In a unanimous decision issued in AgReg in RE 1.439.539/RS, the First Panel of the Brazilian Supreme Federal Court (STF) ruled out the requirement of Income Tax in a case involving the donation of assets by an individual as an advance inheritance. The tax had been levied on the capital gain corresponding to the difference between the acquisition cost and the value assigned to the assets at the time of donation.
However, Justice Flávio Dino, reporting the case, emphasized two key points that led the Court to reject the tax: (i) no increase in the donor’s net worth occurs in a donation, as the donor’s total assets are reduced by the gift; and (ii) the donation is already subject to Estate and Gift Tax (ITCMD) at the state level, meaning that applying federal income tax would constitute unconstitutional double taxation on the same event.
While this STF decision does not have binding effect for all courts, it sets an important judicial precedent that can be used to challenge similar tax assessments. It provides greater legal certainty for individuals who wish to donate assets at market value as part of an inheritance plan, particularly in cases involving family asset planning and succession strategies. If you have questions about how this STF decision may impact your donation strategy, inheritance planning, or tax obligations, our tax law team is ready to help. Reach out to us at tributario@lbm-legal.com.br.