Brazilian reforms propose amendments to taxation of inheritance

Under the law, the ITCMD rate will be progressive, based on the value of the share, legacy or donation. Taxpayers holding “large estates” will be taxed at the maximum rate: this will be determined by the senate, but currently stands at 8 percent.

The tax will apply even in cases where inheritance or donations relate to real estate located in Brazil but the donor or testator is domiciled abroad. This also applies to other assets such as shares or fund units.

The law will also set the application of the ITCMD to private pension plan distributions, under both plano gerador de benefício livre (PGBL) and vida gerador de benefício livre (VGBL) programmes. The ITCMD would be fully applicable to the PGBL; however, it would apply only to VGBL contributions made within the five years prior to the death of the settlor. According to law firm MBG Advogados, this aims to “avoid aggressive succession planning.”

The firm also notes that the law “aims to curb corporate transactions between related individuals that result in disproportionate benefits without a legitimate business purpose.” Further, it allows for tax assessment on transfers where there is no capacity to pay an agreed price or in cases of forgiven debts.

The law also amends the real estate transfer tax, allowing for taxpayers to opt into paying the tax early with the possibility of reduced tax rates. Further, it introduces and defines the concept of market value for the calculation of the transfer tax.

Having been approved on August 13, 2024, the law has moved to the senate for discussion.

Sources

• MBG Advogados
• Coimbra Chaves Batista Advogados (Portuguese)
• Brazil Chamber of Deputies (Portuguese)