By Jose Santiago
September 9, 2013
According to the current legislation, Brazil has state laws that require individuals recipient of donations/gifts and inheritance be taxed. For example, in the state of São Paulo, if I were to receive a donation of R$50,000 from my father as a gift or donation this year, I would have to pay 4% state tax or R$2,000, denominated ITCMD, Imposto de Transmissão Causa Mortis e Doaão.
In Rio de Janeiro, the state tax over such donations, the ITD, is levied by the Secretaria da Fazenda (SEFAZ-RJ) also with a rate of 4%.
However, there are a few ungenerous exemptions that also vary from state to state. Meaning, there is a minimum threshold that an individual can receive from another per year without getting taxed and that varies from state to state. In the state of São Paulo this threshold runs around R$40,000 per year.
Since many foreigners send frequent money transfers to their spouses and friends in Brazil, these laws play a bigger role in the scenario, especially because the government does not alert tax payers of the existence of such laws and individuals are frequently surprised when they get a government bill in the mail, because as always these bills come with heavy fines and interest added to the amount due.
Plus, when the bill is not paid nor legally disputed by the individual, the State usually sends his or her name and CPF to the CADIN or Cadastro de Inadimplentes, which is a database that registers bad payees and leaves a very negative registration to have under your name.
Nonetheless, it is not all bad news. Several people who got taxed in Brazil due to international wire transfers have sought legal assistance, taken their cases to court, challenged these state laws and have WON!
Recently the Highest State Court in São Paulo has ruled that this type of taxation is currently ILLEGAL for those who received money from individuals abroad, due to the lack of a Federal Law that regulates such money transfers and taxation procedures. This alone produced an important piece of jurisprudence which is being used in many other similar disputes.
In conclusion, extra care is necessary when transferring money into Brazil. Always consult an expert because these laws can be changed frequently and you do not want to get off guard. In addition, if you already received a bill, always consult with your own attorney before paying it, because currently there are legal remedies available.
Should you need additional information related to this matter, please feel free to contact my office.
Caveat: This reflect current Legislation (as off August of 2013), which can be changed at anytime by the Brazilian Governmental Agencies at their own discretion.
Jose C. Santiago
Attorney at Law
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