The STF Virtual Plenary began this Friday, the 23rd, the trial of RE 851.108/SP (Theme 825) regarding the constitutionality of state laws that establish the incidence of ITCMD on donations from abroad.

Although the subject of this judgment is a law enacted by the State of São Paulo (State Law 10.705/2000), the decision will have a national impact, since (i) the topic is discussed under the general repercussion system – and will have a direct influence on the jurisprudence of other Courts; and (ii) other federative entities, in addition to the State of São Paulo, have enacted similar rules on the topic in recent years.

In the case at hand, the State of São Paulo claims that the aforementioned state law is valid, so that the federative unit has autonomy to legislate on charges and collection in its own state in the absence of a Complementary Law that should have been issued by the National Congress.

According to the Attorney General's Office of the State of São Paulo, the lack of a clear understanding of the issue is driving maneuvers to avoid taxation of donations by the ITCMD. In short, it is argued that some taxpayers have been making remittances abroad to set up “shelf companies” – as companies that do not carry out any type of activity and are established in tax havens are called. Later, when these resources are repatriated, the amount does not appear in the name of the family patriarch (alleged donor) and instead passes to that of his heirs (alleged donees).

On the other hand, the taxpayer defends the thesis that the discussion on the requirement of ITCMD on donations from abroad is a matter within the jurisdiction of the Union and, therefore, it would be necessary for the National Congress to enact a Complementary Law with the main guidelines for collecting ITCMD in cases where the donor has domicile or tax residence outside of Brazil. Since, to date, no Complementary Law has been enacted in this regard, the States do not have the authority to regulate the matter, under penalty of violating articles 146 and 155, III, item 'b' of the Federal Constitution.

In 2010, the matter was considered by the STF. When analyzing a similar case, Justice Ricardo Lewandowski issued a single judge decision to deny the continuation of Instrument Appeal 805.043/RJ, adopting the understanding that in the absence of a Complementary Law, the States should not be prevented from establishing taxes under their jurisdiction, such as, for example, the ITCMD.

Under the terms of the said decision, “according to the understanding reached by both panels of this Court, given the federal legislator’s failure to establish the pertinent general rules, the member states, also in tax matters, may make use of their full legislative competence based on art. 24, § 3, of the Constitution and art. 34, § 3, of the ADCT.”

Along the same lines, the Special Body of the Court of Justice of the State of São Paulo (“TJ-SP”) has already established, when judging the Claim of Unconstitutionality No. 0004604-24.2011.8.26.0000, that “The Constituent Assembly assigned to the National Congress the institution, through a national Supplementary Law, of the tax on the transfer of assets located abroad by reason of death. Therefore, since there is no national rule regulating the matter in the legal system, the legislation of São Paulo, without the guidelines of a Supplementary Law, cannot require the aforementioned tax.” concluding that “The States do not have tax authority to make up for the absence of a Complementary Law required by the Magna Carta.”

Although it is necessary to adopt measures to prevent the loss of revenue by the States, especially as a result of tax planning instituted exclusively for this purpose, these measures cannot be taken in violation of what is expressly determined by the Federal Constitution. Until a Complementary Law regulating the matter is enacted, the requirement of ITCMD on assets located abroad will, in our view, be unconstitutional.

Our tax team is aware of the possible developments of this judgment and remains available to clarify any questions regarding the matter.