In August 2024, Brazil’s House of Representatives approved the main text of Complementary Bill (PLP) 108/2024, marking the second major step in the regulation of tax reform in the country. Among the key changes is a notable proposal to modify the ITCMD (Tax on Inheritance and Donations of Goods or Rights).
The bill maintains the authority of states and the Federal District to collect and supervise the tax but introduces new guidelines that must be followed by these entities. One of the most significant changes is the new rule regarding the taxation of assets located abroad: ITCMD will now be owed to the state of residence of the deceased or donor, regardless of where the assets are located or where the probate process occurs. If the deceased or donor resides abroad, the responsibility for collecting the tax will fall to the state of residence of the heir or recipient.
Additionally, the bill specifically addresses the taxation of trusts, establishing that the change in ownership of assets within this structure will be treated either as an inheritance or a donation, depending on the timing of the transfer. If the transfer occurs after the death of the owner, it will be considered an inheritance and subject to the applicable ITCMD rules. If it occurs during the owner’s lifetime, it will be treated as a donation, also subject to the relevant tax regulations.
For other contracts that have similar characteristics to trusts, the same rules will apply, both within Brazil and internationally. This harmonization aims to ensure that all forms of asset transfers, regardless of their structure or location, are treated uniformly and appropriately for tax purposes under the new guidelines.
Another significant change is the expansion and clarification of the legislation concerning the tax base calculation, with the goal of standardizing the assessment process across the country, which could result in an increase in taxable amounts. Additionally, the bill establishes that the ITCMD rate will be progressive, varying according to the value of the inheritance or donation. This means that taxpayers with higher-value assets will be subject to higher rates, ensuring more equitable and proportional taxation based on the value of the transferred assets.
After being approved by the House of Representatives, the bill now moves to the Federal Senate, where it will be voted on in a single round. If approved, it will be submitted to the president for sanction or veto for final completion.
The PLP represents a substantial attempt to change Brazil’s tax system, particularly regarding the taxation of inheritances and donations. The bill promises to bring greater clarity and uniformity in the application of ITCMD, ensuring a fairer and more transparent adaptation to new economic realities, both nationally and internationally.
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Published on October 8, 2024