In a recent judgment, the 7th Civil Chamber of the Court of Appeals of the State of Minas Gerais unanimously decided to dismiss an interlocutory appeal brought by the Treasury of the State of Minas Gerais, on the grounds that ITCMD cannot be levied on assets located abroad[1].
According to the vote cast by the Reporting Justice, which was followed by the other Justices: “(…) the controversy lies in the alleged unconstitutionality of Law 14941 of December 29, 2003 and of Decree 43981 of March 3, 2005, in comparison with the provisions of Article 155, §1, item III, b of the Federal Constitution (…)”..
Indeed, as provided for in the Magna Carta, in its article 155, § 1, clause III, “a”, in order for ITCMD to be levied on assets located abroad, a Complementary Law must be enacted.
However, the State Tax Authorities, in a furtive way, issue infraction notices based on the full legislative competence, as stated in article 24, §3, of the Federal Constitution[2].
To use such an argument is to completely hurt the provisions of articles 146 155, both of the Federal Constitution, for the following reasons: (i) the aforementioned article 24, § 3º, confers competence to the states to settle local and regional issues. (ii) It is known that it is necessary to issue a Complementary Law of national character.
It is of utmost importance to transcribe an excerpt of the vote cast by the Hon. Justice Octavio Gallotti, proffered in RE no. 136.215-4/RJ: “(…) the provision in § 3 of art. 24 of the Constitution cannot, therefore, mean the abolition of the Complementary Law necessary for the settlement of competence conflicts between Units of the Federation. The scope of the provision is limited, logically, to situations of simply isolated or local reach, as also indicated by the literal expression of the rule, in its final part, when it states that it is intended to assist the States ‘in their peculiarities’, without thus proving to be pertinent to dealing with tax matters that will fatally comprise the interrelationship of one more State (…)”..
It is important to clarify that the São Paulo Court of Justice has an understanding for the non-levy of the aforementioned tax, as decided in the Argument of Unconstitutionality No. 0004604-24.2011.8.26.0000[3]. According to the Paulista Court:
“(…)
The Constituent Assembly attributed to the National Congress the institution, by means of a national Complementary Law, of the tax on transmission causa mortis of assets located abroad. Thus, as there is no national rule in the legal system to regulate the matter, the legislation of the state of São Paulo cannot, without the guidelines of a Complementary Law, demand the aforementioned tax. The States do not have tax competence to supply the absence of a Complementary Law required by the Magna Carta.
Subparagraph b of item III of § 1 of art. 155 of the Federal Constitution is an exception to the hypotheses foreseen in items I and II of the same paragraph. The exception clarifies the rule. The institution of a tax on transmission causa mortis and donation of real estate – and respective rights -, furniture, bonds and credits of companies located in a State of the Federation does not require a Complementary Law. Subparagraphs a and b of item III, on the other hand, specify the need for regulation by a Complementary Law for the hypotheses of transmission of real estate or assets, tangible or intangible, located abroad, as well as of the donor or of the deceased domiciled or residing outside the country or in the case of an inventory processed abroad.
In fact, what makes it exceptional is the extraterritoriality of the property, of the residence/domicile of the donor/whose or of the place where the inventory was made.
The Constituent Legislator attributed to the National Congress a greater political debate about the criteria for establishing general rules of tax competence for the institution of property transfer taxes, precisely in order to avoid competence conflicts that would generate double taxation among the states of the Federation and among countries with which Brazil has commercial agreements, keeping the tax system uniform.
(…)
The state legislator could not override the federal legislator and regulate the matter, creating varied tax treatment among the Federative units. (…)”.
The Federal Supreme Court, aiming to settle the issue, recognized the general repercussion on the matter in 2015 (Theme 825), through RE 851.108/SP[4].
We are at your disposal should you need any clarification on these or other issues.
[1] “INTERLOCUTORY APPEAL IN A WRIT OF MANDAMUS – COLLECTION OF ITCMD ON MOVABLE ASSETS HELD ABROAD – CONSTITUTIONALITY OF ART. 1, § 2, IV, OF STATE LAW 14941/03 AND ART. 2, II, “D”, OF STATE DECREE 43981/05 – QUESTION SUBMITTED TO THE APPRECIATION OF THE SPECIAL COURT OF THIS HONORABLE COURT OF JUSTICE – PLEA OF UNCONSTITUTIONALITY NO. 1.0000.17.092509-3/002 NOT YET JUDGED – MATTER OF GENERAL REPERCUSSION – APPEAL DISMISSED.
I – In order to grant a preliminary injunction in a Writ of Mandamus, the plaintiff must demonstrate that the requirements for a preliminary injunction have been met, as well as those specifically provided for in Law 12,016/2009, namely: a) the existence of relevant grounds and b) that the impugned act results in the ineffectiveness of the measure.
II – The constitutionality of the regulation brought about by article 1, paragraph 2, IV, of State Law 14941/03 and by article 2, II, “d” of State Decree 43981/05 is a controversial matter, submitted to the Special Panel of this Supreme Court of Justice, by means of the Plaint of Unconstitutionality 1.0000.17.092509-3/002, besides being a matter of General Repercussion in the Supreme Court.
III- Since the authoritative assumptions for the granting of the preliminary injunction have been proven, the dismissal of the appeal is a measure that is imposed.”
(TJMG – Interlocutory Appeal-Cv 1.0000.18.134530-7/001, Reporting Judge: Dr. Wilson Benevides, 7th CIVIL CHAMBER, judgment on 03/26/2019, published on 04/01/2019)
[2] “Art. 24. It is up to the Union, the States and the Federal District to legislate concurrently on
(…)
- 3º If there is no federal law on general rules, the States will exercise full legislative competence, to meet their peculiarities. (…)”
[3] “I – Argument of unconstitutionality. The creation of a tax on transmission ‘causa mortis’ and donation of assets located abroad must be done by means of a Complementary Law. Intelligence of art. 155, §1, clause III, Aline b, of the Federal Constitution.
II – The Constituent Legislator attributed to the National Congress a greater political debate about the criteria for establishing general rules of tax competence for the institution of the tax on the transmission of goods – movable / immovable, tangible / intangible – located abroad, precisely in order to avoid conflicts of competence, generating double taxation, between the States of the Federation, keeping the tax system uniform.
III – Unconstitutionality of item ‘b’ of item II of art. 4th of Law 10.705, of December 28, 2000, recognized. Incident of unconstitutionality upheld.”
(TJSP; Incident of Civil Unconstitutionality Argument 0004604-24.2011.8.26.0000; Rapporteur: Guerrieri Rezende; Judging Body: Special Panel; Foro Central – Fazenda Pública/Acidentes 8ª Vara de Fazenda Pública; Trial Date: 03/30/2011; Record Date: 04/07/2011)
[4] “EMENTA EXTRAORDINARY APPEAL. GENERAL REPERCUSSION. ITCMD. ASSETS LOCATED ABROAD. ARTICLE 155, § 1º, III, LETTERS A AND B, OF THE FEDERAL CONSTITUTION. COMPLEMENTARY LAW. GENERAL STANDARDS. COMPETENCE FOR INSTITUTION.
It is necessary to define, in the cases foreseen in art. 155, § 1, III, letters a and b, of the Constitution, if, in view of the omission of the national legislator in establishing the general rules pertinent to the competence to institute a tax on transmission causa mortis or donation of any goods or rights (ITCMD), the Member States can make use of their full legislative competence based on art. 24, § 3, of the Constitution and art. 34, § 3, of ADCT.”
(RE 851108 RG, Rapporteur: Min. DIAS TOFFOLI, judged on 06/25/2015, ELECTRONIC PROCESS DJe-163 DIVULG 19-08-2015 PUBLIC 20-08-2015)