The states and the Federal District do not have legislative competence to institute the collection of the Tax on the Transfer due to Death and on the Donation of Any Assets or Rights (ITCMD) in cases of gifts and inheritances abroad.
The Plenary of the Federal Supreme Court (STF), by a majority of votes, established this understanding in the judgment of Extraordinary Appeal (RE) 851108, with recognized general repercussion (Theme 825), in a virtual session concluded on 2/26.
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According to the decision, even in the face of the national legislator’s omission on the matter, member states cannot enact laws instituting the collection on the basis of concurrent legislative competence.
The 1988 Constitution establishes that it falls to federal supplementary law – and not to state laws – to regulate the competence and the institution of the ITCMD when the donor has domicile or residence abroad, or if the deceased person possessed assets, was a resident or domiciled abroad, or had their probate inventory processed abroad.
In the case at hand, the State of São Paulo challenged a judgment of the local Court of Justice (TJ-SP) which, in denying an appeal, denied the state government the power to charge the ITCMD on a testamentary gift instituted by an Italian citizen, domiciled in his country, in favor of a Brazilian woman, consisting of a piece of furniture located in the city of Treviso and a sum in euros.
The TJ-SP deemed unconstitutional a provision of state Law 10,705/2000 regulating the collection, on the grounds that, in the absence of the supplementary law referred to in article 155, paragraph 1, item III, of the Federal Constitution, the São Paulo legislation could not require the ITCMD in that situation.
Concurrent competence
The vote of the reporting justice, Dias Toffoli, for denial of the appeal, was followed by the majority of the justices.
He clarified initially that, as a rule, in the field of concurrent competence to legislate, including on tax law, article 24 of the Federal Constitution provides that it falls to the Union to enact general rules, with the states and the Federal District able to supplement them, or, in the absence of general rules, to exercise full competence to enact both general and specific rules.
In the Court’s case law, according to the reporting justice, such competence only authorizes them to legislate, in full, on tax law, in order to address particular features.
Supplementary law
According to Toffoli, neither the concurrent competence of article 24 of the Constitution nor the authorization of article 34, paragraph 3, of the Transitional Constitutional Provisions Act (ADCT) may be invoked to ground the existence of a right of the states and the Federal District to legislate on the matter, without the necessary supplementary law.
This is because, in his view, owing to the element of extraterritoriality, the constituent legislator required the National Congress to conduct a broader political debate on the criteria for setting general rules of tax competence, with the aim of avoiding conflicts of competence that generate double taxation between the states of the Federation and between countries with which Brazil has trade agreements, keeping the tax system uniform.
The required supplementary law, the reporting justice pointed out, does not have the sole sense of a general rule or guidelines, but of an instrument necessary for the national fixing of the exact competence of the states and the equalization of conflicts of competence.
Defeated on the merits were Justices Alexandre de Moraes, Cármen Lúcia, Luiz Fux, and Gilmar Mendes, who would have granted the appeal of the state of São Paulo.
For this line of reasoning, in view of the national legislator’s omission in establishing the general rules pertaining to the competence to institute the tax in the situations referred to, the member states may make use of their full legislative competence, without prejudice to the subsequent enactment of national supplementary law to regulate the matter.
Modulation
The majority of the bench adhered to the proposal to modulate the effects, contained in the reporting justice’s vote, so that the decision begins to produce effects as of the publication of the judgment, except for lawsuits pending conclusion up to that same moment, in which the following are discussed: (1) to which state the taxpayer should make payment of the ITCMD, considering the occurrence of double taxation; and (2) the validity of charging this tax, where it has not been paid previously. However, the proposal of an appeal to the Legislative Branch to remedy the omission and regulate the matter by means of supplementary law was not accepted.
Gifts and inheritances abroad
The general-repercussion thesis established was as follows: “The states and the Federal District are prohibited from instituting the ITCMD in the situations referred to in art. 155, § 1, III, of the Federal Constitution without the intervention of the supplementary law required by that constitutional provision.”
Source: STF
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