STF judges unconstitutional ITCMD charges on inheritance and donations from abroad

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By Adriana Lemos and Camila Cabral

Last Friday, the 26th of February, the Supreme Federal Court (“STF”) concluded its judgement on Extraordinary Appeal (“RE”) No. 851108, regarding the possibility for states to charge Tax on Inheritance tax and Donation (“ITCMD”) in case of inheritances and donations received from abroad.

The result was released on Monday, the 1st of March. With seven votes to four, the STF Ministers decided that it would be unconstitutional for states and the Federal District to charge the ITCMD. The majority decision was that the Federal Constitution requires that taxation on inheritances and donations be regulated by existing Complementary law, which has not yet been instituted, therefore the states and the Federal District do not have the authority to do so.

The ITCMD is a state and federal district tax, which is levied on the transmission of assets as a result of a donation or as a result of succession, and who bestows this jurisdiction to the states and the Federal District is the Constitution of the Federal Republic of Brazil (“Constitution” ), which also lists the main provisions of this tax.

Despite granting this authority to state entities and the Federal District, the Constitution is clear in establishing that a Complementary Law is required to regulate tax jurisdiction in cases which the donor has domicile or residence abroad and in cases which the deceased person possessed assets, whether resident or domiciled, or had their inventory processed abroad.

It is important to note that the majority of states have already established laws concerning the collection of the ITCMD in cases which the donor or deceased resided or domiciled outside the country. However, as long as the National Congress does not approve the relevant legislation, this taxation will be considered unconstitutional, therefore donations and inheritances from abroad will not be taxed by the ITCMD.


The source of the judgement is a security mandate filed with the Court of Justice of the State of São Paulo (“TJSP”), by the State government itself, which had intended to tax an Italian person’s donation of assets that were also located in Italy, but whose recipient was in Brazil.

As a justification, the state of São Paulo cited a state law (Law 10,705 / 00), which determined the effect of the ITCMD on, among other hypotheses, a donation made by a person located abroad, of property also located abroad, to a Brazilian beneficiary.

The Rapporteur of the case was Minister Dias Toffoli, who, in his vote, stressed that Law 10,705 / 00 should be understood as of contained effectiveness, since its effects could only be operated through an authorizing Complementary Law, being, therefore, the ITCMD would be unauthorized on the referred donation.

The Rapporteur’s vote was the winner, with the following thesis:

“States and the Federal District are prohibited from instituting the ITCMD in the cases referred to in art. 155, 1 °, III, of CR / 1988 without the intervention of the complementary law required by the referred constitutional provision ”.


The Ministers decided that the effects of the decision will be valid from the publication of the judgment and cannot be retroactively enforced, except in the case of ongoing legal actions. Thus, only those who have pending lawsuits can question the charges in recent years. The process has general repercussions, that is, the decision will be valid for the whole country.

The debate calls into question inheritance and tax planning involving assets located abroad, since a window was opened for the donation of assets located abroad without the levying of ITCMD – at least until the establishment of a Complementary Law that authorizes state taxation.

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