PT deputy proposes raising inheritance tax by up to 8% in SP

A bill (PL 7/2024) presented in February at the Legislative Assembly of the state of São Paulo (Alesp) by the deputy Donato (PT) provides for a change in the Tax on Transmission “Causa Mortis” and Donation of Any Goods or Rights (ITCMD). Currently unified at 4% on any inheritance or donation value to be transmitted in the state of São Paulo, the tax can reach up to 8%.

The proposed value is calculated based on the Fiscal Unit of the State of São Paulo (Ufesp), a rate recalculated annually by the State Department of Finance and Planning (Sefaz-SP) based on the Consumer Price Index (IPC). It is set at R$35.36 each until the end of 2024.

Thus, according to Congressman Donato’s project, the ITCMD would be at 2% for values ​​of 10 thousand Ufesps, which corresponds to R$ 353.6 thousand; at 4% for amounts between R$353.6 thousand and R$3,005,600; at 6% for between R$3,005,600 and R$9,900,800; and 8% above R$9,900,800.

“My bill updates the legislation of the state of São Paulo after the approval of the tax reform by the National Congress and sanctioned by President Lula. The tax reform established that the tax on inheritance and donations must be progressive, putting an end to the tax rate rule unique as it is applied in São Paulo,” Donato told People’s Gazette.

“According to our calculations, my project will reduce the amount of tax owed to 98% of the population of São Paulo. And even so, there will be no drop in revenue from the state Treasury”, added the parliamentarian.

When questioned, Sefaz-SP stated in a note that “it is analyzing the topic and the bill, and will respond in due course via the State Legislative Monitoring System”. According to the secretariat, in 2023 the state raised R$4.2 billion with ITCMD.

Below, the amount collected with ITCMD in the last five years in the state of São Paulo:

• 2023: R$4.2 billion
• 2022: R$3.8 billion
• 2021: R$4.2 billion
• 2020: R$3.1 billion
• 2019: R$3.2 billion

Base deputies propose lower inheritance and donation taxes

After Donato sent the proposal, two other replacement projects dealing with inheritance and donation taxes were presented by deputies from the government base, Gil Diniz (PL) and Thomas Abduch (Republicans), deputy leader of Tarcísio de Freitas’ government in Alesp.

Diniz’s project sets the tax at 1% for assets equal to or greater than 10 thousand Ufesps, which corresponds to R$ 353.6 thousand; at 2% for amounts between R$353.6 thousand and R$3,005,600; by 3% for the range between R$3,005,600 and R$9,900,800; and 4% for amounts exceeding R$9,900,800.

“I have always fought for reducing taxes and simplifying tax collection. I made the replacement that suits the new tax reform, that is, with tax progression, but without raising the tax”, said Diniz.

Tomé Abduch’s replacement, in turn, proposes reducing the tax to 3%, regardless of the value to be transmitted. According to the proposal, the objective is to “increase state revenue through lower taxation”, using as a basis the Laffer curvea study developed by American economist Arthur Laffer that shows that the rate increase has the effect of lower revenue than that obtained before the increase.

Abduch also argues that in the state of São Paulo there are “countless inventories that have not been completed due to the impossibility of collecting the tax”, which ends up leading the taxpayer to “invest in properties located in other states or even in other countries”.

PT project will not have support from the base

According to advisors close to Congressman Donato (PT), PL 7/2024 has begun to be processed and is awaiting the appointment of the rapporteur by the president of the Constitution and Justice Committee. From there, the project may go through other committees before going to a plenary vote, which will depend on the leaders’ agreement.

“Increasing the ITCMD is out of the question and will not have the support of the government base in Alesp”

State deputy Gil Diniz (PL)

Regardless, Congressman Donato will continue with the proposal. “It is not appropriate here to discuss whether the project is from an opposition parliamentarian or from the situation, but rather to update the state’s legislation and, above all, promote tax justice. I emphasize that my project will reduce taxes for the vast majority of the population without harming tax collection by the state,” he said.

Regarding the replacement proposed by Abduch, Donato believes that it is unconstitutional. “In addition to reducing the collection percentage from 4% to 3%, it maintains the rate at a single value. According to the rule approved in Brasília, the tax must be progressive”, he argues.

Anticipation of patrimonial succession

Thomas Nosch Gonçalves, vice-president of the Notarial Commission of Brazilian Institute of Family Law and 1st Notary Public of Santo André (SP), explained that although the progression of the tax came to light with the tax reform, the Federal Supreme Court (STF) already constitutionally admits this progressivity. “This is a reality in several states and has even brought greater attention to increasing the number of acts and having this succession planning as soon as possible”, he says.

Gonçalves realizes that people are looking more for succession planning in order to save on inheritance tax. “There are countless ways to make this anticipation perfect, whether through public wills, donations or donations with reservation of usufruct. This varies greatly in each case, which is why it is important to contact your trusted notary or your lawyer so that he or she can understand the best way to perfect and access this right”, he analyzes.

If the bill is approved by Alesp, from 2025 onwards, heirs of deceased people who were domiciled in the state of São Paulo will be impacted, as well as donors and donees in the state.

Victoria Siqueira, head of Wealth Planning at Portofino Multi Family Officerecommends making donations in advance to guarantee the current rate of 4%, but emphasizes that this decision “is very personal and depends on an analysis of the family structure, assets and the person’s desires”.

“Considering only the tax part and the rates, until the end of 2024 it is more efficient, as the 4% rate is guaranteed,” she says. “For financial resources, the use of private pensions can be a good alternative, without the need for a living donation”, she adds.