Article 91-16 (Income Deduction for Long-Term Collective Investment Securities Savings)

Where a resident with earned income (excluding daily workers) subscribes to savings that meet all of the following requirements (hereinafter referred to as "long-term collective investment securities savings" in this Article) by December 31, 2015, an amount equivalent to 40 percent of the amount paid in each taxable period shall be deducted from the earned income amount for that taxable period for 10 years from the date of subscription (limited to the earned income amount for that taxable period). <Amended by Act No. 17269, Jun. 9, 2020> 1. The subscriber of the long-term collective investment securities savings must be a resident with earned income whose total salary in the immediately preceding taxable period was 50 million won or less at the time of subscription (limited to cases where the immediately preceding taxable period had only earned income or had earned income and inclusive income not aggregated into the comprehensive income tax base). 2. The savings must be for acquiring collective investment securities of a collective investment scheme under Article 17 (1) 5 of the 「Income Tax Act」, which invests 40 percent or more of its total assets in stocks issued in Korea and traded in Korea (limited to stocks listed on the securities market under the 「Capital Markets and Financial Investment Business Act」). 3. The contract period for the long-term collective investment securities savings must be 10 years or more, and there shall be no withdrawal of principal, interest, dividends, stocks, or beneficial certificates within 10 years from the date of subscription. 4. The savings must be installment savings, with payments not exceeding 6 million won per person per year (referring to the total amount of all long-term collective investment securities savings subscribed to by the resident).

A resident who wishes to receive an income deduction under paragraph (1) shall obtain a payment certificate for long-term collective investment securities savings from the financial institution handling the long-term collective investment securities savings (hereinafter referred to as "savings handling institution" in this Article), which specifies the amount of savings paid in the relevant year necessary for the income deduction, and submit it to the withholding agent or the head of the tax office in charge of the place of residence when performing year-end tax settlement of earned income tax or the final tax return for comprehensive income tax base.

If a subscriber of long-term collective investment securities savings terminates the long-term collective investment securities savings within 5 years from the date of subscription, the savings handling institution shall collect an amount equivalent to 6 percent of the cumulative total amount paid into the savings (hereinafter referred to as "recapture tax" in this Article) and pay it to the head of the tax office in charge of withholding by the 10th day of the month following the month in which the savings contract was terminated. Provided, however, that this shall not apply in cases of termination due to unavoidable reasons prescribed by a Presidential Decree, such as death or emigration overseas. If the amount of tax reduced by the income deduction received by the taxpayer is less than the recapture tax, the amount actually reduced shall be recaptured.

If the savings handling institution fails to pay the recapture tax under paragraph (5) by the deadline or pays an amount less than the tax payable, the savings handling institution shall pay an amount equivalent to 10 percent of the unpaid tax or underpaid tax as an additional amount to the head of the tax office in charge of withholding. <Amended by Act No. 17269, Jun. 9, 2020>

If the savings handling institution is notified that the subscriber of long-term collective investment securities savings does not meet the requirements of paragraph (1) 1, the long-term collective investment securities savings shall be deemed to have been terminated on the date of receiving the notification, and the savings handling institution shall notify the subscriber of the long-term collective investment securities savings thereof.

The subscription procedures for long-term collective investment securities savings, verification and management of eligible subscribers, termination, income deduction procedures, and other necessary matters shall be prescribed by a Presidential Decree.