The Supreme Federal Court will decide whether it is constitutional to levy income tax (IR) on capital gains from the donation of assets in advance of the legitimate inheritance. The debate has widespread repercussions and could directly impact the estate planning of thousands of Brazilian families.
The Federal Revenue Service understands that, if the donated asset has appreciated in value since its acquisition, the difference between its market value and its original value constitutes a capital gain—which would justify the levying of income tax on this “profit.” Taxpayers, however, argue that there is no enrichment in this type of transaction, as the donor is merely transferring assets (and, therefore, experiences a decrease, not an increase). Furthermore, donations are already taxed by the states through the ITCMD (Tax on Income Tax), which could constitute double taxation.
The STF’s decision should standardize case law on the subject and will serve as a parameter for future cases of donations and inheritances.
