Not even death escapes the ‘Leão’ [Lion – the animal-symbol representing the Income Tax Return in Brazil]. What at first seems to be an unusual pun is actually a Brazilian reality unknown to many citizens. According to the tax legislation, the natural person of the taxpayer is not extinguished immediately after his death, but continues beyond life through his/her estate.
In practical terms, when a taxpayer dies leaving assets to be counted, his/her Income Tax Return must be filed by his/her successors, while the partition of his/her assets is not finalized. The person who must pay this tax, however, is not the widower entitled to one half of the couples’ estate, heirs, or legatees, but the estate itself, i.e., the set of assets, rights, and obligations of the deceased.
It is of utmost importance to highlight that for tax purposes, the extinction of the deceased person’s liability does not occur with the death, but only with the judicial decision or by a public probate process and partition of the property deed, at which time the universality of the assets is dissolved, and the probate process is completed. While the probate process does not reach its end, the administrator must make the Estate Income Tax Return in the name of the deceased person, indicating his/her registration number at the Individual Taxpayers’ ID (CPF), using the code of nature of occupation related to the estate.
If the death occurs as of January 1st of the year following that of the receipt of earnings, but before the filing of the Annual Tax Return, this is not characterized as a probate estate, and must, if mandatory, be filed in the name of the deceased person by the administrator, widower entitled to one half of the couple’s estate, successor on any account, or by their representative.
With regard to the mandatory filing of Estate Income Tax Returns, the type of Income Tax Return to be made depends on the stage the probate process is in, and it may be initial, intermediate or final. The initial Income Tax Return corresponds to the one made in the calendar year of the death, and one must pay attention to the need to open the probate process within 60 days after the death. Intermediate Income Tax Returns, on the other hand, refer to the calendar years following the year of death (when the inventory lasts for more than one year) up to the calendar year prior to the partitioning, over-sharing or awarding court decision or to the public deed of the probate and partition of assets. Finally, the final Income Tax Return is the one corresponding to the calendar year of the legal decision of the distribution, over-sharing, or adjudication or of the public deed of the probate and partition of assets.
For initial and intermediary Income Tax Returns, the same rules as those established for individual taxpayers apply.
Note that, just as it applies to the Natural Person’s Income Tax Return, only certain expenses provided by law are deductible on the Estate Income Tax Returns. However, funeral expenses, court costs, or expenses related to the probate process and the partition of property cannot be deducted.
The final Income Tax Return, however, is always mandatory when there are assets to be counted. Its presentation must be prepared using the 2022 Generator Program of the Income Tax Return. The income tax in this case is calculated using the amounts corresponding to the sum of the monthly progressive tables related to the months of the period covered by taxation, in the calendar year to which the final Income Tax Return corresponds, until the date of the final court decision or the public deed of the probate and partition of property is drawn up, even if the income corresponds to only one or a few months of this period.
The Assets and Rights Statement corresponding to the final income tax return must be informed, separately, in relation to each asset or right, the portion corresponding to each beneficiary, identified by name and Individual Taxpayer ID (CPF) number. In the item “Status on the Date of Partition”, the assets or rights must be informed by value, observing the relevant legislation.
The deadline for filing the Final Estate Income Tax Returns is May 31, 2022, in cases where: I – the legal decision for the partition, new partition, or adjudication of the counted assets occurred until calendar year 2021 and was final and unappealable until the last day of February of calendar year 2022; II – the public deed of the probate process and partition occurred in calendar year 2021; III – the final and unappealable decision for the partition, new partition, or adjudication of the counted assets occurred between March 1st and December 31st of calendar year 2021. The deadline for the payment of the assessed tax is the same as the deadline for filing the Final Estate Income Tax Return and cannot be paid in installments. Attention: If the final and unappealable decision for partition, new partition or adjudication of the counted assets occurs between March 1, 2022, and February 28, 2023, the Final Estate Income Tax Return must be filed in 2023, until the last business day of April.
Sending in Estate Income Tax Returns after the legal deadline implies a fine of 1% per month or fraction of the tax due, observing the minimum amounts of BRL 164.75 and maximum of 20% of the tax due. If there is no tax payable, the minimum fine is set at BRL 164.75.
At the end of the probate process with the final and unappealable court decision or with the drawing up of the probate process and partition of property deed, the successors of the deceased taxpayer must state the inheritance received in their own Income Tax Return, highlighting that the operations that involve the transfer of property of goods and rights, by causa mortis succession, to heirs and legatees, are subject to the calculation of capital gain when the transfer of said goods and rights is made at market value, provided this is higher than the value in the deceased person’s last tax return. In this case, the option is informed in the Final Estate Income Tax Return, and the estate is the taxpayer of the tax. The tax must be paid by the administrator by the date foreseen for filing the Final Estate Income Tax Return. For transfers by the value stated in the deceased person’s last Income Tax Return of assets, there is no capital gain to be ascertained.
Available at: https://politica.estadao.com.br/blogs/fausto-macedo/falecimento-do-contribuinte-a-emblematica-declaracao-de-imposto-de-renda-de-espolio/
Autor: Flávia Sant'Anna Benites • email: flavia@ernestoborges.com.br • Tel.: +55 67 99984 1406
