No taxation of investment income during deferral
As of January 1, 2005, the investment income of pension funds is exempt from income taxation during the deferral period.
New plans: benefit taxation based on holding period
Currently, benefit payments are subject to income tax of between 15% and 27.5%, except for the first BRL 1,164 of monthly pension which is tax-exempt.
However, since January 1, 2005, plan members can opt for a different tax payment (for both open and closed funds) under which the tax paid on withdrawals is based on the length of time the assets were held in the plan (Holding Period):
Rate Holding Period
35% < 2 years
30% 2 - 4 years
25% 4 - 6 years
20% 6 - 8 years
15% 8 - 10 years
10% > 10 years
This option is available for both existing Pension Plans and new ones.
Switch deadline: July 1, 2005
The deadline for choosing the “Holding Period Plan” is July 1, 2005, and once chosen, the Participant will not be able to change the option anymore For existing plans, the holding period will be calculated from January 1, 2005, and for new plans it will be counted from the date of the first contribution to the plan. It is understood that the legislation is not in its final form yet and further announcements are expected in the next days.
For more information, please visit www.icatu-hartford.com.br