The ISA's advantage is usually given as "9.9%, taxed separately". Yet what most often decides the bill is not the rate but how the taxable amount is arrived at. An ordinary account ignores losses; an ISA counts after losses and after fees.
1. The set-off has an «order». Same asset type, then dividends, then interest (Decree art. 93-4(10)). Not one lump.
2. Fees and charges come off as well. Article 93-4(11) — a step an ordinary account does not have.
3. Capital losses on listed Korean shares count, even though gains on them are not taxed (Rule art. 42-3(1)).
4. It is all worked out once, on the closing date — so a loss early on reduces a gain years later.
There is an order
The Decree does not stop at "deduct". It sets out three steps.
For an account with a gain of 3m won, a loss of 5m won, dividends of 2m won, interest of 1m won and 200,000 won of fees, the amount that can be taxed is 800,000 won.
Why the order matters: it decides which income survives. Dividends are reduced before interest, so the larger the loss, the more it is interest that is left standing. Either way the rate is the same — but whatever survives is what uses up the tax-free cap.
Put the same year in an ordinary account and the bill is 924,000 won: 15.4% on the entire 6m won, with no regard for the loss or the fees. In the ISA it is nothing.
Which losses count
Decree art. 93-4(9) sets the scope, and the word "shares" inside it is defined again by Rule art. 42-3. The answer only appears once you follow all three levels.
The striking one is the capital loss on listed shares. Gains on listed Korean shares are not taxed at all for ordinary holders — and yet the losses are allowed into the set-off. The asymmetry runs in the taxpayer's favour. It was introduced at the end of 2024 and amended again in 2026.
Where the same stock was bought more than once, cost is worked out on a moving-average basis (Rule art. 42-3(2)). Shares held by a large shareholder are excluded, listed or not.
Fees come off too
Paragraph (11) provides that the total of interest and dividends is the figure after the loss set-off, less the various fees and charges.
But this only reduces tax for someone above the cap; inside it the bill is zero either way. Above the cap, 200,000 won of fees cuts the tax by 19,800 won (200,000 won × 9.9%).
Questions that remain
What if the loss is bigger than the income?
The taxable total is nil, and so is the tax. But there is no carry-forward and no set-off against another account — the statute provides for neither. One account, settled once, as at the closing date.
Which losses are excluded?
The proviso to paragraph (9) excludes three: losses outside dividend income, losses outside income from a collective investment scheme, and losses outside income from an exchange-traded note. In short, losses arising where there was never any tax to begin with.
Does something sold years ago still count?
Yes. Article 91-18(5) computes the total as at the closing date, so an account run for several years has its whole history settled in one calculation.
Sources
Restriction of Special Taxation Act art. 91-18(5) — the total is computed as at the closing date, after deducting losses.
Its Enforcement Decree art. 93-4 — (9) the scope of losses and the three exclusions, (10) the three-step order, (11) fees and charges.
Its Enforcement Rule art. 42-3 — (1) which shares' capital losses count, and the large-shareholder carve-out, (2) the moving-average cost basis, (3).
Act, Decree and Rule were opened and read in turn on the Korean Law Information Centre. The Decree says only "shares prescribed by Ministerial Rule", so the Rule is where listed-company shares finally appears.
Where to check
To put a number on it, the ISA tax-saving calculator takes losses and fees. The basics are in the ISA guide, and how ETFs are taxed in ETF tax.
