
An ISA looks at the account as one thing, once. Article 91-18(5) puts it this way: the total of interest and dividends is computed as at the date the contract ends, taking the income from the account's assets and deducting the losses from it.
So the starting point is not "profit" but "income after losses". The order and the scope of that deduction are set out in the loss set-off article.
Past the cap the saving does not shrink
It is easy to read the cap as the end of the benefit. It is not. Up to the cap the whole tax is saved; above it the two rates keep diverging at 5.5 points.
| Profit in the account | 4m won | 6m won |
|---|---|---|
| Ordinary account | 616,000 won | 924,000 won |
| ISA, 4m won band | nothing | 198,000 won |
| Saved | 616,000 won | 726,000 won |
| Act art. 91-18(1) and (2). Up to the 4m won cap, the whole 616,000 won an ordinary account would charge is saved. In the 2m won band the saving up to the cap is 308,000 won, and on 6m won of profit the tax is 396,000 won. | ||
The annual allowance is written cumulatively
The formula in article 91-18(3)5 reads:
20m won × [1 + years elapsed since joining (capped at four)] − the amount already paid in
That is not "20m won each year" but "the running total you could have paid, less what you have". Skip a year and the room does not disappear — you can use it later.
It does stop, though. From the fifth year the allowance no longer grows and the 100m won total is the end. Interest, dividends and reinvested amounts arising inside the account do not count against it (Decree art. 93-4(12)), so growth does not eat the allowance.
Questions that remain
Which cap applies to me?
It is set as at the day you join or renew, on the «previous» tax year's income (art. 91-18(2)): total salary of 50m won or less, or global income of 38m won or less, gives 4m won. Last year's income, not this year's — and the tax office confirms it to the provider (art. 91-18(9)).
Why does staying out of global income matter?
Once financial income passes 20m won a year it is aggregated with your other income at progressive rates. Interest and dividends inside an ISA do not join that total (art. 91-18(1)). Near that threshold this can be worth more than the rate difference — see the global taxation of financial income.
Do listed Korean shares save tax here?
Gains on them are not taxed anyway, so on that side there is nothing to save. But dividends are sheltered, and losses on selling them do count in the set-off. The asymmetry is unpacked in the loss set-off article.
What if the real figure differs?
This calculator answers only for interest and dividends. A real account also involves how each product is taxed, when you close it, and the provider's fees. Note too that tax is withheld once, on the closing date (art. 91-18(6)) — not as gains arise.
Sources
Restriction of Special Taxation Act art. 91-18 — (1) rate and exclusion from global income, (2) tax-free caps, (3) account conditions and payment limits, (5) loss deduction, (6) withholding on the closing date.
Its Enforcement Decree art. 93-4 — (10) the order of deduction, (11) fees and charges, (12) what does not count against the limit, (13) withdrawals come out of principal first.
The articles were read directly on the Korean Law Information Centre. The annual-allowance formula is not in the running text: it sits in the article as an image, and was taken from its alt text.
The calculator was checked against the same model — 420 combinations of cap, profit, losses and fees, all matching.
Where to check
Before you open one — it is one account per person, so switching provider means a transfer procedure. What you may hold, and what it costs, vary by provider.
The basics are in the ISA guide, the set-off in loss set-off, and what happens at maturity in maturity and the pension transfer. The pension side continues in pension savings and IRP.
