Brazil's ITCMD tax reform shifts donor liability and introduces progressive rates

A recent tax reform in Brazil, anchored by Constitutional Amendment No. 132/2023 and Complementary Law No. 227/2025, changes how the state inheritance and donation tax (ITCMD) is applied. The new rules make the tax progressive, with rates rising with the value of the transferred assets and a national ceiling of 8%, while legislative proposals aim to raise the ceiling to 16%.

The reform also revises the tax base, requiring the market value of assets—such as real estate, company shares, rural holdings, and other property—to be used for calculation. This shift affects families, agribusinesses, and estate planners who must now conduct more detailed valuations and consider the tax rates of their respective states.

In most Brazilian states, the recipient of a donation or inheritance (the donatário) is deemed the taxpayer. However, Rio Grande do Sul uniquely assigns tax liability to the donor, a stance that conflicts with the federal definition and raises constitutional questions about the principle of capacity to pay. Legal scholars argue that the donor’s reduced wealth after the transfer challenges the rationale for imposing the tax on them.

Overall, the reforms aim to standardize ITCMD application across Brazil, increase fiscal progressivity, and tighten oversight of large wealth transfers, prompting a reevaluation of succession strategies nationwide.