8/30/2021
As widely reported in recent months, the Brazilian Federal Supreme Court (“Supreme Court”), through judgment of the Extraordinary Appeal No. 851.108, issued on 1st March 2021 and published in the Official Gazette on 20th April 2021, declared unconstitutional the collection of Inheritance and Gift Tax (“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 Supreme Court Justices considered that State laws directly violate the provisions of the Constitution, since the levy of ITCMD in the events listed above should be conditional on the existence of a Supplementary Law, regulating the jurisdiction of each of the Brazilian States on such taxation.
As a result, the Supreme Court stated that the effects of this decision should prevail not only as of the date of its publication (20th April 2021) but also on prior events which were already under judicial discussion.
However, despite the enforceability of the constitutional provision ratified by the Supreme Court (highest federal court in Brazil), the State laws have not been revoked and still consider gifts and inheritances from abroad as triggering events for the collection of ITCMD.
In addition, the authorities responsible for regulating notarial and registry services, such as the National Council of Justice and the Disciplinary Board of the Courts, for instance, have not yet ratified the decision of the Supreme Court. Therefore, unless a specific judicial order is granted, Notaries Public and Real Estate Registry Offices still do not have the autonomy to draw up and register public deeds, if the ITCMD is not previously paid.
In view of the above, the taxpayer is compelled to resort to the Judiciary Branch to ensure, as a preventive measure, that gifts or inheritances falling under the provisions of Article 155, item III of the Constitution are not subject to ITCMD, as the Supplementary Law (mentioned above) has not yet been enacted.
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 Joao Victor Guedes Santos
