The earlier posts dealt with the math of the strategies themselves. Backtest metrics, the efficient frontier, walk-forward — all answering “what weights, when, on which names”. For a Korean retail investor moving a strategy to live operation, the first decision sits one layer above. Which account holds it?

Buying the same ETF in a general account versus an ISA leads to different after-tax outcomes. Some strategies cannot run in certain accounts at all. Account constraints are an input to strategy design, not an afterthought.

General Account

The most flexible account. Domestic stocks, foreign stocks, ETFs, funds, and bonds can all be traded.

The trade-off for flexibility is that there is no tax-free quota. Financial income (interest and dividends) above KRW 20 million per year falls into comprehensive income taxation. Capital gains on Korea-listed stocks are tax-free, but foreign stocks are taxed at 22% capital gains tax after a KRW 2.5 million annual deduction.

Strategies that require direct foreign investment — SPY, QQQ, VGK and the like — can only run here.

ISA

The Individual Savings Account allows only Korea-listed products. Foreign ETFs and foreign stocks are not allowed. Korea-listed ETFs that track foreign indices, like TIGER S&P 500, are still tradable.

The tax benefit defines the account. The standard form is tax-free on up to KRW 2 million of net gains (KRW 4 million for the “low-income” variant with annual salary below KRW 50 million), with anything above that taxed at a flat 9.9% on withdrawal. Annual contribution is capped at KRW 20 million, up to KRW 100 million cumulative, with unused capacity rolled forward.

The mandatory holding period is three years. Rolling the maturity proceeds into a pension account unlocks additional tax breaks. The account fits domestic ETF allocations and Korean single-stock factor strategies.

Pension Savings Account

Only Korea-listed ETFs and funds can be traded. Individual stocks are not allowed.

The motivation is the income tax credit. Contributions up to KRW 6 million per year qualify for a credit of 16.5% (for annual salary at or below KRW 55 million) or 13.2% (above). A KRW 6 million contribution returns up to KRW 990,000 in taxes.

Withdrawals are restricted to age 55 and above, with a 3.3% to 5.5% pension income tax at distribution. Early withdrawal triggers a 16.5% miscellaneous income tax, which effectively erases the tax benefit. The structure enforces long-term holding.

It suits conservative allocations — all-weather, 60/40, three-bucket — held over a long horizon.

IRP

The Individual Retirement Pension, like pension savings, allows only Korea-listed ETFs and funds. The decisive difference is the 70% risk-asset cap.

Equity-type assets cannot exceed 70% of the account balance. The remaining 30% must be filled with safe assets — bond funds, MMFs, or deposits. A 100% equity strategy cannot run inside IRP.

The tax credit shares a combined annual cap of KRW 9 million with the pension savings account. A common split is KRW 6 million in pension savings plus KRW 3 million in IRP. Withdrawal and early-exit rules match the pension savings account.

The 70% rule looks like a constraint but also nudges naturally toward diversified allocations. A 60/40 portfolio fits IRP without modification, and running closer to 70/30 against the cap is a frequent setup.

Strategy-to-Account Mapping

Mapping strategy types against account feasibility produces the following table.

StrategyGeneralISAPensionIRP
Direct foreign (SPY, QQQ)✅❌❌❌
Korea-listed foreign-index ETF✅✅✅✅
Korean single stocks✅✅❌❌
Domestic ETF allocation✅✅✅✅
60/40 allocation✅✅✅✅
100% equity allocation✅✅✅❌

The trade-off between tax benefits and trading freedom is explicit. The general account has the most freedom and the fewest tax benefits; ISA, pension, and IRP carry strong tax benefits but limit which products and holding periods are allowed.

In practice, running different strategy buckets in different accounts is a common pattern.

  • General: direct foreign positions (SPY, QQQ), short-term trading
  • ISA: Korean single-stock factor strategies, using the KRW 2 million tax-free quota
  • Pension savings: conservative allocations through Korea-listed foreign-index ETFs
  • IRP: 60/40 allocations that align naturally with the 70% rule

After-Tax Impact

Suppose KRW 100 million is invested in KODEX 200 and held for five years at an annual return of 5%. The final value is roughly KRW 127.6 million, with about KRW 27.6 million in gains.

In a general account, capital gains on Korea-listed ETFs are tax-free, while distributions incur a 15.4% dividend withholding tax. In an ISA, the same gains plus distributions net against each other, the first KRW 2 million is tax-free, and anything above is taxed at a flat 9.9% — clearly better than the general account on an after-tax basis. In pension and IRP accounts, taxation is deferred during accumulation and applied as pension income tax on withdrawal, sidestepping the progressive comprehensive-income rate.

Exact figures depend on distribution yield, other financial income, and enrollment timing. The numbers above only indicate direction. Precise tax calculations sit in expert territory.

Caveats

Tax law changes every year. This post reflects the rules as of May 2026; credit rates, contribution caps, and tax-free thresholds shift regularly through legislative revisions. Re-checking the latest rules just before any decision is the safer move.

Eligibility also depends on individual circumstances. Annual salary bracket, prior account history, employer-sponsored IRP enrollment, and total financial income all act as variables. This post stays at the level of orientation rather than tax advice.

Account type is an input to strategy design. Deciding which strategy goes into which account, then descending into security selection and weights, is the natural order. The same allocation strategy must be modified for IRP under the 70% rule; the same ETF delivers the most after-tax value in an ISA within the tax-free quota.

The next post returns to backtesting, expanding the one-line entries on look-ahead bias and survivorship bias into concrete case studies.

References