PLP 108/2024: NEW ITCMD RULES RESHAPE ESTATE AND SUCCESSION PLANNING

The Proposal for Complementary Law No. 108/2024, which establishes general rules for the ITCMD (Tax on Causa Mortis Transmission and Donations), has been approved by the Federal Senate and now returns to the Chamber of Deputies so that the amendments introduced by senators may be reviewed and, eventually, approved. The proposal is part of a broader package of proposals of law aimed at regulating the Tax Reform (Constitutional Amendment No. 132/2023) and seeks to harmonize rules that have thus far been fragmented among the different states. The proposed changes have a direct impact on succession, estate, and corporate planning structures, requiring immediate attention from business families, wealth managers, and investors. The PLP aims to provide greater legal certainty and federal coherence in the taxation of gifts and inheritances, with notable changes that will demand a reassessment of existing strategies.

Among the key changes:

• National standardization: The PLP establishes mandatory general rules for the states, defining uniform concepts related to taxable events, the tax base, and place of incidence (Articles 146 and following).

  1. Each state must enact its own law aligned with the new general standards, while retaining the power to set tax rates, exemptions, and specific scenarios.

  2. The PLP does not replace state laws, but subjects them to uniform parameters, ensuring that the new rules will only take effect once local legislation has been adapted.

• Fair market value as the tax base (Art. 152): States may require the tax to be calculated based on the fair market value of the transferred asset or right, rather than on declared or book values. This particularly affects non-publicly traded assets and corporate interests, potentially requiring formal valuation reports.

• Expanded international scope (Art. 148, §1): The ITCMD will also apply to transfers of assets or rights located abroad that stem from contracts with characteristics similar to trusts, including domestic fiduciary arrangements with equivalent features, provided the beneficiary resides in Brazil. This measure aligns the Brazilian tax system with international standards and calls for close attention to cross-border taxation, especially to avoid double taxation in jurisdictions with specific rules for trusts and family-owned offshore structures.

• Exclusion of private pension plans (Art. 150, III): The PLP expressly excludes from the ITCMD the amounts received through PGBL and VGBL plans, insurance policies, and benefit funds, reinforcing legal certainty for those using these instruments for financial succession planning.

• Taxation of disguised liberalities and simulations (Art. 147, VI, "f" and sole paragraph): The PLP treats as a taxable event simulated transfers that appear to be onerous but in reality conceal gratuitous transfers, particularly between related parties or where financial capacity is not substantiated. This provision may encompass cases of disguised distribution of profits or dividends (DDL) when characterized as concealed gratuitous transfers, thereby expanding the scope of tax enforcement on estate and corporate planning strategies.

The legal framework proposed by PLP 108/2024 represents more than just a regulatory change: it marks a structural shift in how assets are organized, transferred, and taxed in Brazil. By broadening the reach of the ITCMD and establishing objective criteria for its application, the Proposal of Complementary Law redefines the boundaries between lawful planning and tax avoidance, demanding maturity, transparency, and strategy from business families and investors.

In an environment of increasing integration between domestic and international tax authorities, adopting robust and legally sound structures will be essential to preserving long-term asset protection.

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