ITCMD in 2026: What Has Changed Regarding Gifts and Inheritances

As we mentioned earlier in January regarding what to expect in 2026, there was a significant change in the legislation of ITCMD in 2026—our state tax on gifts and inheritances—and we are therefore in an advanced stage of transition regarding this tax. For this reason, this article is of interest to those who:

• wants to know when the ITCMD will increase, whether in 2026 or 2027;
• You need to understand how the tax reform has changed the inheritance and gift tax;
• lives in a state with a flat tax rate (SP, MG, PR) and wants to know how this affects them;
• is planning to make a lifetime gift or settle their estate before the new rules take effect;
• or simply wants to understand, in plain language, what Complementary Law No. 227/2026 means in practice for those interested in ITCMD.

The ITCMD—the tax on inheritance and gifts—has undergone more changes in the past two years than in the previous three decades. Constitutional Amendment No. 132/2023 made a progressive tax structure mandatory. Complementary Law No. 227/2026 regulated the taxation of assets held abroad, redefined the tax base, and established rules for trusts and fractional donations. And each state must adapt its legislation, with deadlines and tax rates that vary widely.

The result is a scenario in which 2026 serves as a transitional period between the old and new systems. For those planning to transfer assets, understanding these changes is not merely an academic exercise: it is a financial decision with significant implications.

Mandatory progressivity: what the ITCMD should become by 2026

Prior to the consumption tax reform, the progressive nature of the ITCMD was optional. The Federal Supreme Court (STF) had already recognized its constitutionality, but each state could opt for a flat rate¹. See decision on Issue 21², RE 562.045. São Paulo charged 4% on any amount—whether for a gift of R$ 50,000 or an inheritance of R$ 50 million.

Constitutional Amendment No. 132/2023 eliminated this discretion, expressly providing that the ITCMD “shall be progressive based on the value of the inheritance, bequest, or donation.“ The maximum ITCMD rate, set by the Senate, is currently 8% ³(see Senate Resolution No. 9/1992). However, only state law may establish the rate applicable to a specific case.

ITCMD in 2026: Those Who Have Not Yet Adapted to the Progressive Tax Rate

Of Brazil’s 27 states (including the Federal District), we note that eight states still maintain proportional tax rates. The situation as of March 2026 is as follows:

The eight states with a flat tax rate account for a large share of the country’s economic activity—including São Paulo, Minas Gerais, and Paraná.

Complementary Law No. 227/2026 echoed the provision of the revised Federal Constitution (Art. 156, subparagraph I). There is no doubt that everyone must transition to the progressive system. The only issue is that there is no state law establishing tax rates under the new system, and therefore there is no basis for requiring anything different.

Under the principle of retroactivity, any increase in ITCMD tax rates takes effect only on the first day of the following year, provided that a minimum interval of 90 days is observed ⁴(see Federal Constitution, Art. 150, subparagraph III). Thus, there is a minimum period of 90 days for preparation immediately following the change in the law.

São Paulo: Two bills under debate

São Paulo still charges a flat rate of 4% (Law No. 10,705/2000). Two proposals are vying for how the progressive tax rate will be structured:

Bill No. 7/2024 has received a favorable opinion from the CCJ and is awaiting review by the Finance Committee. Bill No. 409/2025 has a designated rapporteur in the CCJ, but no opinion has been issued. Neither bill has been voted on by the full chamber.

Once again, even if the tax rate is to be progressive, the situation will only change after a state law to that effect is passed. Furthermore, even if approved in 2026, the new tax rates will only take effect starting in 2027 (principle of annual retroactivity) and subject to a minimum notice period of 90 days (90-day retroactivity). The ITCMD rate in 2026, for São Paulo, remains a fixed 4%.

LC 227: The Six Changes That Matter for the ITCMD in 2026

Complementary Law No. 227/2026, published on January 14, is the general framework that states must follow. For those planning to transfer assets, six points deserve attention.

1. Basis of calculation: market value

Article 152 stipulates that the tax base for the ITCMD must be the market value of the asset or right as of the date of the taxable event. This replaces the practice followed by several states of using outdated values—such as the assessed value used for property tax (IPTU) purposes for real estate or the book value for equity interests.

The most significant change affects those who own family holding companies. Article 154, II requires that equity interests in privately held companies be valued using a “technically sound methodology that reflects market value,” with a minimum threshold based on adjusted net worth—plus goodwill. In plain language: donating holding company shares at book value—a common strategy in estate planning—will no longer be feasible starting in 2027 in most states.

We recently examined how the taxation of real estate holding companies changed in 2026 for personal income tax purposes and in relation to the new taxes, IBS and CBS. The ITCMD is another aspect of this issue.

2. Assets Abroad: The Resolution of Case No. 825/STF

Now, in 2026, Complementary Law No. 227/2026 provides in Articles 158 and 159 for the procedure necessary to determine the competent Brazilian state (or Federal District):

But note: each state still needs its own law to implement the tax, taking into account the one-year and ninety-day grace periods, just as with the progressive tax rate. In most cases, the new tax will not take effect until January 1, 2027, assuming that the state law is passed in 2026, particularly in the case of gifts and inheritances received from abroad.

3. Split donations: the aggregation rule

Article 155, IV authorizes states to aggregate donations from the same donor to the same donee within a period specified by state law. The progressive tax rate is applied to the aggregate amount, after deducting any tax already paid.

Splitting a donation into annual installments to keep each installment within the lower tax bracket is less effective. Several states already have rules in place regarding this. The aggregation periods vary:

4. Trusts: First Regulations in Brazil

ITCMD is triggered by the actual transfer of assets to the beneficiary or upon the death of the settlor—whichever occurs first. The creation of the trust, in and of itself, does not constitute a taxable event.

This resolves a source of uncertainty that had been affecting families with assets held abroad. The tax rules are now clear, although their practical application still depends on regulations issued by each state.

5. VGBL and PGBL: Exemption Confirmed

The Federal Supreme Court (STF), in its ruling on Issue No. 1,214 (RE 1,363,013/RJ), had already declared unconstitutional the collection of ITCMD tax on VGBL and PGBL amounts received by beneficiaries following the death of the account holder. Complementary Law No. 227/2026 now expressly provides that these are contracts of an onerous and aleatory nature, not forms of asset transfer, and are therefore outside the scope of the ITCMD (Art. 150, item III).

6. Termination of usufruct: no new tax

Article 150, subsection II, of Complementary Law No. 227/2026 provides that no ITCMD is levied upon the termination of a usufruct that transfers full ownership to the bare owner. In simple terms: when a father donates shares to his children and reserves the usufruct for himself, the ITCMD is paid at the time of the donation. When the father renounces the usufruct or dies, thereby extinguishing the usufruct, no new ITCMD tax is levied.

What you can still do with the ITCMD in 2026

The year 2026 serves as a transitional period. Complementary Law No. 227/2026 is already in effect, but most states have not yet adapted their respective laws. Three conditions currently exist that are unlikely to recur:

1. The flat tax rate in São Paulo (4%), Minas Gerais (5%), and Paraná (4%) is proportional; it needs to be changed;
2. Accounting basis for holding company shares—prior to the mandatory transition to fair value; and
3. No ITCMD tax is levied on assets held abroad in most states—Complementary Law No. 227/2026 requires state legislation to enforce the tax.

Starting in 2027, the combination of a progressive tax rate, a market-value-based tax base, and an aggregation rule could result in a significant increase in tax liability in specific situations. For high-net-worth individuals with assets structured through holding companies, the difference could be substantial.

This does not mean that every donation should be brought forward to 2026. The decision depends on multiple variables—the state of residence, the type of asset, the corporate structure, and the bill that will be passed. Bringing forward a donation to avoid a tax rate that may end up being lower than the current one (as in the scenario of Bill No. 409/2025 in São Paulo) would be a planning mistake.

The point is this: 2026 is the last year with known rules. Starting in 2027, the outlook depends on legislative decisions that are still up for debate. For those who need predictability, acting now is worthwhile—not necessarily because it’s cheaper, but because it’s safer.

Conclusion

Brazil’s ITCMD has changed more in two years than it did in thirty. Constitutional Amendment No. 132/2023 introduced a progressive tax structure. Complementary Law No. 227/2026 regulated assets held abroad, standardized the tax base, and established rules for trusts, fractional gifts, and the termination of usufruct. States have until 2027 to adapt, and the tax rate map will be redesigned.

For those planning to transfer assets, there are three certainties: the ITCMD tax will be progressive in all states; the tax base will be market value; and gifts and inheritances from abroad will be taxed. The uncertainty lies in the amount—and that depends on where you live, the amount involved, and which bill is passed in your state.

The advice is straightforward: assess your situation now, while the 2026 rules are still in effect. Not necessarily to rush into a transaction, but to make a well-informed decision—not under the pressure of a deadline that has already passed.

Count on me!

Warm regards,

Vinicius Tersi

• 1
  . See decision on
• 2
  , RE 562.045
• 3
  (see Senate Resolution No. 9/1992)
• 4
  (see Federal Constitution, Art. 150, subparagraph III)

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Article published in March 2026. The information reflects the laws in effect as of the date of publication and may be subject to change due to subsequent legislative or judicial developments.

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Further reading:

• Gifts and Inheritances Received Abroad: How to Report and Pay Taxes
• Real Estate Holding Companies in 2026: Is It Still Worth Setting One Up?
• Income Tax in 2026: What to Expect?