The São Paulo State Legislative Assembly (“ALESP”) published in early February 2024, Bill No. 07/2024 (“PL No. 07/2024”), which proposes introducing progressive rates to the Inheritance and Donation Tax (“ITCMD”).

The ITCMD is due to the states in the case of succession by death and donation of assets and is paid by the taxpayer receiving the property (donee or successor). The effects of the ITCMD tax burden are central to the development and implementation of wealth and succession planning.

Currently, the legislation governing ITCMD in the State of São Paulo establishes a single rate of four percent (4%) on transactions subject to the tax. As a rule, transactions not exceeding the amount of BRL 88,400.00 are exempt from ITCMD in the state.

Due to changes brought about by the Tax Reform (Constitutional Amendment No. 132/2023) approved by the National Congress in 2023, PL No. 07/2024 proposes changing the current single rate to a progressive taxation model ranging from two percent (2%) to eight percent (8%) based on transaction values.

PL No. 07/2024 is still in the initial stages of the legislative process and is justified by seeking greater tax fairness. If approved in 2024, progressive rates can only be implemented in the following year, potentially allowing for revisions to wealth and succession matters before any changes in the legislation take effect.