This week, the Chamber of Deputies’ Working Group concluded and presented the report on PLP 108/2024, which addresses the second phase of the tax reform regulation, including some changes to the original report.

One of the main changes is the establishment of the Mortis Causa Transmission and Donation Tax (ITCMD) on supplementary private pension plans, such as the Free Benefit Generator Plan (PGBL) and the Free Benefit Generator Life Plan (VGBL).

Initially, the ITCMD levy on these plans was provided for in a draft of the government’s project that circulated on June 3 but was removed from the final text sent by the Executive to Congress and now reincluded in the current report.

The new text provides for the incidence of ITCMD on “financial contributions capitalized in the form of private pension plans or any other form of financial application or investment, regardless of the guarantee mode.”

Pension entities, insurers, and financial institutions will be responsible for withholding and collecting the tax in cases of transmission by death or donation, with the taxpayer being subsidiarily responsible if the entities do not withhold the tax.

However, insurance-like plans similar to life insurance will not be taxed, nor will amounts invested in VGBL plans more than five years before the triggering event. That is, ITCMD will only apply to amounts invested in pension plans for less than five years.

During the press conference presenting the report, it was emphasized that the five-year period applies only to the VGBL, as there has always been an incidence of ITCMD on the PGBL.

Additionally, the PLP provides that in the case of transmission of the pension plan to heirs, the rate will be calculated based on the transmitted value and must be “supplemented when the remainder of the assets and rights are transferred, adding the value of the previously transmitted assets to the tax base and deducting the ITCMD amounts already collected, observing the progressivity of the rates provided for in state or district legislation based on the total value of the share or legacy.”

The deputies justified the inclusions in PLP 108/2024 as a measure to prevent individuals from using private pension plans for abusive tax and succession planning to escape state taxation.

We highlight that the incidence of ITCMD on PGBL and VGBL is a subject of discussion among taxpayers and is being evaluated by the STF in the context of general repercussion (Theme 1214), still without a judgment date. Taxpayers argue that these applications, by their nature, should not be included in the hereditary estate and, therefore, would be outside the scope of ITCMD.

The Tax Advisory department of Marins Bertoldi Advogados closely monitors the developments on this topic and is fully available to clarify any doubts and deepen the understanding of each business reality.

By Gabriel de Araujo Garcez Hoerner and Ana Caroline Ferreira