Supplementary pension entities are created with the purpose of managing financial assets of third parties, seeking better income for their investments that ensure the granting of retirement benefits.

As such, supplementary pension entities are managers of third-party funds, with no income or profit, since any surplus ascertained must be fully transferred to the pension plans.

In this context, just as these entities do not make profit, since, by law, they have to revert their surpluses into the pension plans themselves, when there is a deficit, those responsible for settling it are also the beneficiaries.

Lately, the news articles that supplementary pension entities have shown deficits in their accounts have been frequent. Regardless of the reasons for these results, the fact is that both normal and extraordinary contributions are identical in nature, since both are designed to shore up the solidity and financial health of these entities so that their associates may, at the time, enjoy the benefits of supplementary retirement.

Therefore, the mandatory distinction made by the Federal Revenue Service of Brazil (RFB) in the tax treatment of these normal and extraordinary contributions is absolutely misplaced. In repeated responses to consultations, like Cosit No. 354/17, the RFB has taken the position that only normal contributions could be deducted from the calculation of individual income tax.

In order to find grounds to validate this forced and haphazard differentiation in the tax treatment granted to normal and extraordinary contributions, the RFB maintains that:

"Thus, per the principle of strict legality in tax matters (paragraph 6 of article 150 of the Federal Constitution of 1988), it is found that the contributions discounted from the amounts paid as supplementary retirement, by private supplementary pension funds, intended to defray deficits, cannot be deducted from the individual income tax calculation basis. These contributions do not have the same nature as that of normal contributions.”

In our understanding, it is impossible to integrate the legal norm with a purpose to merely collect taxes. In effect, Complementary Law No. 109/2001, when dealing with the modalities of contributions to supplementary pension entities, makes no distinction as to the nature of the contribution.

On the contrary, in passing the complementary law, the legislature stated that contributions intended to create reserves are classified as normal or extraordinary, both of which " will have the purpose of providing for payment of retirement benefits":

“Article 19. Contributions intended for the creation of reserves will have the purpose of providing for the payment of retirement benefits, observing the specificities set forth in this Complementary Law.

Sole paragraph. The contributions mentioned in the head paragraph are classified as:

I - normal, those intended for paying the benefits provided for in the respective plan; and

II - extraordinary, those intended for the payment of deficits, past service, and other purposes not included in the normal contribution.”

As set forth in the text, normal or extraordinary contributions are species of the same genus. Both are designed to keep the entity healthy and in order, because only then may their associates benefit from the pensions that they long for desire.

Also in the tax law that grants the deductibility of contributions to supplementary pension plans there is no distinction between normal and extraordinary contributions. When dealing with deductible payments in determining the calculation basis for the individual income tax, Law No. 9.250/95 thus establishes:

“Article 4. In determining the calculation basis subject to the monthly levy of income tax, the following may be deducted:


V - contributions to private pension entities domiciled in the country, whose burden has been that of the taxpayer, intended to pay for complementary benefits similar to those of Social Security;”

It is concluded, therefore, that these contributions, normal or extraordinary, are species of the same genus, since both are intended to "provide the payment of retirement benefits."

That being the case, there has been an intense race to the Judiciary to recognize the deductibility of extraordinary contributions to cover deficits incurred by private pension entities, observing the percentile allowed by the legislation (e.g., 12% of total income computed in the determination of the calculation basis of the tax due, according to article 11 of Law 9,532/97).

Some decisions handed down by several judicial sections of Brazil have already ruled out the non-deductability of these extraordinary contributions, such as that handed by Appellate Judge Ângela Catão, of TRF-1st Circuit {Federal Court of Appeals of the 1st Circuit}:

"Therefore, no income tax is levied on the amounts paid to the fund in the form of extraordinary contributions instituted as a result of the plan's deficit, since it does not create an increase in equity, such that taxpayers are entitled to deduct the respective amount from the income tax calculation basis.”

In the same sense, the National Harmonization Panel of the Special Federal Courts (TNU) established that " contributions by the beneficiary for the reorganization of the finances of the closed-end private pension entity may be deducted from the income tax calculation basis, but within the legally established limit (article 11 of Law No. 9,532/97).”

Based on the foregoing, we believe that there are solid and consistent legal grounds for overruling the limitations on the deductibility of extraordinary contributions paid to supplementary pension entities.