Tarcísio de Freitas vetoes ITCM reduction – 02/08/2023 – Market

Governor Tarcísio de Freitas vetoed the bill approved in 2022 at Alesp (São Paulo Legislative Assembly) that would reduce the tax on inheritances and donations in the state.

The ITCMD (Tax on Transmission Causa Mortis and Donation of Any Assets or Rights) would increase from 4% to 1% on inheritances and to 0.5% on donations.

Calculations by the Department of Finance and Planning of São Paulo indicate that the measure would have an impact of R$ 4 billion a year.

In the message sent to the Legislative Assembly this Wednesday (8), Tarcísio said he recognized the “elevated purposes” of the legislator. He defended, however, that measures that imply waiver of revenue need to be accompanied by an estimate of the impact on the budget and means of compensation.

The project was authored by deputy Frederico d’Avila (PL-SP). For the parliamentarian, “the exacerbation of the ITCMD tax burden on the transmission of assets, whether inter vivo or causa mortis, especially after the pandemic, is unjustifiable.” Brazil, however, has a low rate by international standards.

The governor also mentions, in the veto message, that the Secretariat of Finance and Planning had already been unfavorable to the proposal because it understood that it “almost completely emptied the tax collection”, since the new rate would correspond to 25% of the current level , in the case of inheritances, and 12.5%, for donations.

ITCMD must be paid by those who receive goods or rights, by inheritance or donation. Those who receive money, vehicles, apartments or other goods need to make the declaration.

This is a state tax. Each entity defines the criteria and rates for their regions. The tax cannot exceed 8%, as defined by the Federal Senate. Currently, it ranges from 1% to 8%.

Some states have a single rate, such as São Paulo, Paraná, Espírito Santo, Pará and Roraima (all 4%), Amazonas (2%), Rio Grande do Norte (3%) and Minas Gerais (5%).

In the others, it generally varies according to the value of the goods and with a difference between inheritance and donation in life. Ten states apply the highest rate, including Santa Catarina (1% to 8%), Bahia (from 3.5% to 8%) and Rio de Janeiro (from 4% to 8%).

In some locations, there is an exemption band in addition to rules on immunity.

The current rates were instituted, in most cases, in the middle of the last decade. In São Paulo, for example, ITCMD must be paid by anyone who received an inheritance or donation from 2001 onwards.

According to the Tax Foundation, the world’s highest inheritance rate of 55% is in Japan, followed by South Korea (50%) and France (45%). Even Latin American neighbors have higher rates than Brazil, such as Chile (25%) and Peru (10%).