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With the New Tax Reform, The Progressivity of the Tax Becomes Mandatory and The Calculation Base Changes, Forcing Families to Reassess Their Succession Planning.
Approved by Congress, the Tax Reform has brought one of the most profound changes in inheritance and donation taxation in recent decades, generating a central question for thousands of families: will the tax become more expensive? The answer is complex, but for higher estates, the trend is a significant increase. The change does not create a new tax, but restructures the rules of the already existing Tax on Transmission Cause Mortis and Donation (ITCMD), making its collection stricter and, in many cases, more burdensome.
The epicenter of the transformation is Constitutional Amendment (EC) 132/23, which, as detailed in an analysis by the CNB/SP portal, made the progressivity of the tax a mandatory rule throughout Brazil. This means that, the higher the value of the inheritance or donation, the higher the tax rate applied. This alteration, combined with other fronts such as the taxation of assets abroad and the new calculation base based on the “market value”, as pointed out by the NetCPA portal, is causing a real rush among families to reorganize their financial planning before the new rules come into effect.
The End of Fixed Rates: What Changes in Practice?
The main and most immediate consequence of the Tax Reform on the ITCMD is the end of fixed rates, a model previously adopted by economically significant states such as São Paulo (4%) and Minas Gerais (5%). The new constitutional rule imposes a mandatory progressive rate system throughout the national territory. In practice, the tax rate will no longer be a single percentage of the total value, but divided into brackets, which increase as the value of the transferred asset or right increases.
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This determination forces states to review their legislation to comply. Experts expect, as noted in the CNB/SP analysis, that most states will extend their tax brackets up to the maximum cap allowed today, which is 8%. For large estates located in these states, the consequence may be the doubling of the tax to be paid. This transition, however, creates a “window of opportunity”, as the new tax laws must respect the principles of previousness, encouraging families to anticipate donations to take advantage of the current, more beneficial rules.
Assets Abroad and Market Value: The New Taxation Fronts
In addition to progressivity, the reform advances on two fronts that promise to increase revenue and the complexity of planning. The first is the closure of a historical loophole: the taxation of inheritances and donations involving assets located abroad. Previously, due to the lack of a complementary law, this charge was prohibited. Now, the Tax Reform establishes clear rules for states to tax global assets, reaching an increasing number of Brazilians with investments or residence in other countries.
The second front, highlighted by the NetCPA portal as one of the most impactful, is the change in the calculation base for equity interests. Bill Complementary (PLP) 108/2024, which regulates the reform, proposes that the tax should be applied to the “market value” of shares or stocks, and no longer on their accounting net asset value, which is generally much lower. For family businesses, for instance, this change may triple the amount of tax due, as well as open up significant potential for legal disputes between taxpayers and the Tax Authority regarding the appropriate valuation methodology.
Private Pension: The Relief Point in the Reform
Amid a scenario of increasing tax burden, one news item brought relief to those using financial planning instruments. According to a report from InfoMoney on the progress of PLP 108/2024, the text approved in the Senate explicitly excluded the balances of private pension plans (PGBL and VGBL) from the ITCMD calculation base. This decision aligns the legislation with an already established understanding in the Supreme Federal Court (STF), which considers such plans to have the nature of insurance, and not of inheritance.
The confirmation of this exemption, if maintained in the final vote in the Chamber, consolidates private pension as one of the most efficient tools for wealth succession in Brazil. The resources accumulated in these plans are transferred directly to the designated beneficiaries, without going through the probate process and, crucially, without the inheritance tax. This tax advantage tends to further strengthen the role of these products not only as a retirement strategy, but as a central pillar in the succession planning of Brazilian families.
How Does Succession Planning Look Now?
As the rules of the Tax Reform become clearer, the urgency for well-structured succession planning has never been more evident. Tools such as establishing family holdings and donating assets during one’s life with reserved usufruct remain valid strategies, but they need to be reassessed. The holding, for example, loses part of its tax efficiency with taxation based on “market value”, but strengthens as an essential instrument for governance and organization of family wealth.
However, haste can be the enemy of perfection. A rushed plan, without a detailed analysis of the family’s objectives and the profile of the assets, can lead to conflicts among heirs and even a higher tax burden in the future. The unanimous recommendation from experts is to seek qualified advice that integrates legal, accounting, and financial areas to navigate the new landscape safely and ensure the preservation of the legacy for future generations.
Do you agree with this change? Do you think it impacts the market? Leave your opinion in the comments, we want to hear from those who experience this firsthand.
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