Succession planning, a subject often avoided by families, has been reconsidered after this Covid-19 pandemic. After all, there is a general perception that life is fleeting and that unforeseeable and impossible events can happen. Another factor that has led families to consider starting succession planning is the bill being processed in the Legislative Assembly of the State of São Paulo (Bill No. 250/2020) which proposes changes to the taxation of transactions subject to the Tax on Transmission Causa Mortis and Donation (ITCMD), with the progressivity of rates, change in the calculation basis, and inclusion of supplementary pension plans.
Today, the ITCMD, which is levied in the event of the transmission of an inheritance causa mortis or in donations and usufructs, is assessed by applying the fixed rate of 4% on the respective calculation basis.
In the proposal of Bill No. 250/2020, the rate becomes progressive, possibly reaching up to 8%, according to the value of the calculation basis:
| Inheritance/Bequests | |
|
Calculation Basis (in R$, based on the UFESP for 2020) | New proposed rate |
| Up to R$ 276,000.00 | 0% |
| From R$ 276,000.01 to R$ 828,300.00 | 4% |
| From R$ 828,300.01 to R$ 1,380,500.00 | 5% |
| From R$ 1,380,500.01 to R$ 1,932,700.00 | 6% |
| From R$ 1,932,700.01 to R$ 2,484,900.00 | 7% |
| Above R$ 2,484,900.00 | 8% |
| Donations | |
|
Calculation Basis (in R$, based on the UFESP for 2020) | New proposed rate |
| Up to R$ 69,025.00 | 0% |
| From R$ 69,025.01 to R$ 414,150.00 | 4% |
| From R$ 414,150.01 to R$ 1,380,500.00 | 5% |
| From R$ 1,380,500.01 to R$ 1,932,700.00 | 6% |
| From R$ 1,932,700.01 to R$ 2,484,900.00 | 7% |
| Above R$ 2,484,900.00 | 8% |
In the donation with reservation of usufruct, currently the calculation basis of the ITCMD is equivalent to 2/3 of the value of the asset and the remaining portion of the tax is collected at the time of the extinction of the usufruct. In the proposal, the reduced calculation basis in the ITCMD will be applicable only in the cases of non-onerous transmission of bare ownership, when the transferor was not the last holder of full ownership.
And with regard to real estate, the current rule is that the calculation basis of the ITCMD must not be lower than the calculation basis of the IPTU relating to urban properties and, as for rural property, the total value of the property declared by the taxpayer in the assessment of the ITR – Rural Land Tax. In Bill No. 250/2020, the calculation basis of the ITCMD would correspond to the market value of urban or rural properties disclosed by the Treasury Department of the State of São Paulo (SEFAZ/SP), based on agreements, cooperation terms, partnerships, with the possibility of hiring specialized services or other procedures provided for in the legislation for assessing the value.
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And while the market value is not disclosed by SEFAZ/SP, the ITCMD would be calculated as follows: for urban property, the value used by the municipal tax administration of the location of the asset for purposes of taxation of the ITBI (Real Estate Transmission Tax) and, for rural property, the value of the bare land and of properties with improvements disclosed by the Department of Agriculture and Supply of the State of São Paulo.
In supplementary pension plans, which today are exempt from ITCMD, the exemption will only apply to payments made by the National Social Security Institute (INSS) and to São Paulo Previdência (SPPREV), coming to be levied on the amounts transmitted by private supplementary pension institutions and insurance companies.
And, finally, with regard to shares (that are not the object of trading on the stock exchange and/or that have not been traded in the last 180 days) and corporate quotas, on which today the ITCMD is levied on the book value, it will come to be calculated on the value of the net equity of the company, adjusted by the revaluation of assets and liabilities and by the updating of assets to the market value on the date of the triggering event.
It is important to remember that with regard to assets located abroad the non-incidence of the ITCMD is the subject of controversy between the tax authorities and the taxpayers. The thesis that has been prevailing in the Judiciary is that the ITCMD does not apply to assets located abroad due to the lack of provision in a supplementary law, of a national character, as required by the Federal Constitution, the provision of incidence in a state law being insufficient.
In addition to Bill No. 250/2020, there are other bills being processed that, in general terms, bring a significant increase in the value of the ITCMD that will be levied on the transmission of an inheritance, in addition to including supplementary pension plans. In this legal context, anticipating succession planning is a way to reduce uncertainties about the potential increase in the cost of transmitting an inheritance.
This article is generic and informative in nature, and does not constitute legal opinion for any specific case.
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