Supreme Court sets out a 12-month term for Congress to enact a Supplementary Law on ITCMD tax on foreign gifts and inheritances


Recently, the Federal Supreme Court (STF) decided the Direct Action for Declaration of Unconstitutionality by Omission (ADO) No. 67, filed by the Federal Attorney General, Augusto Aras, regarding the legislative omission claimed with respect to the regulation of article 155, paragraph 1, item III, of the Brazilian Constitution, within the scope of the rules that permit the states and the Federal District to institute the collection of tax on gifts and inheritances from overseas.

In this case, the en banc STF confirmed the existence of such legislative omission and established a term of 12 months for the National Congress to enact a supplementary law with general rules about the Estate and Gift Tax (ITCMD) in case of gifts and inheritances from abroad.  

Indeed, the Brazilian Constitution, in its article 155, paragraph 1, item III sets forth that the jurisdiction to institute the ITCMD shall be ruled by a supplementary law if the donor is domiciled or resident abroad, or if the deceased owned assets, was resident or domiciled abroad, or had their inventory processed overseas.

In the more than 30 years of the Brazilian Constitution was created, the supplementary law under discussion has not yet been enacted, and most states have instituted by law the collection of ITCMD tax where the donor or the deceased is domiciled or resident abroad.

Thus, the topic was assessed in the trial of Extraordinary Appeal (RE) No. 851,108 (Topic 825 of general repercussion), which established the decision that Brazilian states and the Federal District are prohibited from instituting the ITCMD tax in the cases referred to in art. 155, paragraph 1, III, of the Brazilian Constitution without the intervention of the supplementary law required by such constitutional provision.  

The effects of the decision were modulated so that its effectiveness began on the date of publication of the appellate decision of RE No. 851,108 (04/20/21), excluding the actions pending until the same date that discuss to which State the taxpayer should pay the due ITCMD, considering the occurrence of double taxation or the validity of the tax collection.

Therefore, as of April 20, 2021 and as long as the National Congress does not approve the relevant law, foreign gifts and inheritances, as set forth in art. 155, paragraph 1, III, of the Brazilian Constitution, cannot be subject to the ITCMD tax.