Main points and controversial issues in the Brazilian Legal System regarding gifts or inheritance operations

Luiz Flávio Paina Resende Alves
Tomás Lima de Carvalho

Succession planning involving international operations, or even pre- or post-immigration tax planning, are commonly based on the use of corporate structures in the country of origin and/or in another international jurisdiction. Therefore, some strategies are implemented to regulate the transfer of assets, rights, and income between the individual and/or the corporate structures located in the aforementioned jurisdictions, such as incorporation into share capital, purchase and sale of assets, donation or loans.

In some cases, in which the recipient of the planning has a family in another jurisdiction and may receive assets from a jurisdiction where he does not have tax residence, it is recommended the prior adoption of strategies aimed at conferring tax efficiency in the future assets’ transmission.

This article does not intend to present solutions to operationalize, with tax efficiency and legal certainty, international transfers, direct or indirectly, of assets, rights, or resources. Especially because such strategic solutions demand a specific analysis of the case and the details implicated in the concrete situation and in the legislation of the countries involved. For this, it is recommended to carry out a specific legal planning.

The aim here is to present the existing controversies in the Brazilian legal system on international gift and inheritance operations, to point out the operational advantages, the risks involved, and the possible legal-tax discussions that may occur.

Overview of ITCMD incidence rules (or not) on gift or inheritance:

At the end of February 2021, the Brazilian Federal Supreme Court (“STF”) decided, with general repercussion, for the non-levy of gift or inheritance tax (“ITCMD”) on assets located abroad, especially if the donor or deceased (inheritance) are not Brazilian residents.The discussion, in the specific case, covered the eventual competence of the states to demand the payment of ITCMD in the transmission due to death and donation of real estate and their respective rights, as well as movable assets, titles and credits, even if located abroad.

By majority vote, the STF decided that the issues (i) of taxation of non-residents in relation to assets and rights located in Brazilian territory and (ii) of the rule of taxing all transmissions carried out by transferors domiciled therein, including of assets located abroad, cannot be treated unilaterally by the States and the Federal District.

With this favorable result, the States of the Federation cannot charge ITCMD for cases of gift or succession of assets abroad, until there is a Complementary Law approved by Congress supporting such requirement.

The decision of the STF was based on article 155, §1, iii, b of the Constitution of the Federative Republic of Brazil (CRFB), which limits the competence of States to establish the ITCMD by determining that it is up to a Complementary Law – and not to State laws – to regulate such competence in relation to cases in which the “deceased owned assets, was resident or domiciled or his probate occurred abroad”.

It was concluded, therefore, that the Constitution did not grant the States the competence to institute the ITCMD in this case, and that the States that did so were doing something formally unconstitutional due to an affront to that constitutional provision.

Here is the rule prescribed in the CRFB:

Article 155. The states and the Federal District have the power to enact taxes on:

I – transfer by death and donation of any property or rights; 


Paragraph 1. The tax established in item I: 

I – Regarding real estate and the respective rights, is within the competence of the state where the property is located, or of the Federal District;

II – regarding bonds, titles and credits, is within the competence of the Federal District or of the state where the inventory (probate) and partition of succession proceeding, or where the donor is domiciled;

III – a Complementary law shall regulate the competence for the institution of such duty:

  1. a) if the donor is domiciled or residing abroad;
  2. b) if the deceased owned property, was resident or domiciled or had their inventory and partition of succession (probate) proceeding abroad;


Thus, in view of the provisions of article 155, §1, III, b of the CRFB, and STF’s decision, it is understood that the impossibility of levying ITCMD, due to the absence of a Complementary Law, presupposes that the donor or deceased resides abroad, or, if residing in Brazil, the object of the donation is an immovable property located abroad; or the Inventory and Probate is processed abroad or, even if processed in Brazil, has movable or immovable property located abroad as its object.

Understanding of the Federal Revenue on the levy of IRRF on Gift or Succession operations of Assets and Rights located in Brazil, from Brazilian to non-resident recipient:

The former Income Tax Regulation (“RIR/1999”) expressly provided in its article 690 that the transfers of amounts of inheritance or gift by a resident or domiciled abroad were not subject to Withholding Income Tax (“IRRF”). This provision was not repeated in the Decree that succeeded it, the new RIR/2018, which was silent about the continuity of the exemption from the withholding of the IRRF in these cases.

With this, the Federal Revenue Service of Brazil started to manifest itself through Consultation Solutions that established that, from the validity of the RIR/2018, transfers of inheritance or donation abroad began to be subject to the IRRF at the rate of 15% (fifteen percent), or 25% (twenty-five percent), if the beneficiary resides in a tax haven, pursuant to article 744 of the RIR/2018. Check out:


Cosit solution nº. 309, of December 26, 2018:

“SUBJECT: WITHHOLDING INCOME TAX – IRRF SUMMARY: INTERNATIONAL TRANSFERS. GIFT. INCIDENCE. Amounts transferred as a gift to a resident or domiciled abroad, individual or legal entity, are subject to the incidence of IRRF, at the rate of 15% (fifteen percent), or 25% (twenty-five percent), in the event that the beneficiary is resident or domiciled in a tax-favored country or dependency. LEGAL PROVISIONS: Law Nº. 5,172, of October 25, 1966 (National Tax Code), art. 43; Income Tax Regulation, attached to Decree Nº. 9,580, of November 22, 2018 (RIR/2018), art. 744, caput and §1º.”

Cosit solution nº. 142, of September 21, 2021:

“SUBJECT: WITHHOLDING INCOME TAX – IRRF. HERITAGE. PART OF ASSET. ACQUISITION. There is no incidence of IRRF on the payment made to an heir residing in the country for the acquisition of the right to the portion of the asset that was due to him as a result of inheritance. The tax will apply if the heir is a non-resident. Legal Provisions: arts. 35, VII, “c”, 128, §4º, 680 and 741 of the Income Tax Regulation (RIR/2018), approved by art. 1º of Decree Nº. 9.580 of November 22, 2018; and art. 1.784, of Law Nº. 10.406, of January 10, 2002, Civil Code (CC/2002).”

We understand, however, as wrong the interpretation of the Federal Revenue Service of Brazil concerning the incidence of the Withholding Income Tax on the transmission of inheritance and gift of assets held by non-residents in the country, especially regarding the value of the “principal” inherited or received by donation:


  • The CRFB assigns competence to Federal Government to establish the income tax, and to the States of the Federation the power to establish the general rules related to the competence to impose tax due transfers under gifts and inheritance. Consequently, the Federal Government does not have the competence to institute the income tax (in this case, the IRRF) in the face of these latest events (inheritance and gift), and therefore the understanding of the Federal Revenue in this sense is unconstitutional. 

  • The assets transfer carried out through a gift/inheritance does not fall under the concept of taxable income, despite being an equity addition. In this regard, the collection of IRRF appears to be unconstitutional and illegal.

  • Article 6, Item XVI, of Law n. 7.713/1988, in full validity, expressly grants exemption from income tax on the value of assets received by an individual as a gift or inheritance, making no distinction between resident and non-resident beneficiaries in the country. Thus, the non-subjection to income tax (including IRRF) must apply to both, being illegal any charge that does not observe these precepts.
  • By the provisions of Article 10, §2, “b” and those of Article 97, §3 of Decree-Law n. 5.844/1943, still in validity, it can be concluded that the IRRF on payments and remittances abroad is applied on gross income, not including “the value of assets acquired by gift or inheritance”.


  • The change took place through an administrative decree that does not have the force of law.


  • The gift or inheritance must be understood either as income or as an equity transfer, as these are excluding categories. Otherwise, the taxpayer would pay two different taxes on the same fact (bis in idem).


Therefore, given the opportunity of discussing the possible incidence of IRRF based on an understanding formalized by the Federal Revenue’s consultation solution; and the possible change in the scenario of incidence of ITCMD in case of legislative change (Complementary Law); The rule currently valid is as follows:

In fact, such rules – and tax risks arising from the mentioned operation – have a great impact on the dynamics of the relationships to be consolidated through specific succession, patrimonial and/or tax planning, which is why they must be considered, reflected, and also submitted to a prior planning for greater tax and operational efficiency.