Retirement Savings Plans (PPRs - Planos Poupança Reforma) are among the most used products to save long-term and, at the same time, reduce your IRS (Imposto sobre o Rendimento de Pessoas Singulares - Portuguese Personal Income Tax). However, the tax benefit has rules and limits that are important to know to make the most of it.
What is a PPR?
A PPR is a medium and long-term savings product, primarily designed to complement retirement. It can take the form of a fund or an insurance policy, with different levels of risk and potential profitability.
The initial tax benefit
Contributions to PPRs can grant a deduction from your IRS (tax collected), corresponding to a percentage of the amount invested in the year, with limits that vary according to the taxpayer's age. Younger individuals generally have a higher deduction limit than those closer to retirement.
Age limits
Deduction limits are staggered by age brackets, being higher for younger taxpayers and decreasing as age advances. It is advisable to confirm the values applicable to the year in question before planning your contributions.
Redemption precautions
The tax benefit assumes that the money remains invested for the long term. Redeeming outside the foreseen conditions, for example, before retirement and without a legally accepted reason, may require you to return the benefits obtained, with penalties. Redemptions under legally provided conditions have more favourable taxation on the income.
When it pays off
PPRs are particularly beneficial for those who want to save disciplinedly for the future and have sufficient IRS (tax collected) to take advantage of the deduction. For those who do not have a tax liability, the initial tax benefit loses its effect.
Plan your contributions
Distributing contributions throughout the year and adjusting the amount to the deduction limit prevents you from investing more than what provides a tax benefit. It is a product that benefits from planning.
At Grupo Your, we help you understand how much you can deduct and plan your savings in a tax-efficient way. Talk to us before the end of the year to take advantage of the benefit.
