The 1st Panel of the Federal Supreme Court (STF) unanimously ruled that the Withholding Income Tax (IRRF) does not apply to the advance of the legitimate portion, referring to the donation of assets or rights made during one’s lifetime that constitutes part of a future inheritance. The decision was issued in the judgment of Extraordinary Appeal (RE) 1439539, in which the justices determined that an advance on inheritance does not constitute a taxable event for Personal Income Tax (IRPF) purposes.
The federal government argued for the application of the IRPF on the supposed capital increase resulting from the donation. According to the Treasury, the donor should pay tax on the difference between the historical value of the asset in their declaration and the market value on the donation date. However, the opinion of the rapporteur, Minister Flávio Dino, prevailed, noting that no capital gain is subject to taxation since a donation as an inheritance advance does not trigger a taxable event for income tax purposes.
It was also emphasized that the IRPF tax base does not overlap with that of the Inheritance and Donation Tax (ITCMD). For IRPF, the basis would be a capital gain, while for ITCMD, the property’s market value is used. However, the minister underscored the absence of tax materiality in such operations, as the donor does not gain capital from the advance donation but simply transfers already existing assets.
The Supreme Court’s consolidated understanding ensures that donations of assets or rights that make up the future inheritance, in the context of advancing the legitimate portion, do not generate a capital gain and therefore cannot be taxed under IRPF. This distinction between tax regimes for IRPF and ITCMD protects taxpayers from double taxation on the same operation.