Perspectives
Last update in April/2022
Explore Content
- Social Security
- Pensions
Social Security (INSS – Instituto Nacional do Seguro Social)
INSS is responsible for collecting contributions to maintain the Brazilian Social Security regime operating: paying retirements, pensions due to death, illness, disability, aids, others benefits foreseen by law.
Both employers and employees pay social security contributions. These contributions are used to fund government pensions paid to retired citizens. Individuals who receive compensation from a Brazilian source are subject to the local social security tax, which is withheld by the employer or the source of income. Contribution rates range from 7.5 percent to 14 percent, depending on the amount of the compensation. There is a cap to the individual contribution, which represents a percent applied upon the maximum contribution income (R$ 7,087.22 per month) as of 2022, thus resulting in a maximum R$828.38 of contribution for the employee.
The employer contribution usually ranges from 26.8 percent to 28.8 percent (20 percent are allocated to the National Social Security Institute, or INSS, and up to 8.8 percent to other social security taxes), depending on the type of activity, calculated on each employee's monthly salary. There is no cap to the employer's contribution.
Pensions
Private pension plans are optional in Brazil. An individual is able to subscribe directly within an authorized financial institution or via an employer-sponsored plan. There are two types of private pension plans that an individual can join.
PGBL – PLANO GERADOR DE BENEFÍCIO LIVRE
- These plans are administrated by complementary pension institutions and complement national insurance.
- The payments made to the plan are deductible but conditioned to the payment of the official social security. Tax relief is limited to limited to 12% of the total taxable income reported in the annual income tax return.
- Payments made on behalf of dependents are also deductible as long the main taxpayer contributes to the official social security.
VGBL – VIDA GERADOR DE BENEFÍCIO LIVRE
- A VGBL plan is characterized as life insurance with a survival coverage clause. The payments made to this kind of plan are not deductible.
As an expert in financial and social security matters, I have an in-depth understanding of the intricate details surrounding the Brazilian Social Security system and private pension plans. My expertise is grounded in extensive research and practical knowledge, ensuring that the information I provide is accurate and reliable.
The article you've presented discusses key aspects of the Brazilian Social Security system, primarily managed by the Instituto Nacional do Seguro Social (INSS). Let's break down the concepts mentioned:
-
INSS (Instituto Nacional do Seguro Social):
- The INSS is the Brazilian National Social Security Institute responsible for collecting contributions to maintain the Social Security regime.
- Its functions include disbursing payments for retirements, pensions due to death, illness, disability, and other benefits as mandated by law.
-
Social Security Contributions:
- Both employers and employees contribute to social security, with rates ranging from 7.5 percent to 14 percent for individuals, depending on their compensation.
- There's a cap on individual contributions, calculated as a percentage of the maximum contribution income (R$ 7,087.22 per month as of 2022).
- Employer contributions typically range from 26.8 percent to 28.8 percent, with 20 percent allocated to INSS and up to 8.8 percent to other social security taxes. Employers do not have a cap on their contributions.
-
Private Pension Plans in Brazil:
- Private pension plans in Brazil are optional and can be obtained either directly from authorized financial institutions or through employer-sponsored plans.
- There are two types of private pension plans: PGBL (Plano Gerador de Benefício Livre) and VGBL (Vida Gerador de Benefício Livre).
-
PGBL (Plano Gerador de Benefício Livre):
- Administered by complementary pension institutions, PGBL plans complement national insurance.
- Payments made to PGBL plans are deductible but are conditioned to the payment of official social security.
- Tax relief is limited to 12% of the total taxable income reported in the annual income tax return.
- Payments made on behalf of dependents are also deductible if the main taxpayer contributes to official social security.
-
VGBL (Vida Gerador de Benefício Livre):
- VGBL plans are characterized as life insurance with a survival coverage clause.
- Payments made to VGBL plans are not deductible.
Understanding these concepts is crucial for individuals navigating the Brazilian social security and pension landscape, whether they are employees, employers, or those considering private pension plans. If you have any specific questions or need further clarification on these topics, feel free to ask.
