The Estate and Gift Tax in Brazil

Can receiving a gift or an inheritance have a downside? Well, it could if you’re the one having to pay tax on it.

If you’re from the US, you’ll likely be familiar with the gift tax and estate tax. In Brazil, these taxes are combined into one - the Imposto de Transmissão Causa Mortis e Doação or ITCMD.

The ITCMD is a tax levied by the state and is usually paid by the recipient. The rate varies from state to state, but under the current laws, it never exceeds 8% of the value distributed. In the State of São Paulo, for example, the tax is 4%.

In the case of inheritance, the heirs pay the tax after starting the inventário process, which requires proof of death along with other documents to create an inventory of assets and liabilities. The deadline to pay differs depending on whether the process is judicial or extrajudicial. However, the payment must generally happen within 60 days from the date of death.

In the case of a gift, the beneficiary fills out a declaration and pays the tax immediately before the transfer of assets. There are some exemptions to keep in mind. Such is the case in São Paulo for gifts that do not exceed R$69,000 (approximately US$12,600) in 2020.

Receiving assets from others can certainly have its benefits. Just make sure you’ve considered any potential downsides, including the tax implications. You don’t want to finish with the losing end of the stick.