Deadline for opting for PGBL deduction in the income tax ends on 12/30

Anyone wishing to use the PGBL (Free Benefit Generator Plan - "Plano Gerador de Benefício Livre") to deduct Income Tax must pay attention to the deadline established by the Federal Revenue Office. Taxpayers have until December 30 to choose this type of private pension or make a contribution.

Understand the benefit of opting for PGBL

PGBL investors can deduct the contributions made to the plan on their income tax return up to a limit of 12% of their annual gross taxable income.

By opting for this, taxpayers postpone the payment of income tax, since it is collected only at the time of redemption of the accumulated amount (formed by the contributions and income obtained).

Rules to get the benefit

In addition to contracting this private pension or making a contribution until the last bank day of the year, December 30, 2021, the taxpayer must:

• use the complete Annual Adjustment Statement (Declaração de Ajuste Anual - DAA) form;
• contribute to Social Security or to the public servants' system.

Note: if the plan is in the name of dependents over 16 years of age, they must also be Social Security contributors.

PGBL taxation

Taxpayers must pay attention to the choice of taxation regime at the time of total or partial redemption of PGBL, indicating preference for progressive or regressive taxation.

Before defining the taxation, it is important to simulate which model of income tax return best fits your reality.

Progressive Taxation

In this case, the progressive income tax taxation table will be applied, with rates ranging from 0% to 27.5%, depending on the amount of redemption.

TAX BASIS (BRL)	INCOME TAX RATE
Up to BRL 22,847.76	Exempt
From BRL 22,847.77 to BRL 33,919.80	7.5%
From BRL 33,919.81 to BRL 45,012.60	15%
From BRL 45,012.61 to BRL 55,976.16	22.5%
Above BRL 55,976.16	27.5%

The redemption is considered taxable income subject to annual adjustment in the DAA and must be recorded as Taxable Income Received from Legal Entities by the Holder and/or Dependents.

The PGBL custodian institution will pay a 15% withholding tax. This withheld percentage will be considered tax already paid, and the declarant will either supplement the payment or receive a refund according to the result of his DAA.

Regressive Taxation

Regressive taxation has descending rates ranging from 35% to 10%, according to the period between application and redemption.

PERIOD (TERM)	INCOME TAX RATE
Up to 2 years	35%
From 2 to 4 years	30%
From 4 to 6 years	25%
From 6 to 8 years	20%
From 8 to 10 years	15%
Over 10 years	10%

Taxation is source exclusive. Therefore, the declarant must include the redemption amount net of tax in the Income Subject to Source Exclusive Taxation table in his DAA.

To find out which amounts need to be stated as income and redemptions, it is necessary to check the statement of earnings and the statement of the private pension plan.

Individual tax compliance

DPC's Individuals department guides taxpayers on the taxation of PGBL and other investments, supporting them in all stages of compliance with the Federal Revenue Office. Count on this support: dpc@dpc.com.br.