Recently, the Federal Supreme Court (“STF”) issued a decision favorable to the taxpayers regarding the taxation on the appreciation of assets transmitted by inheritance or donation.

For the purposes of ITCMD (Brazilian tax on transfer causa mortis and donation), the law imposes that the asset must be transferred at its market value. However, for Income Tax (“IR”) purposes, there is legal permission for this to be transferred in two ways, acquisition cost or market value.

When the asset transfer is carried out at market value, the federal tax authority understands that the value referring to the appreciation of the asset should be considered as a capital gain and, consequently, taxed by the IR at the rate of 15% to 22.5%.

The taxpayer’s main argument was that when the state tax authority requires the ITCMD on the value transmitted by inheritance and donation and the federal tax authority requires the IR on the appreciation of these assets, there is double taxation.

In the decision issued recently, the ministers of the Federal Supreme Court understood that in this scenario there is double taxation and, therefore, IR should not be levied on the appreciation of assets.

Despite the favorable decision, this subject still under discussion before the court, since there are also decisions favorable to the Union issued by the STF itself.

We are at your disposal to discuss any doubts regarding this matter.