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Pensions for Expats in Brazil

Submitted: May 2014

Brazil’s pension system is two-tier, contribution-based system. Besides, the Government pays out means-tested benefits to low-income pensioners, regardless of their previous contributions into the system.

The pension system as a whole is facing serious financial challenges, as the Brazilian Government has been over-generous since the advent of democracy in 1988. To illustrate this generosity, female public sector workers could retire at the age of 48 until fairly recently.

Social insurance

Brazil has one scheme for public sector workers and another for the private sector. The former is more generous than the latter.

Regarding private sector workers, the mandatory old-age insurance scheme is the RGPS (Regime Geral de Previdencia Social).

Under the RGPS, the pension age is the lower of:

  • 65 years for men and 60 years for women, providing your social security record shows at least 15 years of contributions, or
  • The age at which you can show 35 years of contributions (30 years for women).

Contributions are paid along with your other social security contributions to the National Social Security Agency (Instituto Nacional do Seguro Social – INSS). Typically, employers pay 20% while employees pay 8% to 11%. Special rules may apply for some sectors.

Private pension schemes

Private pension schemes should be viewed as a supplement to the RGPS. Participation is only voluntary, and the schemes may either be occupational or personal. Both defined contribution and defined benefit schemes are permitted.

Contributions are to Brazilian private pension schemes are tax-deductible, but pay-outs are taxable. Capital growth within your pension pot is tax-free since 2005.

In all cases, you should check very carefully the administration charges before signing up for a superannuation product. This rule is not specific to Brazil though.

International superannuation planning

Many jurisdictions offer private tax-efficient pension plans. Therefore, they are heavily regulated in order to avoid any undue tax base erosion. However, tax neutrality should not be taken for granted in cross-border situations, and there are double taxation risks. Thus, you might wish to check:

  • If, while in Brazil, you are going to receive a taxable pension for which you did not get tax relief
  • Any issues regarding your foreign pension arrangements whilst you are in Brazil
  • How any Brazilian pension benefits may possibly be taxed by your future country of residence.

Cross-border superannuation planning is always on a case-by-case basis. It is strongly recommended to seek specialist advice regarding this matter.

 

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