South Korea Tightens ISA Rules: 5-Year Limit, No Contribution Carry-Over from 2026

South Korea's popular tax-advantaged Individual Savings Account (ISA) is set for significant changes starting in 2026, introducing a maximum maturity period of five years and eliminating the carry-over of unused annual contribution limits. These adjustments are expected to complicate financial planning for individual investors seeking tax benefits.

Under the revised regulations, new general ISA accounts opened from January 2026 will have a mandatory minimum term of three years, extendable up to a total of five years. Currently, ISAs can be extended indefinitely, allowing investors to defer taxes on investment income like interest and dividends. The Ministry of Economy and Finance stated the five-year cap aims to "normalize taxation" by limiting excessive tax deferral benefits.

Furthermore, the provision allowing investors to carry forward unused annual contribution limits will be abolished. Previously, an investor who contributed less than the annual limit (20 million won) could add the remaining amount to the next year's limit. For example, contributing 5 million won one year would allow a 35 million won contribution the following year (20 million new limit + 15 million carry-over). This flexibility is being removed, with the ministry citing a desire to "encourage lump-sum investment" rather than gradual accumulation.

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There is a side that gives excessive benefits through indefinite tax deferral, and it is in the direction of normalizing taxation.

These changes necessitate strategic adjustments for investors. Those interested in investing in domestic or overseas ETFs through their ISAs can avoid the new five-year maturity limit by extending their existing or newly opened general ISA accounts before the end of 2024. However, the elimination of the contribution limit carry-over will apply to all accounts, making it advisable to contribute the full 20 million won annually.

For investors seeking a dedicated domestic investment portfolio, the introduction of a new 'Productive Financial ISA' offers an alternative. This new account type allows for a higher annual contribution limit of 20 million won (totaling 200 million won) and provides full tax exemption on interest and dividend income. Its maturity period can also be extended up to a total of 10 years, offering greater flexibility for long-term domestic investments.

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The intention is to encourage lump-sum investment.