The Limit Comes in Two Layers
The pension account tax credit is set by Article 59-3 of the Income Tax Act. The limit is not one figure but two layers, and that is where the calculation goes wrong.
First, money paid into a pension savings account is recognised only up to KRW 6 million a year. Pay in KRW 7 million and the excess of KRW 1 million is treated as if it were not paid. This does not block you from paying in; it means the amount is left out of the credit calculation.
Next, the amount within KRW 6 million of pension savings plus contributions to a retirement pension account is recognised up to KRW 9 million a year. IRPs and defined contribution retirement pensions fall here.
Pay KRW 9 million into pension savings alone and you receive the credit on only KRW 6 million. To have the full KRW 9 million recognised, split it into KRW 6 million in pension savings and KRW 3 million in a retirement pension. Paying the whole KRW 9 million into an IRP, on the other hand, falls within the limit.
The Credit Rate Splits by Income
The same contribution returns a different amount depending on your income.
A tax credit is subtracted directly from income tax, so local income tax falls by the same proportion. The figure you actually feel is the one including local income tax.
The calculation differs from an income deduction. An income deduction reduces the tax base, so the tax falls by the amount of the rate; a tax credit is subtracted directly from the tax already calculated. That is why a tax credit is felt more at lower incomes.
The Amount Refunded by Contribution
KRW 1,485,000
The amount refunded when the KRW 9 million limit is filled and the 15% credit rate applies. This figure includes local income tax.
Up to KRW 6 million can be filled with pension savings alone; KRW 9 million requires a retirement pension account as well.
Converted to Monthly Contributions
If paying it in one go is a burden, monthly contributions are counted as an annual total.
Paying the full KRW 750,000 a month into pension savings reduces the eligible amount to KRW 6 million. Splitting it into KRW 500,000 in pension savings and KRW 250,000 in a retirement pension has the full KRW 9 million recognised.
Moving Matured ISA Funds Raises the Limit
If you pay the balance of a matured ISA into a pension account, that amount is included in the pension account contribution and an extra limit is added. The additional limit is the smaller of 10% of the transferred amount and KRW 3 million.
Move KRW 30 million and 10% of it, KRW 3 million, is added to the limit, raising the eligible amount for that year from KRW 9 million to KRW 12 million. At 16.5% that returns KRW 1,980,000, and at 13.2% KRW 1,584,000 — increases of KRW 495,000 and KRW 396,000 respectively over filling the basic limit alone.
This additional limit applies only in the year the matured ISA balance is paid into the pension account. It cannot be carried into the following year.
Conditions Attached to What You Get Back
A tax credit returns money now and collects later. A pension account assumes you will receive the money as a pension from age 55, and the rate depends on how you take it out.
Withdrawals for defined reasons such as natural disaster, death, emigration, illness, or bankruptcy are taxed at the pension income rates.
Receive KRW 990,000 back under the 16.5% credit rate and then withdraw early, and you pay the same 16.5% as other income tax. Paying in and taking it out does not by itself reduce tax. The difference arises when you receive it as a pension, at 3.3% to 5.5%.
A large refund is not a reason to fill the limit. KRW 9 million is KRW 750,000 a month and is difficult to draw on midway. Keep emergency funds and money you will soon need somewhere you can reach, such as a parking account, and fill this with what is left over.
Contributions for which you did not claim the tax credit are not taxed on withdrawal. Amounts paid in above the limit fall here.
Timing is also worth checking. Amounts paid in by December 31 are reflected in that year's year-end settlement or the following May filing. Once the year turns, the previous year's limit cannot be used again.
Frequently Asked Questions
Can I just pay KRW 9 million into pension savings?
No. Pension savings are recognised only up to KRW 6 million. To claim the credit on the full KRW 9 million, the remaining KRW 3 million must go into a retirement pension account such as an IRP.
Can I pay the whole KRW 9 million into an IRP?
Yes. The KRW 9 million limit combines the amount within KRW 6 million of pension savings and retirement pension contributions, so paying it all into a retirement pension account is recognised up to KRW 9 million.
What is the basis for the 15% credit rate?
Comprehensive income of KRW 45 million or less for the tax period. If you have only employment income, the basis is total salary of KRW 55 million or less. Above that, 12% applies.
What happens if I take the money out midway?
Other income tax is charged on the contributions for which you claimed the credit and on the investment returns. Including local income tax that is 16.5%, the same proportion as the credit rate. Because you return what you received, it is difficult to use as short-term money.
What happens if I pay in above the limit?
The excess is left out of the tax credit. In exchange, because no credit was claimed on it, it is not taxed on withdrawal either.
What happens if I pay in and withdraw right away?
You receive 16.5% back and pay 16.5% as other income tax on early withdrawal. You return what you received. Receiving it as a pension is taxed at 3.3% to 5.5%, so the difference arises from the method of receipt.
How much does moving matured ISA funds add?
The smaller of 10% of the transferred amount and KRW 3 million is added to the limit. Move KRW 30 million and KRW 3 million is added, raising the eligible amount for that year to KRW 12 million. It applies only in the year of transfer.
What is the difference between a tax credit and an income deduction?
An income deduction reduces the amount on which tax is assessed; a tax credit is subtracted directly from the tax already calculated. A pension account is a tax credit, so the contribution multiplied by the set rate comes straight off the tax.
Sources and basis
- Pension account tax credit — Income Tax Act Article 59-3
- Contribution limits — KRW 6 million a year for a pension savings account, KRW 9 million a year including retirement pension
- Credit rates — 15% for comprehensive income of KRW 45 million or less (total salary of KRW 55 million or less with only employment income), 12% in all other cases
- Local income tax — falls by 10% of the income tax under the Local Tax Act
- Other income tax of 15% on non-pension receipt and withholding rates of 3–5% on pension income — Income Tax Act Article 129
- Additional limit for ISA transfers — Income Tax Act Article 59-3, the smaller of 10 per 100 of the transferred amount and KRW 3 million
Tax law is subject to amendment. The law was verified on August 8, 2026.