doações e heranças recebidas no exterior-02

Donations and inheritances received abroad: how to tax and declare

We constantly serve customers who receive donations or inheritances from assets located abroad. There are doubts about the taxes due in Brazil on the value of these donations and inheritances received abroad and the obligation to inform them to the Federal Revenue Service (RFB) through the income tax return (DIRPF) and to the Central Bank through the Declaration of Brazilian Capitals Abroad (CBE).

The purpose of this text is to describe in a general way what is the tax due and what should be declared. In particular, it is important to describe the discussion of the incidence of ITCMD (transfer tax cause of death and donation) on donations and inheritances received from abroad.

Taxation of inheritances and donations: general rule

In general, for inheritances and donations, there are two taxes to consider: the ITCMD and the personal income tax (IRPF). ITCMD is a state tax, as a rule due by the recipient of the transferred good or right (the grantee or successor, as the case may be). The IRPF is not levied on the value of the donation or inheritance, but on any capital gain earned by the donor or the estate of the deceased person. The table below summarizes the main differences between the two taxes:

Taxpayerrecipient of the donation or inheritance (or the donor, in exceptional cases)holder of the transferred good or right (donor or estate)
Taxable eventDonation or opening of the succession (inheritance)Transfer of ownership of assets and rights to the beneficiary
Calculation basisvenal value of the good or right transmittedcapital gain
Calculation basis considers:the set transmitted to the same beneficiaryeach asset or right transmitted in isolation (option to transfer at acquisition cost, without gain, or at market value)
Aliquotup to 8%, assuming progressivity (each state establishes its rate)15% -22.5%, due to the capital gain

To explain the differences between the ITCMD and the IRPF, assume that properties in Brazil 1 and 2 are donated to two beneficiaries called A and B, in equal parts (A receives 50% of property 1 and 50% of property 2, as well as B). For both properties, the acquisition cost of each is R $ 100,000 and the market value is R $ 1,100,000, equivalent to the market value:

  • for ITCMD purposes, the calculation base will be R $ 1,100,000 for each grantee (50% of the sum of the venal value of the two properties), and the tax due must be collected by each of them;
  • for IRPF purposes, the donor may choose to transmit each property for a different amount. Thus, the donor can decide to transfer property 1 for the acquisition cost of R $ 100,000 (R $ 50,000 for A and R $ 50,000 for B), without paying IRPF on the transfer. In turn, property 2 can be transferred for R $ 1,100,000 (R $ 550,000 for each beneficiary), taxing the capital gain, corresponding to the positive difference of R $ 1,000,000 (R $ 1,100,000 minus R $ 100,000). The IRPF will be due by the donor, and beneficiaries A and B are exempt, each one having to inform his share in the properties for the amount attributed by the donor.

It is worth noting that the value of the assets and rights transferred is different for each tax. Thus, the amount assumed for ITCMD purposes is irrelevant for calculating the IRPF, and vice versa. The amount attributed for IRPF purposes must be informed in the DIRPF of the transferred asset or right (and, if applicable, the calculation of the capital gain) and in the DIRPF of the beneficiary of the donation or inheritance, at the value attributed by the former holder.

The ITCMD rate is up to 8%, a limit established by the Federal Senate. Each state is competent, however, to set its own ITCMD rate within this limit. This means that taxation in each state may vary. The table below shows as an example the ITCMD rates of the states of São Paulo, Rio de Janeiro and Minas Gerais today:

StateTax rateObservations
SP4%Exemption from donation of up to 2,500 UFESPs (R$ 69,025.00 in 2020) to the same donor and grantee in the same calendar year.
RJ4-8%Exemption from donation of up to 11,250 UFIRs-RJ to the same grantee in the same calendar year (R$ 39,993.75 in 2020). 4% rate for amounts of up to 70,000 UFIRs-RJ (R$ 248,850.00 in 2020). Intermediate rates of 4.5%, 5%, 6% and 7%. Maximum rate from 400,000 UFIRs-RJ (R$ 1,422,000.00 in 2020).
MG5%Exemption from donation of up to 10,000 UFEMGs (R$ 37,116.00 in 2020), or 50% discount of the tax due on donations of up to 90,000 UFEMGs (R$ 334,044.00 in 2020) to the same donor and grantee, considered 3 calendar years.

The comments above apply, in general, both to donations and inheritances referring to assets and rights located in Brazil or abroad. In the case of ITCMD, however, there is the possibility of questioning its requirement for donations and inheritances received from abroad.

Legal discussion on donations and inheritances received from abroad for ITCMD

For situations where (a). the donor is domiciled or resident abroad or in which (b). the deceased person had assets, was a resident or domiciled or had their inventory processed abroad, the Federal Constitution required a complementary law to define the competent state. This complementary law was never passed.

Although the requirement required by the Federal Constitution has not been met, the states and the Federal District have started to demand ITCMD in their respective legislation. Although each taxing entity may have a different way, the ITCMD is usually required by the state where the beneficiary of the donation or inheritance is domiciled. The tax authorities’ main argument is that the Federal Constitution and the Transitional Constitutional Provisions Act authorize that States may exercise full legislative competence, including with regard to the national tax system, in the absence of federal law providing for general rules.

This led to several questions from taxpayers. The Special Body of the São Paulo Court of Justice, for example, recognized that the provision of the São Paulo legislation is unconstitutional, and the ITCMD cannot be required in the cases in which the complementary law is required (ArgInconst 0004604-24.2011.8.26.0000, rel Des Guerrieri Rezende, j. 30.03.2011). In Rio de Janeiro there is a similar discussion, judged in favor of the Tax Authorities (ArgInconst 0189188-24.2011.8.19.0001, rel. Des. Nagib Slaibi Filho, j. 01.02.2016, still without res judicata).

Current status of the discussion

The Federal Supreme Court (STF) recognized the general repercussion of the issue (Topic 825). This means that the pending judgments in the lower courts must be suspended until the STF pronounces, and the decision taken by the STF must be followed in the other judgments. The current trend is towards a favorable judgment for taxpayers, given the Court’s precedents on similar issues. Thus, taking the right precautions, it is possible to bring a lawsuit to avoid the requirement of the ITCMD on donations and inheritances received from abroad.

It should be noted that there is a project in progress by the National Congress to regulate the tax jurisdiction of the States and the Federal District (Draft Supplementary Law no. 363/2013, authored by Federal Deputy Erika Kokay (PT / DF)). Even if the project is approved and converted into law, the complementary law should not apply to the facts that occurred before its effectiveness.

Other comments

It is worth remembering that assets and rights abroad owned by a tax resident in Brazil must be informed to the Central Bank through the declaration of Brazilian capital abroad (CBE). In this regard, the comments in our post on “How to declare assets abroad” are valid.

I also recommend reading the text with guidelines on the topic “declaration of Brazilian capital abroad”, updated content that will help keep you up to date with the tax authorities.

In this blog you will always find relevant and updated information on the subject, in addition to guiding you to avoid problems with the Tax Authorities and other authorities. Feel free to tell us about your experience, share the content with other friends who need guidance and contact us via email or via WhatsApp. Click here to send a message now.

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Vinicius Tersi é advogado, especialista em Direito Tributário Internacional.

Elaborado por 3MIND – Especialistas em marketing jurídico