The race for estate and succession planning.

By Claudia Lopes The Inheritance

and Gift Tax , known in the State of São Paulo as ITCMD, is a state tax levied on assets and rights transferred due to the death of their owner ( causa mortis ) or due to a non-onerous transfer between living persons (donation, including that resulting from unequal division in divorce or dissolution of a stable union) and, as such, is present in a large part of estate and succession planning. Provided for in Article 155 of the Federal Constitution, the ITCMD has a maximum rate of 8% on the value of the assets and rights to be transferred, and being a state tax, the States and the Federal District have their own rules regarding exemptions and rate setting. The ITCMD currently varies between 1% and 8%, with 17 Federative Units already adopting progressive rates, according to the value of the assets and rights. The State of São Paulo, which adopts a fixed rate of 4%, is an exception. The tax reform approved by the National Congress made the progressive rates of the ITCMD (Inheritance and Gift Tax) mandatory. Thus, the larger the inheritance or assets to be transferred, the more tax will be paid. In some cases, this will mean paying double the amount. The expectation is that the new rules will be in effect by 2025, but while state laws regulating the progressivity are not yet enacted, the demand for estate and succession planning has intensified, aiming to take advantage of the current scenario. It is worth noting that the tax reform brought other changes regarding the transfer of assets and rights, in addition to the progressive ITCMD rate. With regard to real estate, the state where the property is located becomes the recipient of the tax; with regard to movable property, the beneficiary may be the state where the probate proceedings take place or the domicile of the donor, the choice being up to the taxpayer. Furthermore, in the case of movable property or rights, including financial assets and corporate shares, the taxpayer will no longer be able to choose to proceed with the division in the State where the inventory is carried out, taking advantage of a lower tax rate. It will be mandatory to pay the ITCMD (Inheritance and Gift Tax) in the State of domicile of the deceased. Another relevant point is the incidence of the tax on inheritance or donation originating from abroad. This is because, in the case of a donation, if it is movable property, even if the donor resides abroad, ITCMD will be levied in the State of domicile of the donee. In the case of immovable property, even if the donor and donee reside abroad, the tax will be levied in the State where the property is located. Regarding transmission causa mortis