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Tax Reform and State Laws Increase Inheritance Tax in Brazil; Heirs Now Share Assets with Creditors and the Government Before Division.
What was once an almost automatic process, receiving the assets of a deceased relative — is becoming a tax maze that surprises thousands of families across the country.
With the ongoing tax reform in the National Congress and the approval of new state laws, the inheritance and donation tax (ITCMD) has become the new villain for those expecting an intact estate after the division.
States such as São Paulo, Rio de Janeiro, Minas Gerais, Paraná, and Bahia are reviewing their legislation to increase rates, revisit exemptions, and expand the tax base on assets, funds in bank accounts, and even properties located abroad. The movement has a clear motive: to reinforce public coffers in light of the structural changes brought about by the federal tax reform.
The ITCMD: A State Tax with Growing Weight
The ITCMD (Tax on Transmission Cause Mortis and Donation) is a tax charged by the states whenever there is an inheritance or donation of assets.
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Provided for in Article 155, Item I, of the Federal Constitution, it has rates defined by each state, with a ceiling of 8%, established by the Resolution No. 9/1992 of the Federal Senate.
For many years, most states maintained average rates of 4% to 6%, which made the impact relatively small.
But the scenario is changing rapidly:
- São Paulo is analyzing PL 511/2023, which raises the tax to up to 8%, the maximum limit allowed.
- Rio de Janeiro updated its Decree No. 48.956/2023, increasing oversight of inherited assets abroad.
- Minas Gerais and Bahia are studying similar projects, justifying the increase by the need to compensate for revenue losses caused by exemptions and tax benefits.
These state changes add to the discussions of the federal tax reform (PEC 45/2019 and PEC 110/2019), which foresee a standardization of the ITCMD at the national level and increased transparency in transfers between heirs and donors.
Tax Authorities and Creditors Come First: What Heirs Need to Know
The impact of the changes is not limited to the new rates.
The order of priority in the division — defined by Article 1,997 of the Civil Code and Article 186 of the National Tax Code (CTN) — establishes that taxes and debts take precedence over the inheritance.
In practice, this means that before any asset is divided among children, spouses, or dependents, the estate must clear debts with the tax authorities and private creditors.
Only after resolving these issues is the remaining balance shared among the heirs.
In other words: if the deceased had debts, financed properties, or overdue taxes, part of the inheritance goes straight to the government and banks, reducing the final amount received by the relatives.
In many cases, the state tax on the transmission of assets is collected even during the inventory process, forcing families to sell properties or use reserves just to regularize the inheritance.
Tax Reform May Standardize and Increase the Tax
While states act on their own, the National Congress is discussing a national standardization of the ITCMD within the context of the tax reform.
Among the proposals under discussion are:
- Mandatory collection on inheritances received abroad;
- Creation of progressive brackets, which increase the rate according to the value of the inheritance;
- Centralization of revenue collection by the Union, with redistribution to the states.
If approved, this reformulation will increase the effective tax burden on medium and high estates, raising concerns among lawyers, economists, and families planning for estate succession.
According to estimates from the National Confederation of Municipalities (CNM), the changes could raise ITCMD revenue by up to 45% in the coming years, especially in the wealthier states.
Experts Warn: Estate Planning Is More Important Than Ever
Tax attorneys and family law experts emphasize that, in light of this new scenario, estate planning has ceased to be a luxury and become a necessity. Instruments such as public wills, donation with a reservation of usufruct, and establishing family holdings are legitimate strategies to avoid unpleasant surprises and reduce the tax impact on the inheritance.
Without this planning, heirs may face years of court inventory, pay high taxes, and still see part of the estate go to the government and creditors even before receiving what is rightfully theirs.
What emerges, therefore, is a new map of inheritance in Brazil. State taxation rises, oversight cross-references data with notaries and banks, and the tax reform promises to standardize but also make the process more expensive and bureaucratic.
In this scenario, one truth prevails: those who do not plan may leave their heirs with more debts than assets.
É absolutamente inconstitucional cobrar sobre herança no exterior! Isso fere a soberania do Estado estrangeiro que legisla sobre os bens que se situam sob a jurisdição do seu próprio território!!! Além do problema de bitributação, isso é tão absurdo como se o Brasil cobrasse IPTU ou IPVA sobre bens em outro país.