KOSPI targets 5,000 points... Launching a "tax incentive bomb" into the capital market

The government is expected to officially introduce a large-scale tax support plan in the near future aimed at activating the domestic capital market. Accordingly, investors in citizen participation policy funds will be offered tax credits or income tax deduction benefits. For dividend income generated by funds, a low tax rate separation taxation is also expected to be applied.

The Ministry of Finance and Economy plans to release the “2026 Economic Growth Strategy” centered around this plan. This strategy is the first official economic vision since the government’s restructuring to the Ministry of Finance and Economy, with a clear intention to directly inject funds into the stock market, attracting the attention of the investment industry and investors. Its core content involves providing tax incentives to citizens investing in national growth funds or corporate growth collective investment schemes (BDCs) through policy fund investments.

The plan is to apply tax credits or income tax deductions to the investment portion for policy fund investors and to offer 5~9% separation taxation on dividend income. This is expected to be designed to match or exceed the 9% dividend income separation tax benefit provided during the Moon Jae-in government’s “New Deal Fund” period. The government is studying design schemes to minimize the regressivity of the deductions and prevent excessive benefits from concentrating on high-income groups.

Meanwhile, a new model of Individual Savings Accounts (ISA), focused on domestic asset investments, will also be promoted simultaneously. The new ISA plan will include public policy funds such as the Citizen Growth Fund as investment targets, aiming to generate synergistic capital inflows. Currently, the tax exemption limit for ISAs is 2 million KRW for the basic type and 4 million KRW for the civilian type, but discussions are underway to raise this to over 5 million KRW or to expand it to full tax exemption within the contribution limit.

In addition, to encourage investment in risk enterprises, the income tax deduction limit for the Kosdaq risk fund, which has played a major role as an institutional investor, is very likely to be expanded. Currently, a maximum 10% income tax deduction is available on investments of 30 million KRW, and industry advocates are calling for raising this cap to at least 5 million KRW. This is part of the strategy to actively channel funds into the Kosdaq market.

Furthermore, the government will work to improve investment convenience for foreign investors to attract global capital. The foreign exchange market will be expanded and reorganized for 24-hour operation, and efforts will be made to activate foreigner comprehensive accounts, allowing foreigners to directly invest in Korean stocks through local securities firms without opening a domestic securities account. This move, which considers inclusion in the MSCI Developed Markets Index, is regarded as a strategic step to enhance the status of the domestic financial market.

This series of initiatives, through dual incentives of tax support and institutional improvements, aims to attract funds into the capital market and lay the foundation for reaching the KOSPI 5000 points era. The market’s focus is on whether, compared to short-term individual benefits, a structural shift can be achieved that fosters medium- to long-term trust and expectations in the market.