![An advertisement for a securities firm's ISA product is displayed on a billboard at a mart in Seoul. [Yonhap]](https://wimg.heraldcorp.com/news/cms/2026/08/17/rcv.YNA.20260812.PYH2026081214320001300_P1.jpg)
The government is reviewing targeted adjustments to the annual contribution carryover and contract period rules for individual savings accounts (ISA) as part of its legislative notice process for the tax reform package.
On real estate taxation, the government appears set to submit its proposal to the National Assembly largely intact — preserving the core framework on deduction methods and tax rates — while leaving detailed debate to lawmakers. However, non-residency exemption criteria, which can be set by presidential decree without Assembly approval, are expected to be expanded with additional specific cases.
According to officials familiar with the matter, the government is reviewing necessary revisions to key issues in the tax reform plan based on feedback received during the legislative notice period.
Particularly under active consideration are changes to two provisions that drew the most investor criticism: the abolition of the annual contribution carryover for ISAs and the imposition of a contract period limit.
Under the current reform proposal, the government introduced a new "productive finance ISA" product while eliminating the annual contribution carryover and capping the contribution period at 10 years. At the same time, it applied a carryover ban and a five-year contribution limit to existing ISAs as well.
Critics argued the changes would disadvantage self-employed workers and freelancers with irregular incomes, and could undermine the benefits of long-term investment and compound returns.
In response, the government is now positively considering restoring the carryover of unused contribution limits and allowing contract periods to be extended indefinitely, as under the previous rules.
If adopted, the adjustments would apply equally to both existing ISAs and the new productive finance ISA.
However, the productive finance ISA would still differ from the standard ISA in contribution limits and tax benefits. Under the government's proposal, the total contribution cap for a standard ISA is 100 million won ($70,700), while the productive finance ISA allows up to 200 million won. The productive finance ISA also offers greater tax-free treatment on investment returns.
A separate request to include overseas equity ETFs among eligible investments for the productive finance ISA is understood to be unlikely to be accepted. The government intends to maintain the restriction limiting investments to domestic stocks, domestic equity funds and national growth funds.
This reflects the fact that the productive finance ISA is designed to stimulate the domestic capital market, and that investors can hold both a standard ISA and a productive finance ISA simultaneously.
On real estate taxation, feedback has centered on concerns about higher tax burdens, issues surrounding jointly held property by married couples, and non-residency exemption criteria.
The government appears increasingly likely to submit the real estate tax amendment to the Assembly without altering the core framework — including deduction methods and tax rates — leaving specific disputes to be resolved through the legislative process.
Within the Democratic Party of Korea, a range of views has emerged. Some Democratic Party lawmakers, particularly those representing constituencies in the greater Seoul metropolitan area, have reportedly called for keeping the tax burden cap at 150 percent to cushion the impact of higher comprehensive real estate tax rates.
The government's proposal would raise the tax burden cap from the current 150 percent to 200 percent to reflect the effect of the higher comprehensive real estate tax rate.
On jointly owned property by married couples, the government is maintaining its existing position that taxpayers can choose whichever option is more advantageous after weighing the applicable tax benefits.
Couples who jointly own a single home and apply for the single-household exemption can receive the same basic comprehensive real estate tax deduction as sole owners — currently 1.2 billion won, rising to 1.4 billion won under the reform.
However, since non-residency exemption criteria can be set by presidential decree, the government is reviewing whether to add some of the cases raised during the legislative notice period.
The current proposal recognizes non-residency periods of up to three years as qualifying residency when a homeowner relocates due to unavoidable circumstances — such as schooling, a job change, illness, a child's school transfer, an overseas stay or caring for elderly parents. Construction periods arising from redevelopment or reconstruction would also count as residency.
Additional feedback has been submitted on how broadly to extend exemptions to individual cases such as caring for grandchildren or temporarily relocating to rent in a preferred school district, raising the possibility that further specific exemption grounds will be added to the presidential decree.
On share-price suppression measures, the government is reviewing partial supplements to its existing proposal, while calls have also emerged for the measures to be discussed in tandem with pending amendments to the Commercial Act and the Capital Markets Act in the Assembly.
The government is understood to be considering modifications such as extending the valuation period under tax law or capping inheritance tax liability so it does not exceed the value of the inherited estate.
Under the government's proposal, a company is presumed to have engaged in share-price suppression if its price-to-book ratio (PBR) falls in the bottom 25 percent of its Kospi sector or the bottom 10 percent of the Kosdaq for 12 of the most recent 13 half-year periods, or if its share price has fallen more than 30 percent below its three-year average alongside actions such as dual listings or exchangeable bond issuances over the past year. Companies meeting these criteria would face a valuation period extension and a minimum 30 percent premium applied to the assessed value.
Market participants and politicians have raised concerns that the criteria could be circumvented by managing PBR figures for only select periods, potentially undermining the measure's effectiveness.
Some have also argued that share-price suppression should not be addressed solely through inheritance and gift tax valuation rules, but should be tackled alongside shareholder protection and capital market reforms through the Commercial Act and the Capital Markets Act.
A Capital Markets Act amendment introduced by Democratic Party lawmaker Kim Hyeon-jeong in March would require listed companies with a PBR below 1 for two consecutive years to prepare and disclose a corporate value improvement plan. A separate Capital Markets Act amendment she introduced in April would mandate disclosure of the issuer's position and directors' interests in tender offers, and require matters with a material impact on shareholder interests to be included in major disclosure reports.
While the government's share-price suppression measure aims to use tax law to prevent artificial undervaluation for the purpose of reducing inheritance and gift tax burdens, the proposed Capital Markets Act amendments can be seen as a complementary capital market approach — one that seeks fair share valuation through enhanced corporate value and shareholder protection.
The government plans to gather public feedback through the legislative notice period ending Thursday, discuss a revised draft at vice-ministerial and Cabinet meetings, and submit the bill to the Assembly in early September.
A Ministry of Economy and Finance official said the government would "listen as broadly as possible to a wide range of voices and, on that basis, carefully deliberate to identify reasonable supplementary measures that faithfully serve the purpose of the reform."
oskymoon@heraldcorp.com
