The Complementary Bill (PLP) 108/2024 proposes significant changes to the taxation of the ITCMD – Tax on Causa Mortis Transmissions and Donations – a central issue for those seeking efficiency in estate and succession planning. The proposal comes in the context of the Brazilian tax reform and aims to standardize the legislation of the states, but it brings with it significant financial impacts.
In this material, we analyze the main changes envisaged by PLP 108/24, including the introduction of progressive tax rates, the expansion of the tax base and the direct effects on entrepreneurs, investors and companies with complex corporate structures.
Objective of PLP 108/2024: standardization with increased revenue
PLP 108/24 aims to standardize state legislation on ITCMD, promoting predictability for taxpayers and the tax administration. One of the main changes is the provision for progressive rates, replacing the fixed rate model adopted by most states. This change, already in force in states such as Rio de Janeiro and Santa Catarina, tends to increase the tax burden on higher inheritances and donations.
In practice, the proposal also eliminates the possibility of “geographical planning”, in which taxpayers choose states with lower taxation to formalize their succession planning.
Uniform state laws and ITCMD progressivity
Currently, ITCMD rules vary widely between states, which allows some room for tax planning. The PLP 108 proposal seeks to create a more uniform model, reducing disparities between federal entities and, at the same time, instituting progressivity: the higher the value transmitted, the higher the rate applied.
The maximum rate is still 8% – according to Senate Resolution 9/1992 – but discussions are underway to increase this ceiling to up to 16%. If approved, this measure could have a significant impact on large inheritances and donations, requiring extra attention in succession planning.
New calculation basis: market value of assets transferred
One of the most important changes in PLP 108/24 is the expansion of the ITCMD calculation basis. In the case of transfers of shares or equity stakes, the tax will now be calculated based on the market value of the assets, and no longer on the book or equity value.
This means that companies with undervalued assets on their balance sheets will have to revalue them according to technical methodologies that reflect market value – including real estate and goodwill. The measure tends to increase the amount of ITCMD due, significantly impacting structures such as holding companies and family businesses.
Impacts for companies and investors with ITCMD
Medium-sized and large companies with valuable assets and low accounting valuations could face a considerable increase in their tax burden. Shareholdings that are currently transferred based on asset value will now be taxed according to their market value, requiring a new look at succession planning.
A detailed valuation of assets will be essential. The recommendation is that entrepreneurs and investors anticipate revisions to their structures to avoid surprises when the new legislation comes into force.
Trusts and structures abroad will also be impacted
PLP 108/24 also innovates by expressly addressing trusts and similar structures. The proposal states that the assets in the trust will continue to be considered as belonging to the settlor until his death. As a result, the transfer of assets to beneficiaries will be treated as a donation or as a transmission causa mortis, depending on the moment of the transfer.
This novelty directly affects international estate planning, requiring a reassessment of strategies involving structures abroad.
New rule for where the ITCMD is levied
Today, the ITCMD can be levied in the state where the inventory or probate of assets is processed. With PLP 108, the tax will now be collected in the state where the deceased was domiciled. This change reduces the scope for planning strategies that choose states with a lower tax burden, such as São Paulo.
When do the changes come into force?
The new rules set out in PLP 108/24 are expected to come into force in 2025. Until then, taxpayers, entrepreneurs and investors have a window of opportunity to review their estate and succession planning and make any adjustments.
How to prepare?
Faced with such significant changes, the recommendation is clear: get ahead of the game. Planning ahead allows for greater predictability and lower tax impacts. Here are some recommended actions:
- Review existing estate and succession planning, adjusting strategies to the new tax base and progressive model.
- Revalue assets and companies, using appropriate market valuation methodologies.
- Hire specialized consultants, such as tax lawyers and company appraisers, to ensure compliance and legal certainty.
- Monitor the legislative progress of PLP 108, as the text may still undergo changes during its processing.
Conclusion
PLP 108/2024 represents a significant transformation in the way ITCMD is levied in Brazil. The introduction of progressivity, the broadening of the calculation base and the inclusion of structures such as trusts require attention and strategic planning on the part of entrepreneurs and investors.
Anticipating these changes is essential to avoid unnecessary tax impacts. The Drummond Advisors team is prepared to offer complete legal and tax support to optimize your estate and succession planning in the face of the new rules.
Contact us through the available chat or via email info@drummondadvisors.com to understand how we can help your company and your personal planning to prepare for PLP 108/2024.
Written by Marcos Ferreira, Content Analyst at Drummond Advisors