ITCMD: strategy can reduce the impact of taxation on equity

Whenever there is a transfer of assets and rights from one person to another through inheritance or donation, it is necessary to consider the incidence of the Tax on Cause Mortis and Donation Transmission (ITCMD).

In fact, scheduling the transmission of goods in life can be a way to protect family assets and avoid the bureaucracy and stress common in an inventory process.

Augusto Andrade, partner and manager of the Individual’s Department at Domingues e Pinho Contadores, highlights that this programis not a guarantee of savings, but can bring benefits if it is done in a focused and advance way. "Those who plan have a chance to organize the succession in such a way that there is a reduction in the cost of taxes or that they are paid over the time," he explains.

In these cases, to compose the assessment of what can be more advantageous for each case, it is necessary to know the taxes that fall on the succession currently. Thus, also using an accounting and tax consultancy helps in the analysis of the most indicated procedures.

What ITCMD is

ITCMD is a state tax on donations, transfers of assets and inheritances. In some places, this tax may also be referred to as ITCD, ICD or ITD.

Who is entitled to pay the ITCMD

Beneficiaries who become taxpayers are (as a general rule):

• in the "causa mortis" transmission: the heir or the legatee;
• in the donation: the grantee.

 

Rates

The ITCMD rate varies according to the State, but is limited to 8% on the transferred assets.

“In the present days, there is this constitutional limit on inheritance and donation tax, but there are proposals in progress to raise this percentage to 20%. So, anticipating a succession, imagining that the rule may change, and that this process will become more expensive, is an opportunity and a way to protect the assets”, evaluates the expert.

Currently, the rate is progressively applied in Rio de Janeiro, varying according to the value of the property transferred, with the percentage between 4% and 8%.

 

Rio de Janeiro
UFIR value in 2020:	BRL 3.5550
Rate	Values in UFIR
4%	Up to 70,000
4.50%	Above 70,000 and up to 100,000
5%	Above 100,000 and up to 200,000
6%	Above 200,000 and up to 300,000
7%	Above 300,000 and up to 400,000
8%	Above 400,000

In São Paulo, the percentage is fixed at 4%, but the State may adopt the progressive and staggered collection of rates, according to the value of the asset to be transferred. A proposal to that effect is underway in the legislative area.

 

Sao Paulo
UFESP value in 2020:	BRL 27.61
Rate:	4%

Both states provide for tax exemptions. In Rio, the “cause mortis” transmission of residential properties to individuals that the total amount the maximum of 60,000 UFIR is not required to pay it. In São Paulo, on the other hand, there is no payment for transmission of donations in an amount corresponding to up to 2,500 UFESP.

ITCMD payment location

Depending on the kind of asset, the location for paying the tax may vary, as follows:

• Real estate: where the property is located.

• Movable assets (cash donation, corporate shares, jewelry, etc.): as a rule, in the place where the grantee resides.

When the donor of a property located in Brazil resides overseas, the ITCMD is paid at the donor's residence state or, in the case of real estate, where the property is located.

Tax advice complements legal advice on succession planning

There are several means to compose succession planning, such as private pension plans, real estate funds, the establishment of a family holding company, donation, will, among others. A law firm will be able to assess the demands and objectives of the interested party to point out the best path.

Acting in a complementary manner, Domingues e Pinho Contadores assists the taxpayer in the calculation of related taxes, whether in the advanced scheduling of an obligations or in complying with the estate practices.

Counting on a tax consultancy guided individuals about the taxes on the practices adopted for inheritance, which can contribute, in a strategic way, in preserving the family assets and resources.