For years, Brazilian states were constitutionally barred from taxing inheritances and gifts originating abroad. That bar has been lifted — not by a court, but by the statute the Supreme Court said was missing.
What happened
Two things happened, and they need to be read together.
First, the constitutional bar. In Extraordinary Appeal 851.108 (General Repercussion Theme 825), Brazil's Supreme Federal Court held that states and the Federal District could not institute ITCMD in the situations described in Article 155, § 1, III of the Constitution — those involving a foreign element — without the complementary law that provision requires. State laws attempting to do so were struck down.
Second, that complementary law now exists. LC 227/2026 supplies it. Articles 158 and 159 assign jurisdiction, expressly including assets abroad:
"Article 158. Competence to impose the tax on real property and related rights lies with: [...] II — for property located abroad, the State or Federal District: (a) of the domicile of the deceased or donor, if domiciled in Brazil; or (b) of the domicile or residence of the successor or recipient, if the deceased or donor is domiciled or resident abroad."
"Article 159. Competence to impose the tax on movable property, including securities, credits, and other intangible rights and assets, lies with: I — in transfers upon death, regardless of the location of the assets: (a) if the deceased was domiciled in Brazil, the State or Federal District where the deceased was domiciled; or (b) if the deceased was domiciled abroad, the State or Federal District of the successor's domicile [...]"
LC 227/2026 took effect on publication. Article 182, item III is express: the ITCMD provisions produce effects "as of publication." No transition rule, no deferral.
The technical read
Two gears turn at different speeds, and the gap between them is where the planning window sits.
The federal gear has already turned. The framework is set: mandatory progressivity by individual share (Article 156, I), bracketed calculation (§ 2), aggregation of successive gifts (Article 155), valuation of quotas at market value plus goodwill plus prospective cash generation (Article 154, II), and jurisdiction over foreign-situs assets (Articles 158 and 159). None of this is optional for the states.
The state gear turns at its own pace. Each state must enact its own law, and each law must respect the annual and 90-day constitutional waiting periods. A state legislating in December 2026 will see the new rules take effect in 2027. A state legislating in 2027 will see them in 2028. Paraná and Amazonas have already enacted conforming legislation; most have not.
That mismatch is the window. Until the competent state legislates — and until the new law clears the waiting periods — existing state law continues to apply. In São Paulo, that means the flat 4% rate of State Law 10.705/2000, with a bill pending to introduce progressivity.
Three precisions that separate serious planning from a blind sprint.
First: the window is not uniform, and it may not be the window you assume. It depends on the competent state, which is not always where the assets are. For movable property — including company quotas and financial assets — Article 159 fixes jurisdiction by the domicile of the donor or the deceased. A family with assets in three states may face a single state's law. A family with all assets abroad may still face a Brazilian state's law, through the heir's domicile.
Second: accelerating is not always the right call. An accelerated gift consumes liquidity, transfers title in a generally irreversible way, and can cost more than the rate saved — particularly where usufruct, restrictive clauses, municipal transfer tax, or capital gains are involved. The right question is not "how much ITCMD do I save," but "what does the whole transaction cost, and does it make sense outside the tax logic." Gifts made in haste to save tax are among the most reliable sources of family litigation.
Third — and this is the part that matters most to readers with U.S. structures — trusts now have express treatment. LC 227/2026 closed a historic gap. Under Article 150, V and VI, ITCMD does not apply to the transfer to the trustee, which is presumed onerous, nor to a transfer to a beneficiary who is the settlor. Article 151, § 1 fixes the taxable moment:
"In transfers of assets and rights to the beneficiary of a trust abroad, the taxable event is deemed to occur at the moment of the change of title of the assets and rights to the beneficiary or at the moment of the settlor's death, whichever occurs first."
Article 151, § 2 adds that the transfer may be deemed to have occurred earlier, where the settlor irrevocably relinquishes rights over part of the trust property. Article 151, § 3 extends all of this to foreign contracts with characteristics similar to a trust, and to Brazilian fidúcia arrangements that may be created along similar lines.
For a family with a U.S. or offshore trust and beneficiaries or a settlor connected to Brazil, this is the first clear Brazilian rule on when the tax bites. It requires a fresh reading of structures built before 2026 — especially as to the timing of distributions to beneficiaries.
Who this affects
- Families with a succession plan in preparation or underway
- Holders of holding companies with interests in operating businesses
- Anyone with a trust or similar structure abroad, with any Brazilian connection
- Brazilians resident abroad who expect to inherit, or to leave, Brazilian assets
- U.S.-resident heirs of Brazilian parents, and Brazilian-resident heirs of parents abroad
- Anyone with an open Brazilian probate where quotas have not yet been appraised
What to do, and by when
- Identify the competent state — for movable property, the domicile of the donor or the deceased; where that person is abroad, the domicile of the recipient (Articles 158 and 159). This is the first fact, and the one most often gotten wrong.
- Track the legislation in that state. The window closes when the state law is published and clears the waiting periods, not on any national date.
- Run the whole calculation before accelerating anything: current ITCMD, projected ITCMD, transfer tax, capital gains, liquidity cost, and the effect on control of the assets.
- Review trust structures against Articles 150 and 151, particularly as to the moment of reversion to the beneficiary.
- Document appraisals made under current law, with a dated report and stated methodology.
The cost of doing nothing
Leaving the decision until after the state law is published means losing the choice. But accelerating without the full calculation trades a known tax cost for an unpredictable family one.
Background for readers outside Brazil
Four things make the rest of this document legible.
ITCMD is Brazil's inheritance and gift tax. It is a state tax, not a federal one — each of Brazil's 26 states and the Federal District sets its own rate and rules, within a federal ceiling currently fixed at 8% by the Senate. There is no lifetime exemption comparable to the U.S. federal estate tax exclusion. The tax falls on the recipient, not the estate.
Brazil is in the middle of the largest tax overhaul in its modern history. Constitutional Amendment 132/2023 replaced five consumption taxes with two value-added taxes — IBS (state and municipal) and CBS (federal). The transition runs from 2026 through 2033. 2026 is a test year: invoices must carry the new taxes, but the tax itself is generally not collected.
Two Complementary Laws govern all of this. Lei Complementar 214/2025 created the IBS and CBS. Lei Complementar 227/2026, enacted January 13, 2026 and published January 14, 2026, created the national rules for ITCMD and amended parts of LC 214/2025. A Complementary Law sets binding national standards; states then legislate within them.
A holding familiar is a Brazilian holding company — usually a sociedade limitada, the closest analogue to a U.S. LLC — used to hold family real estate and operating businesses and to organize succession. Its ownership units are called quotas. It is the single most common estate-planning vehicle in Brazil, and three of the five pieces below concern it directly.
Editorial record
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Pillar: 1 — Wealth under fiscal pressure
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Related service (performed in Brazil): succession planning with state-window analysis
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Editorial tier: Ruby
Sources: LC 227/2026, arts. 150, 151, 154–159 and 182 — Planalto · Supreme Federal Court — state law cannot impose tax on foreign gifts and inheritances (RE 851.108, Theme 825) · ITCMD on foreign inheritances and gifts: what the tax reform changed — Conjur, February 2, 2026 · São Paulo State Law 10.705/2000
Notice
The above is provided for informational purposes only, in accordance with Provimento No. 205/2021 of the Brazilian Bar Association (OAB). The practical guidance is general and does not substitute for analysis of a specific matter. Artificial intelligence assisted in research and drafting, under the responsibility of the signing attorney, in accordance with Recommendation No. 001/2024 of the Federal Council of the OAB.
Scope
This content addresses Brazilian law only. Matters governed by foreign law are handled in partnership with lawyers licensed in the relevant jurisdiction.
Verification record
All provisions were verified against the official text published by the Presidency of Brazil and the Diário Oficial da União on August 6, 2026. Verification corrected six statements circulating in secondary analyses:
- LC 227/2026 was enacted January 13, 2026 and published January 14, 2026 (republished January 15, corrected January 23).
- The gift aggregation rule is in Article 155, not Article 157, which addresses taxpayers.
- Mandatory electronic invoicing for real property rentals is December 1, 2026, not August 1 or 3, 2026.
- CBS does not reach its full rate in 2027: Article 347 of LC 214/2025 provides a 0.1 percentage point reduction for 2027–2028.
- 26.5% is not a rate — it is a review trigger under Article 475, § 11. Reference rates will be fixed by Senate resolution under Article 349.
- Residential rentals of up to 90 days carry a 40% reduction, not 70%, and lose the social reducer (Articles 253 and 281, against 260 and 261).
State caveat: progressive ITCMD rates depend on state legislation. São Paulo still applies the flat 4% rate of State Law 10.705/2000, with a bill pending to introduce progressivity.
A note on the English edition
These pieces are adaptations, not translations. Legal citations retain their Portuguese designations, since those are what a Brazilian court, notary, or tax authority will recognize.
About the firm
Andrade & Cintra Advogados is a boutique law firm dedicated to Civil, Corporate and Real Estate Law, with a focus on Family and Succession Law, concentrated on estate and succession planning, the structuring of family and asset-holding companies, corporate governance and the organization of wealth for succession purposes — always with business purpose, substance and legal compliance. International practice in cooperation with Sintra Legal & Partners.
About the author
Dr. J. Guilherme de Andrade Cintra — Founding Partner · OAB/SP nº 220.915. Editorial co-authorship assisted by artificial intelligence (Anthropic Claude) as editor, under the review and responsibility of the signing attorney.
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