The New Regulation on Income Tax was published in 22.11.2018 (Decree 9.580/2018) and entered into force on the same date.
At first, from a general reading of its more than a thousand articles, this regulation was considered a consolidation of the regulations, with the updating of concepts and the regulation of fiscal nature’s topics that, during the last years, were treated by specific regulations.
After the holiday period, it is important that lawyers working in this area make a more in-depth analysis of the Regulation, in order to verify the real innovations introduced by it and that could involve significant changes to the daily activities of law firms operating in the tax branch.
Following this line, this article aims to deal with the changes introduced by the new Regulation, regarding the taxation of the Income Tax on remittances abroad of values deriving from inheritance and donations.
The previous Regulation, Decree 3.000/1999, in its article 690, paragraph III, expressly provided for the exemption from Income Tax for remittances, destined abroad, of values of assets deriving from inheritance and donation, that is:Article 690: Does not comply with the retention as described in article 682 the following remittance with foreign destination:
III – the value of goods accounted, from heritage or donation, by resident or domiciled abroad. Therefore, there is no doubt that the old Regulation did not provide for the incidence of Income Tax on values sent abroad by way of inheritance or donation.
The new Regulation, in turn, by altering the order of the articles and confirming most of the concepts related to the taxation of remittances abroad, has excluded the aforementioned paragraph III, from which it can be deduced that, starting from this moment, remittances abroad by way of inheritance or donation are subject to IRRF taxation at a rate of 15%, thanks to the application of articles 741 and following of the New Regulation.On the other hand, article 43 of the National Tax Code provides that income tax generates the acquisition of economic availability, that is:
I – of income, thus understood the product of capital, of work or of the combination of both;
II – of earnings of any nature, thus understood the unjustified equity asset increases in foregoing subparagraph.
Paragraph 1° of the same article provides that the tax’s incidence does not depend on the denomination of the income or revenue, as well as on the source’s legal status and nationality.
From this point of view, the donation and the inheritance were treated by Receita Federal as a capital increase liable to tax on Income Tax (the aforementioned paragraph II), however they were considered exempt from taxation, thanks the provisions of Article 690, paragraph III, of the old Regulation on Income Tax.
With the publication of the new Regulation, that did not include this hypothesis in the non-incidence list, begins an important dilemma in whereof legislator intention.This topic must be treated carefully, since in practice it is not possible to make remittances abroad by legal means without the intervention of a bank/exchange agency, which, in turn and thanks to the new legislation, require a tax’s payment to make remittances of this nature.
Therefore, a new taxation has been created, which we consider illegitimate, on remittances in favor of non-residents of values deriving from inheritance and donation!
Our tax sector is available to provide further clarifications, with practical suggestions for cases already in progress.
Giacomo Guarnera and Milena Romero Rossin Garrido
