If you own property in Brazil (São Paulo, Rio de Janeiro, etc.) or expect to inherit assets there, it’s important to understand the legal and tax implications involved in realizing an inheritance. Given the variety in local laws, taxpayers are often confused, especially when it comes to transferring assets across borders or when the deceased held property in multiple jurisdictions.
Understanding the local law in advance, along with early planning around wills, residency, and gifts during one’s lifetime, can significantly reduce exposure to tax liabilities during generational wealth transfer. Proper planning can also prevent legal disputes, delays in estate processing, and unexpected demands from authorities.
What’s the difference between the Estate Tax and the Inheritance Tax?
- Estate Tax – Imposed on the estate of the deceased before transferring to heirs.
- Inheritance Tax – Imposed on the assets received by the heir.
Inheritance Tax in Brazil
Brazil imposes both inheritance and gift taxes. This tax is imposed on the heirs and is known as ITCMD (Imposto sobre Transmissão Causa Mortis e Doação). Each Brazilian state applies its own rules regarding how ITCMD is assessed. The tax applies to the transfer of property or assets, either through inheritance or gifting, and is calculated based on the market value of the transferred asset or right.
Authority to collect ITCMD lies with each of the 26 states and the Federal District, depending on the location of the property and the deceased’s residence.
- Tax rates vary based on local policy, ranging from 0% (in cases of exemptions) to a maximum of 8%, as set by law.
- For example:
- São Paulo typically charges a flat rate of 4%.
- Rio de Janeiro uses a progressive system where the tax rate increases with the asset’s value, up to 8%.
- For example:
Some states offer exemptions – for instance, on gifts or charitable donations up to a certain amount or transfers between close relatives.
It’s crucial to check the specific laws of each state because the differences in rates and methods of assessment can significantly affect estate planning.
Inheritance Tax in Israel Compared to Brazil
In Israel, unlike Brazil, there is no estate or inheritance tax. However, in some cases, capital gains tax may apply, such as when an inherited property is sold.
There is a tax treaty between Israel and Brazil that includes provisions to prevent double taxation. Nonetheless, it’s important to carefully plan your reporting and filings to avoid paying taxes in both countries.
To read the Israel-Brazil tax treaty in English on the Ministry of Finance website, click here.
Making a Will in Brazil – A Key Step to Saving Taxes and Avoiding Conflicts
Inheritance doesn’t always proceed smoothly. Often, complex legal steps are required, such as obtaining a court probate order or permission to realize assets.
Drafting a valid will is not just a personal decision – it is a critical part of estate tax planning. A will ensure that assets are transferred efficiently and according to the deceased’s wishes. However, the will must also comply with legal requirements to remain valid.
In Brazil, there is a “forced inheritance” law, meaning 50% of the estate automatically goes to legal heirs (spouse, children, and/or parents). The testator can decide who receives only the remaining 50% through a valid will.
You can often choose which law applies to the will. For assets in Brazil, this decision may significantly impact inheritance planning. Without a will, the applicable law will typically be that of the deceased’s last main place of residence.
Without a will, determining inheritance rights may become complex and vary based on family circumstances and place of residence.
We recommend making a will to ensure a smooth transfer of assets. A will can prevent misunderstandings and lengthy legal processes and guarantee an orderly inheritance process after death.
Received an Inheritance in Brazil? 8 Steps for Proper Realization of Inheritance from Brazil
1. Clarification of Factual and Legal Background
First, you must check the type of property that is to be inherited, its location, the identity and status of the heirs, the value of the property, and more.
2. Examination of local legislation
It is recommended to familiarize yourself with the general taxation in the relevant country in order to ensure proper and efficient management of inheritance and the transfer of gifts and to minimize the consequences of unnecessary taxes.
3. Checking the Timing and Location of Inheritance Realization
Consider whether it’s advisable to realize the asset now and if so, where is it better to realize it – in Brazil or in Israel?
4. Regulatory and Banking Aspects
It is recommended to check the costs of money transfers, whether it is necessary to open an account in Brazil or another country in order to transfer funds, what approvals are required, etc.
5. Planning the asset transfer
It is necessary to consider whether to transfer the property itself or its consideration, and what the implications are in terms of tax, exemptions, deductions, etc.
6. Avoiding double taxation
In light of the existence of a double taxation treaty, it is recommended to check whether a mechanism exists for crediting tax paid in Brazil against tax liability in Israel. It is important to ensure that the reporting is done correctly and accurately in order to avoid double payment.
7. Checking the future implications on the asset
It is recommended to examine the future effects on the asset, for example, a future sale of the property in many cases will be subject to capital gains tax in Israel as well.
8. Transferring the asset to Israel
Performing all necessary actions, submitting documents, dealing with banks in Brazil and Israel, and transferring the property.
How Can We Help?
The goal is to transfer the inheritance to heirs in Israel in the most tax-efficient way, while addressing legal issues in Israel and Brazil and issues related to banking and regulation. For example, whether it’s better to realize a certain asset in Brazil or transfer it to Israel; how to transfer inheritance funds to a bank account in Israel; how to use various exemptions between heirs; whether to give gifts during lifetime; whether to establish a trust, and more. Strategic planning, according to law and tax treaties, is essential to minimize tax liabilities.
Nimrod Yaron & Co. has extensive experience in personally and professionally accompanying Israelis with assets or inheritances in many countries around the world, including Brazil – from the first stage of planning, through dealing with authorities in Brazil and Israel, to transferring inheritance funds to the heir’s bank account.
We work with all relevant professional entities in Brazil and Israel and offer legal solutions both in terms of taxation and banking, tailored to the circumstances of the case.
If you have inherited an asset or wish to bequeath assets in Brazil in the future, our team of lawyers specializing in international taxation and inheritance law will be happy to advise you on this matter – contact us for an initial consultation.
What is ITCMD?
It’s the Brazilian inheritance and gift tax – Imposto sobre transmissão causa mortis e doação.
Do I have to pay tax in Israel on an inherited asset from Brazil?
No. There is no inheritance tax in Israel. However, capital gains tax may apply after the sale of the property. It is important to check the recommended date for selling the inherited property.
Why are there tax rate differences across Brazilian states?
The authority to collect ITCMD rests with each of the 26 states and the federal district separately. Each state defines the tax rates, exemption amounts, and calculation methods according to its needs, which leads to significant differences between the different states.
Why is early planning for generational wealth transfer important?
Transferring assets from abroad to an intergenerational level is not only a family matter, but is also a tax and financial matter. Early planning, while addressing legal issues in Israel and abroad, may save a lot of money and prevent legal complications.
How can inheritance be realized in a tax-efficient way?
In order to realize the inheritance in the best possible way and save unnecessary tax payments, all tax options must be examined, including utilizing exemptions, gift planning, establishing companies, trust funds, and more.
How can the inheritance tax in Brazil be reduced?
Through early tax planning, which includes drafting a will, utilizing exemptions, giving gifts during your lifetime, and more, you can significantly reduce your tax liability.
Is it better to gift an asset during life or bequeath it in a will?
The choice between giving a gift or an inheritance depends on the circumstances of the case. Sometimes a gift will be taxed similarly to an inheritance. Therefore, the legal and tax aspects should be examined before making a decision.
What happens if there is no will?
In the absence of a will, the inheritance will be divided among the legal heirs in accordance with local inheritance law.
What documents are needed to inherit assets in Brazil?
In order to realize an inheritance in Brazil, documents such as a death certificate, a will (if one exists), copies of the heirs’ ID cards, property ownership documents, bank account confirmations, and more are required.
How long does the inheritance process take in Brazil?
It should be considered that the process of realizing an inheritance in Brazil can take between several months and a year or more, depending on the complexity of the testator’s estate, the number of heirs, the existence of a will, and other factors.
