The Tax Reform provides for the unification of tax rates and progressive taxation of ITCMD (or ITD), the tax on Transfers Causa Mortis and Donations, which will significantly impact the succession plans of family-owned businesses in the transfer of ownership through inheritance or donation.
Approved by the National Congress and currently under review in the Federal Senate, the Tax Reform provides for progressive taxation and unified rates on inheritances. Although the details have not yet been defined, inherited assets and rights may be subject to the maximum rate of the ITCMD/ITD, whose current constitutional ceiling is 8%; however, there is Senate Resolution Bill No. 57, which has been in progress since 2019 and proposes raising the constitutional ceiling to 16%, which may gain momentum during the progress of the Tax Reform.
The new tax rates will impact higher-value assets and rights with higher percentages, and will cause companies to be affected in future succession processes, inheritances, and donations, unless a thorough analysis and a change of strategy are implemented in advance. The Reform's text leaves no room for future planning aimed at reducing financial impacts, but there is an opportunity for financial gains before the Tax Reform regulations come into effect.
Currently, rates vary according to the legislation of each Brazilian state, with some applying a rate of 2% and others already applying the maximum rate of 8%. Only 10 of the 26 states and the Federal District apply the maximum rate, and states such as São Paulo and Paraná that currently tax inheritances at a flat rate of 4% will be required to adopt progressive rates according to the value of the asset transfer.
Many companies are turning to Apter to find out the best way to protect their assets and act proactively to avoid significant losses once these new ITCMD rates are implemented.
In this emerging landscape, carrying out thorough succession planning aligned with a cohesive strategy plays the central role of protecting the assets and legacy of business families, is essential for the future direction of the business, and may also result in financial savings by anticipating the inheritance process and taxing at current rates, since even in states that already apply progressive rates it is possible to achieve financial savings by being taxed at current rates and avoiding the future costs associated with the probate process. Furthermore, the carrying out succession planning minimizes the bureaucracy of a probate process that can be extremely slow, jeopardize the business, and affect the financial situation of the families involved.
This challenge becomes even greater for Agribusiness companies that own land in agricultural areas, which are subject to numerous rules and regulations, such as: certification that the land is not located on indigenous and/or quilombola territories and that it complies with all environmental law requirements. Obtaining the necessary certificates and certifications can be a bureaucratic and lengthy process, but it is more efficient when carried out with the owners still living, as they hold details and information that may be lost in a probate proceeding.
Apter is prepared to analyze each case and provide guidance to reduce these impacts and secure the future of these businesses.
Talk to Apter and protect your company's future: Click here
Roberto Mitsuo Suguihara
Managing Partner, Apter Consultoria
Bachelor's degree in Accounting from Faculdades Padre Anchieta (SP), with an MBA in Business Management from Fundação Getúlio
Vargas (FGV, SP) and a business direction specialization course (Program for Management Development, IESE Business School, Universidade de Navarra), Roberto Suguihara is Managing Partner at Apter in the Advisory area, with a focus on financial consulting projects, corporate governance structuring, and business succession processes.
