Reform will exempt 23.6 million Brazilian retirees from income tax

RIO DE JANEIRO, BRAZIL – Pensioners and retirees of the National Institute of Social Security (INSS) will have relief in their pockets if the proposed tax reform increases the exemption limit of individual income tax (IR) from R$1,903.98 to R$ 2,500 is approved by Congress.

Currently, 23,683,780 beneficiaries receive up to R$2,500 (US$1,385.91), according to INSS data.

Of this total, 15,303,004 beneficiaries are older than 65, which guarantees their right to a double income tax exemption. That is a bonus within the limit of R$1,903.98 per month.

This benefit becomes a double exemption if the income is above this amount (R$3,807.96). Whatever remains after deducting the bonus is taxable income. If the same logic is maintained, the double exemption will reach those who earn R$ 5,000 per month.

However, it is worth noting that those who are still working or have other sources of income, such as rental income, are not entitled to the additional exemption amount for these earnings. That is, the exemption only applies to the proceeds of retirement or pension. And those who have more than one pension/annuity can consider only one of the packages as tax-exempt; the other will be registered as taxable.

Today, a retiree up to age 65 who earns R$2,500 net and has no deduction pays R$44.70 per month in income tax.

– With the new regime, the tax will be set to zero

The calculation basis of the other salary ranges of the IR will also change, providing more relief to taxpayers. Here is another example:

– A pensioner over 65 years old who earns the upper limit of the INSS, today of R$6,433.57, will also receive a tax reduction. Currently, he pays R$188.75. If Congress approves the reform, the levy will drop to R$162.54.

The government’s proposed changes still fall short of expectations, but experts say they signal a path to follow.

– In addition to taxing dividends, taxing profits abroad, the proposal brought measures that catch large taxpayers, closed funds. (The text) also corrects distortions exploited by abusive tax planning – says Kleber Cabral, president of the National Sindifisco.

Inconsistencies in reported figures.

However, one fact stood out during the announcement of this second part of the tax reform, presented by the Minister of Economy, Paulo Guedes. The number of people who would benefit from the change in the Individual Income Tax Exemption Limit (IRPF) from R$1,903.98 to R$2,500,

According to INSS data, the number of pensioners and retirees receiving R$2,500 reaches 23,683,780 people. In its report, however, the ministry speaks of 16.3 million.

When asked, the Ministry of Economy and the Tax Office did not provide information on how many taxpayers are eligible. Or rather, how many income tax declarants receive up to R$2,500 per month.