Inheritance Tax in Brazil (ITCMD): What It Is and What Changed with the 2026 Law
The so-called “inheritance tax” in Brazil is officially known as ITCMD – Tax on Transfer by Death and Donations of Any Assets or Rights. It is one of the most discussed taxes in the context of tax and estate law, especially following the recent changes brought by the Tax Reform.
What Is ITCMD?
ITCMD is a state-level tax that applies to:
The transfer of assets and rights through inheritance (when a person passes away and their assets are transferred to heirs);
Lifetime donations. (Serviços e Informações do Brasil)
It is regulated by the Federal Constitution (Art. 155, I) and the National Tax Code, but its collection and rates are determined by each state within legal limits. (Serviços e Informações do Brasil)
How ITCMD Worked Before
Traditionally, each state applied a fixed rate within the maximum limit allowed by law — historically, this ceiling was 8% of the transferred assets.
For example, in many states, the standard rate was 4%, regardless of the total value of the inherited estate.(Serviços e Informações do Brasil)
Por exemplo, em muitos estados a alíquota única era de 4%, independentemente do tamanho do patrimônio herdado. (Marcos Martins)
New Rules in 2026: Complementary Law 227/2026
On January 13, 2026, Complementary Law 227/2026 was enacted — the final result of Complementary Bill 108/2024, regulating part of the tax reform. This law introduces important changes to ITCMD:
1. Mandatory Progressive Rates
Previously, states could apply a single rate within the 8% ceiling. Under the new law:
All states and the Federal District are required to adopt progressive ITCMD rates.
This means that the tax will be calculated in brackets based on the value of inherited assets — the higher the estate, the higher the applicable rate.
The maximum ceiling remains 8%, but the brackets must consider the market value of the assets. (Portas)
This progressive model is similar to what some states (like São Paulo) had already been testing, with proposed brackets ranging from 2% to 8%. (Baker McKenzie InsightPlus)
2. Tax Base Based on Market Value
Another key change is that the tax base will now be the market value of assets on the date of transfer (by death or donation), rather than historical or accounting values. This is likely to increase the tax due on real estate and other assets that appreciate over time.(Portas)
Practical Impacts of the New Law
More Urgent Estate Planning
With mandatory progressive rates and the new market-value calculation, the total cost of transferring an estate is likely to increase significantly in many cases.
This reinforces the importance of proactive estate planning for families and business owners.(Forbes Brasil)
Standardization of State Rules
Before LC 227/2026, there was significant variation between states in both rates and calculation criteria.
Now, a minimum uniformity is imposed by the law, facilitating tax interpretation and estate planning strategies. (Serviços e Informações do Brasil)
Inheritance of Assets Abroad and ITCMD
The new law also specifically addresses the transfer of assets located abroad and inheritances from other countries, establishing clear rules for these events to be taxed by Brazilian states.
(Important: previous Supreme Court decisions had limited ITCMD collection on foreign assets when no valid complementary law existed — the new legislation seeks to resolve this definitively.) (Pontes Vieira)
Conclusion
The Inheritance Tax (ITCMD) in Brazil is undergoing a significant structural change due to the tax reform. Complementary Law 227/2026 introduces:
Mandatory progressive rates,
Market-value-based calculation,
Clearer rules for inheritances involving foreign assets.
These changes have a direct impact on estate and succession planning and highlight the need for specialized legal guidance so individuals and families can legally minimize tax burdens when transferring assets.