Tax reform: text changes inheritance tax rules

Progressivity in the collection of inheritance taxes is one of the changes brought about by the tax reform (PEC 45/2019), pending in the Senate. Currently, in most states, taxation is fixed and varies between 4% and 8%, regardless of the amount transferred. The reform establishes general rules so that the higher the value of the transferred assets, the higher the rate charged. That’s what Eduardo Natal, Master in Tax Law from PUC/SP and advisor to the Brazilian Association of Tax Advocacy (ABAT), explains.

“The first aspect is that whoever has a larger inheritance will probably pay more tax than whoever has a smaller inheritance. Today, this progressivity is not mandatory. So São Paulo, for example, applies a single inheritance rate of 4%. Today in Brazil, states can charge up to 8% as inheritance tax. What the rate will be in the reform is not yet defined”, he points out.

According to Natal, the current differences in the tax laws of the states lead many taxpayers to carry out a plan to carry out the inventory in the states that tax less. The reform prevents this from happening by determining mandatory progressivity in tax collection. For him, “it will be difficult to create this tax planning because there will be a general regulation for inheritances and donations, including the inheritance of assets abroad.”

For Daniel Moreti, doctor and master in Tax Law from PUC/SP and judge of the Tax and Fee Court of the State of São Paulo, the Causa Mortis and Donation Transmission Tax (ITCMD) appeared in the text of the PEC “by default”. He argues that the proposal aims at taxation on consumption, which includes PIS and Cofins, IPI, ICMS and ISS. However, Moreti claims that the changes correct a problem: the criterion that determines which state should receive the ITCMD.

“In the current text of the Constitution, property left by inheritance has its tax paid wherever the property is located. Now any other goods, tax is paid at the place where the inventory is processed. Now the rule is: the tax is due to the state of the last domicile of the deceased. So if the subject died in the state of Rio de Janeiro, he will be paid to Rio de Janeiro”, he explains.

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Tax reform

Approved in the Chamber of Deputies in the first week of July, the tax reform is now being discussed in the Senate. The proposal’s rapporteur, senator Eduardo Braga (MDB-AM), states that the expectation is that the text will be approved with amendments by the end of October 2023. The proposal aims to simplify the Brazilian tax system — pointed out by the World Bank as one of the worst in the world — and greater transparency for the taxpayer.

The reform unifies the five main taxes on the consumption of goods and services into a Dual Value Added Tax (VAT). In practice, two taxes. On the one hand, IPI, PIS and Cofins, from the Union, give rise to the Contribution on Goods and Services (CBS). On the other hand, ICMS (state) and ISS (municipal) form the Tax on Goods and Services (IBS). CBS will be paid to the Federal Revenue Service, while IBS will be paid to a Federative Council that will represent states, the Federal District and municipalities. New rules come into effect from 2026, if approved by the Senate.

IPVA

Another novelty brought by the tax reform is the collection of IPVA on the ownership of aircraft and vessels. Today, the charge applies only to land vehicles, such as cars, motorcycles and trucks. Daniel Moreti recalls that the topic has already been the subject of discussion at the Federal Supreme Court (STF), which decided to maintain the exemption on water and air vehicles.

“This text corrects this distortion, determining that the IPVA is levied not only on the ownership of land vehicles, but also on water and air vehicles. In addition, the text raises the possibility of charging differentiated IPVA for vehicles that tend to an environmental purpose, electric vehicles, those with lower pollutant emissions and so on”, he explains.

excise tax

PEC 45 provides for the creation of a selective tax that will be introduced in the general value-added rule with higher or lower rates, considering the impacts of a given product or service on society. For example, cigarettes, which are scientifically considered harmful to the health not only of those who smoke, but also of those who inhale the smoke, should have a higher tax incidence. On the other hand, vehicles with lower environmental impacts should have a milder taxation. The rates and products will be defined by complementary law.

Cashback

Cashback is a mechanism foreseen in the proposal to return part of the taxes collected to low-income families. The details also depend on the edition of the complementary law.