The Beijing Tax Bureau has clarified the tax implications of retirement income, offering a clear delineation between traditional pensions and the burgeoning realm of personal pension plans. According to the 12366 taxpayer service hotline, the standard, monthly basic pension—often referred to as a retirement pension—is exempt from individual income tax.
However, the landscape shifts when considering personal pension schemes. These plans, encouraged by government policy and managed on a market basis, provide a supplemental layer to retirement income. Individuals can voluntarily contribute up to 12,000 yuan annually, enjoying select tax advantages. This translates to a pre-tax deduction of contributions from income, effectively bypassing income tax at the contribution phase.
The key question then becomes: what happens when these personal pensions are accessed? The Ministry of Human Resources and Social Security, addressing this point, has stated that a 3% tax rate applies to the total amount withdrawn from the personal pension account. This rate encompasses both the initial contributions and any investment gains accrued.
This 3% rate isn’t a novel imposition. A joint declaration from the Ministry of Finance and the State Taxation Administration, issued on December 13, 2024, has already outlined this system. It specifies that personal pension withdrawals are treated separately from overall income and taxed at the 3% rate, with these taxes categorized under “wages and salaries.” This structure underscores the government’s aim to incentivize the use of these personal pension schemes, offering a tax-advantaged path to securing retirement funds.
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