On October 23, 2023, the General Coordination of Taxation of the Federal Revenue Service (COSIT) published its response – Consultation Solution No. 245 – regarding a formal inquiry made by a taxpayer, seeking clarification on whether the taxation of Income Tax on capital gains from units of investment funds in closed multimarket funds of a deceased individual would be correct if these units were not liquidated during their lifetime but, due to the death, will be transferred to their heirs.

COSIT clarified that, according to Normative Instruction No. 1,585 of 2015, when there is a succession of units in closed multimarket investment funds of a deceased individual residing in Brazil, the transfer to the heirs constitutes a form of alienation for the purpose of Income Tax incidence. In other words, if there is a capital gain from the alienation of these units, the calculated tax must be paid on behalf of the estate.

It was also clarified that the calculation base and applicable rates for investors residing in Brazil as “de cujus” (the deceased) will be those established by Law No. 8,981 of 1995, in its Article 21, namely: i) 15% on the portion of gains up to R$5,000,000.00; ii) 17.5% on the portion of gains exceeding R$5,000,000.00 but not exceeding R$10,000,000.00; iii) 20% on the portion of gains exceeding R$10,000,000.00 but not exceeding R$30,000,000.00; and iv) 22.5% on the portion of gains exceeding R$30,000,000.00.

Finally, it was clarified that the responsibility for withholding and paying the tax, if any, will be the responsibility of the investment fund administrator or institution that intermediates resources on behalf of its respective clients, as established by the rules of the National Monetary Council (CMN), thus endowing the deceased with the status of a taxpayer.

Given this context, we understand that there are arguments for discussing the non-taxation of capital gains, and if it is levied, the application of the fixed rate of 15%.

Our Wealth Planning team is available to assist you.