Estate and succession planning: the progressivity of the ITCMD (Inheritance and Gift Tax).

As widely reported, the tax reform approved by the National Congress provides for progressive rates for the Inheritance and Gift Tax   , changing the current scenario in many states. In São Paulo, for example, a fixed rate of 4% has been applied for over 20 years.

If Bill 7/2024, currently before the Legislative Assembly of the State of São Paulo, is approved without modifications, the following rates will be applied:

I – 2% on the portion of the tax base that is equal to or less than 10,000 (ten thousand) UFESPs;

II – 4% on the portion of the tax base that exceeds 10,000 (ten thousand) UFESPs and is equal to or less than 85,000 (eighty-five thousand) UFESPs;

III – 6% on the portion of the tax base that exceeds 85,000 (eighty-five thousand) UFESPs and is equal to or less than 280,000 (two hundred and eighty thousand) UFESPs;

IV – 8% on the portion of the tax base that exceeds 280,000 (two hundred and eighty thousand) UFESPs;

In 2024, each UFESP is equivalent to R$ 35.36, but its value is updated annually by the Consumer Price Index (IPC).

The calculation is done as follows: the corresponding rate is applied to each asset bracket, and the tax due will be the result of the sum of the amount calculated in each bracket, just as occurs in the calculation of income tax.

Given that the ITCMD (Inheritance and Gift Tax) applies to 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), it is a tax present in a large part of estate and succession planning.

The expectation is that the new rules will come into effect in 2025, and therefore it is prudent for families to anticipate the regulation of the progressive ITCMD rate and carry out estate and succession planning, taking advantage of the current scenario which appears more favorable from a tax perspective.