The Federal Revenue Service recently issued Consultation Solution DISIT/SRRF03 No. 3002, dated January 10, 2025, which establishes Income Tax (IR) on amounts redeemed from VGBL plans, even in the case of taxpayers with serious illnesses. However, the position of the Regional Federal Court of the 3rd Region (TRF-3) contradicts the IRS’s understanding, guaranteeing IR exemption in these cases.
The legislation guarantees income tax exemption for retirement income, pensions, or retirement benefits received by those with serious illnesses, such as malignant neoplasms and Alzheimer’s. Additionally, it also extends the exemption to retirement supplements received from private pension plans.
The TRF-3 decision analyzed the case of a taxpayer with a serious illness who redeemed accumulated funds in a supplementary pension plan (VGBL). Although the Federal Revenue Service argued that the VGBL did not qualify as a supplementary pension plan because it was technically an “insurance plan,” the court emphasized that, in essence, both the VGBL and the PGBL are pension plans, as they provide investors with a monthly income or a lump sum payment.
The Superior Court of Justice (STJ) case law also reinforces this understanding, concluding that the exemption provided for in the legislation applies to both PGBL and VGBL, regardless of the plan type. Following this reasoning, the TRF-3 recognized that amounts redeemed by individuals with serious illnesses are exempt from income tax, regardless of the plan’s technical classification.
The Federal Revenue Service’s understanding is illegal, as it contradicts the legislation and established case law on the matter. Taxpayers who feel harmed by the charge should seek legal action to ensure the right to exemption is enforced and recover the amounts unduly paid.
