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 8 percent to 11 percent, depending on the amount of the compensation. There is a cap to the individual contribution, which represents 11 percent applied upon the maximum contribution income (R$ 5,531.31 per month) as of January 2017, thus resulting in a maximum R$608.44 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.
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 “com clausula de cobertura por sobrevivência” The payments made to this kind of plan are not deductible.
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