Tax reform: inheritance or gift tax may rise in 10 states; understand

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The text of the reform provides that taxes will be progressive throughout the country, based on the value of assets. States that do not yet have rules in this model will have to adapt. House is considered the most expensive in the United States Disclosure/Coldwell Banker Residential Real State The consumption tax reform, approved and promulgated by the National Congress last year, may increase the tax charged on inheritances or donations, known as ITCMD or ITCD, in ten states across the country. This happens because the text of the reform establishes that the tax will become progressive. Therefore, throughout the country, the rates must increase, varying according to the size of the assets transferred. Most states in the federation already have progressive taxes, that is, with higher rates for the transfer of more valuable assets. However, in ten states, the rate is still fixed and, with the reform, it will have to be changed to comply with the rule. They are: Alagoas Amapá Amazonas Espírito Santo Mato Grosso do Sul Minas Gerais Paraná Rio Grande do Norte Roraima São Paulo How does inheritance and gift tax work? The ITCMD is a state tax that is levied on the sale value (venal value) of goods or rights, such as real estate, vehicles, shares and money, when they are transmitted to heirs in the event of death, or through donations made during life. . Currently, inheritance tax is limited to 8%, a ceiling defined by the Federal Senate. There is a proposal under debate, not yet approved, that increases this value to up to 16%. The rates charged on inheritances may be different from those on donations, depending on the rules of each state. In 2017, the state of Rio de Janeiro raised the tax ceiling on inheritances and donations. See the report below: The ceiling for tax collection on inheritances and donations rises to 8% Taxpayers come forward While new state tax laws are not approved, taxpayers have come forward to pay a lower rate before the increase. According to Ettore Botteselli, partner at Martinelli Advogados, in São Paulo, there was a significant increase in consultations on succession planning at the beginning of this year. In the first two months of 2024, the office worked on 36 succession plans, almost a third of the total operations of this type carried out throughout last year. By March, the number jumped to 48 cases. “The expectation is that the new rules on the Mortis and Donation Transmission Tax will come into effect from 2025. Today, the tax, which is statewide, has rates that vary between 2% and 8%. With the reform, the amount to be collected could double, depending on the federation unit and the value of the assets”, assesses Botteselli. International comparison Inheritance tax in Brazil has different rates, which vary from 1% to 8%, depending on the state. In other countries, there are much higher limits. In the United States, for example, the rate can reach 40%; in Germany, 50%; and in France, 60%. However, the director of the International Accounting office Roger Mitchell states that this direct comparison between rates is not the most appropriate, as other nations do not have the same inventory costs (collection and sharing of assets among heirs after death). The expert states that in Brazil, in addition to the ITCMD, depending on each case, costs such as: court fees (1%) formal registration of sharing of assets (1%) market valuation of the assets (1%) legal fees (5 % to 10%) capital gains tax (15% of appreciation) deed (1%) Real estate transfer tax (ITBI) (4%) notary costs (1%) In practice, Mitchell calculates, the percentage tax on heirs, together with procedural costs, can reach 37%. “Adding the tax to inventory costs, our country imposes a significant burden on Brazilian families in the transmission of assets to heirs, harming the transfer of generational wealth”, he assesses. Other changes in the tax reform In addition to determining that states have progressive rates for inheritance or gift tax, the approved tax reform also established other changes to the tax. See below: The ITCMD will now be charged at the place of residence of the deceased or the donor of movable assets, titles or credits: Today, taxation occurs in the state where the inventory or listing of assets is processed. The new rule will apply to succession processes opened after the promulgation of the reform. The rule aims to prevent heirs from seeking regions with lower taxes to prepare the inventory. Rule for collection of inheritances abroad: If the donor is domiciled or resides abroad, the collection will be made where the heir, or beneficiary, is domiciled. If the beneficiary lives in another country, the charge will be made in the state where the asset is located. In the case of assets abroad, the charge may be made in the state where the heir was domiciled, or, if domiciled or resident abroad, where the heir is domiciled. Transfers and donations to non-profit institutions: The tax will not apply to the transfer of goods to institutions with purposes of public and social relevance, including assistance and charitable organizations, religious entities and scientific and technological institutes, and carried out by them in the achieving its social objectives. See the current rates in Acre states: progressive rate of 2%, 4%, 6% and 8% (donation) and 4%, 5%, 6%, 7% and 8% (death); Alagoas: rate of 2% (donation) and 4% (death); Amapá: rate of 3% (donation) and 4% (death); Amazonas: 2% rate per death or donation; Bahia: rate of 3.5% (donation) and progressive rate of 4%, 6% and 8% (death); Ceará: progressive rate of 2%, 4%, 6% and 8% for death or donation; Federal District: progressive rate of 4%, 5% and 6% upon death or donation; Espírito Santo: 4% rate upon death or donation; Goiás: progressive rate of 2%, 4%, 6% and 8% upon death or donation; Maranhão: progressive rate of 1%, 1.5% and 2% (donation) and progressive rate of 3%, 4%, 5%, 6% and 7% (death); Mato Grosso: progressive rate of 2%, 4%, 6% and 8% per death or donation; Mato Grosso do Sul: rate of 3% (donation) and 6% (death); Minas Gerais: 5% rate per death or donation; Pará: progressive rate of 2%, 3% and 4% (donation) and progressive rate of 2%, 3%, 4%, 5% and 6% (death); Paraíba: progressive rate of 2%, 4%, 6% and 8% due to death or donation; Paraná: 4% rate on transmissions due to death or donation; Pernambuco: progressive rate of 2%, 4%, 6% and 8% due to death or donation; Piauí: rate of 4% (donation) and progressive rate of 2%, 4% and 6% (transmission due to death); Rio de Janeiro: progressive rate of 4%, 4.5%, 5%, 6%, 7% and 8% per death or donation; Rio Grande do Norte: 3% rate per death or donation; Rio Grande do Sul: rate of 3% and 4% per donation, and progressive rate of zero, 3%, 4%, 5% and 6% for transmissions due to death; Rondônia: progressive rate of 2%, 3% and 4% for death or donation; Roraima: 4% rate upon death or donation; Santa Catarina: progressive rate of 1%, 3%, 5%, 7% and 8% per death or donation; São Paulo: 4% rate on transmissions due to death or donation; Sergipe: progressive rate of 3%, 6% and 8% for death and 2%, 4%, 6% and 8% for donation; Tocantins: progressive rate of 2%, 4%, 6% and 8% due to death or donation.

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