September 2, 2015 Fernando Muniz

Tax on offshore gifts?

A very interesting development is under way at the Supreme Court. As our clients and partners know we have always advocated about the opportunity of setting up an international estate planning with the benefit of not having to pay ITCMD tax on offshore gifts. That is possible because of a loophole in the regulation and with a lot of cases lost by the estates revenue services makint it pretty secure until now.

Sao Paulo estate revenue service lodged an appeal against the judgment of the 6th Public Law Chamber of the São Paulo Court of Justice (TJ-SP) which recognized the right of the taxpayer not be compelled to collect the amount for the gift tax/inheritance tax (ITCMD) on the bequest of a property located in Treviso, Italy, and on the transfer of a sum of money foreign (Euro), both operations carried out in 2005.

The Treasury, in its appellate reasons, says it is possible the incidence of the tax, even at the absence of additional specific law because, in its view, § 3 of art. 24 of the Constitution, as well as § 3 of art. 34 of the ADCT, grant full and effective powers to states to discipline matter.

Today courts differ on the possibility for Member States to exercise full competence to legislate on the subject. Hence the great importance of the screen on trial.

Our take is that as the command expressed in art. 155, § 1, III, “b” of the Constitution, the incidence of ITCMD in this case is reserved to regulation by complementary law.

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