The São Paulo State Court of Justice (TJSP) recently issued a decision reaffirming the understanding that the State Inheritance and Donation Tax (ITCMD) is not due in cases of donations made by donors residing abroad, even when the asset is located in Brazil.
Court’s Reasoning
The ruling is grounded in Theme 825 of the Brazilian Supreme Federal Court (STF), which held that States may not levy ITCMD on donations or inheritances originating abroad without the prior enactment of a federal supplementary law — a statute that has not yet been published.
In the case at hand, the TJSP upheld a lower court judgment that dismissed the tax assessment on the donation of real estate located in São Paulo made by a person residing abroad. The State Treasury appealed, but the Court confirmed the decision in favor of the taxpayer.
Key Takeaways
- The decision reinforces the illegality of ITCMD levies on donations and inheritances from abroad in the absence of a federal supplementary law;
- The precedent applies to donations of assets located in Brazil when the donor resides outside the country;
- Taxpayers able to demonstrate tax residency abroad may benefit from this interpretation;
- The case may still be brought before the Superior Court of Justice (STJ), making it advisable to monitor future rulings.
Practical Implications
This understanding is particularly relevant for estate and succession planning strategies involving families with members residing abroad. Until a federal supplementary law is enacted, the States’ collection of ITCMD in such cases remains unconstitutional.
Recommendations
- Assess donation or inheritance situations with cross-border elements, especially when the donor or deceased is domiciled outside Brazil;
- Gather documentation evidencing foreign residence (such as proof of address or a definitive departure declaration filed with Brazilian tax authorities);
- Consider initiating judicial proceedings, when necessary, to challenge improper ITCMD assessments.
We remain available to review specific cases, advise on succession planning, and adopt the appropriate judicial or administrative measures to safeguard your assets.