The state donation tax, which is levied on donations of money, rights, real estates and other assets, as well as on heritage grants, has undergone recent changes and have just changed again.

In the State of Rio, the donation tax, known as ITD, after have increased in December 2015, had another readjustment approved today by Law 7.786/2017, which changed the previous Law 7.174/2015.

According to the new law approved, starting in January 1, 2018, the ITD higher will be applicable varying according to UFIR/RJ (* 1 UFIR 2017 = R $ 3,119), ranging from 4.5% to 8%, which is the limit currently set in Brazil. The tax previously applied was 4.5% for until 400 thousand UFIR, and 5% for higher amounts. Thus, with this increase, the ITD in Rio de Janeiro doubled in a period of two years.

We remind that there is an agreement between the State Treasury and the Federal Revenue of Brazil (RFB), aiming to exchange information regarding donations made. In fact, once the donation is reported on the individual´s annual income Tax Return, the State Treasury will be aware of the transaction and will demand payment of the ITD.

Also, we note that in addition to this increase in the State of Rio de Janeiro, there is still a Law under discussion in the Senate that can change the country's tax limit from the current 8% to 20%. If this increase is approved at the national ambit, the Brazilian states will have even more force for proposals aimed at increasing the rate of donation tax in the future.

Given the increase in the tax rate in Rio de Janeiro in 2018 and the uncertainty about the limit of 8% for the coming years in the country, individual taxpayers who aim to donate assets or implement succession plans, are recommended to implement such transactions still during 2017 considering the current rates of 4.5% and 5% in Rio de Janeiro.

RSM is available to assist with any questions about ITD and applicable planning.

 

 

 

 

 

 

 

 

 

 

 

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ContaCts:

Marcelo Sampaio
Partner | National Tax Leader
[email protected]

 

Carolina Rotatori

Partner | Private Clients

[email protected]