On February 26, 2021, the Brazilian Federal Supreme Court (Supreme Court) ruled unconstitutional the collection of ITCMD by the Brazilian States in cases in which (a) a donor or decedent is/was domiciled abroad, (b) the decedent had assets located abroad or (c) the probate proceedings take place abroad, as provided for in Article 155, item III, subitems a and b of the Brazilian Federal Constitution (Constitution).
The majority of the Supreme Court Justices understood, as provided by the Brazilian Constitution of 1988, that taxation on gifts and inheritances of assets located abroad should be conditional on the existence of a Supplementary Law, regulating the jurisdiction of the Brazilian States on such taxation. However, more than 30 years after the Constitution came into force, the Supplementary Law has not yet been enacted.
In light of the above, the Supreme Court declared that the effects of this decision should prevail not only as of the date of its publication (March 11, 2021) but also on prior events which are already under discussion in court.
It is worth noting that currently 22 of the 27 Brazilian States have already provided by law the collection of ITCMD in cases where the donor or decedent is domiciled abroad and, depending on the State, the ITCMD rates can vary from 2% to 8%, which is the range established by the Constitution.
Our Tax and Private Client teams are available to provide any clarification and guidance on this and other related matters.
Coauthors: Maria Paula Meirelles Thomaz de Aquino, Marcelo Trussardi Paolini and João Victor Guedes.
