Reform proceeded in two major installments: the VAT was introduced in 1986; the income tax reform, for both personal and corporate income, became effective in 1989. The VAT, whose normal rate was 17%, replaced all indirect taxes, such as the transactions tax, railroad tax, and tourism tax. Marginal tax rates on both personal and corporate income were substantially cut, and in the case of individual taxes, the number of brackets was reduced to five. The basic rate of corporate tax was 36.5%, and the top marginal tax rate on personal income was cut from 80% to 40%. A 25% capital gains tax was levied on direct and portfolio investment. Business proceeds invested in development projects were exempt from capital gains tax if the assets were retained for at least two years.