The newly elected governor of the State of São Paulo vetoed Bill n. 511/20 (“PL”), which had been approved by the State Assembly at the end of December 2022.

The PL sets forth a reduction on the State Tax on Donation and Succession (“ITCMD”) rates applied in the State of São Paulo, changing from the general rate of 4% to 0.5% in cases of donations and 1% in cases of succession.

The veto was published this week (02/08/2023) on the basis that the sharp reduction in rates and the absence of budget counterparts creates an affront to the Civil Liability Law. According to the veto arguments, all tax reductions must be supported by compensation measures in order not to affect the expected fiscal budget. The PL approval would generate a revenue waiver of R$ 4 billion per year.

The veto will be appreciated by the Assembly of the State of São Paulo which may accept it and file the project if it agrees with the Governor’s arguments or enact the law, in case of disagreement.