Tax and pen

Brazilian Supreme Court will define wether ITCMD is levied upon pension plan (PGBL) and cash value life insurance plan (VGBL), in case the owner’s passing


In judgment session occurred on May 12, 2022, Brazilian Supreme Court (STF) Justices acknowledged general repercussion to the Extraordinary Appeal that discuss whether ITCMD is levied upon pension plan (PGBL) and cash value life insurance plan (VGBL) upon owner’s death. The controversy was registered as the no. 1,214 General Repercussion theme.

At the lower Court, the original lawsuit challenged the constitutionality of the articles 5º, II, “b” and “c”, 12, 23, 24, I, “b”, “d”, “e”, and III, and 42, all from the State Law no. 7,174/2015, of the Rio de Janeiro State, which provides that ITCMD is levied on VGBL and PGBL plans. Rio de Janeiro State Court partially granted the request in order to declare the unconstitutionality of the articles that provided for the ITCMD levy upon the VGBL plan. Therefore, both parties filed extraordinary appeals that had its general repercussion acknowledged by the Supreme Court.

It is worth mentioning that on November, 11, 2021, the Brazilian Superior Court stated that the amounts received by VGBL´s beneficiaries, due to the death of the plan’s owner, are not part of the inheritance and, therefore, cannot be taxed by ITCMD, considering that the VGBL plan´s nature of life insurance.
Thus, the Supreme Court will decide definitively, by means of a binding precedent, whether ITCMD is levied upon the referred plans.

We also highlight the possibility of modulation of the effects of the decision by the STF, which means that the decision start its effects from a certain moment. As a rule, the STF grant the effect of the decision to taxpayers who have filed lawsuits before the trial. In this sense, taxpayers who want to discuss the issue regarding the past should analyze the filing of a lawsuit before the start of the judgment by the STF, in order to have more chances of recovering amounts unduly paid in the past.

The judgment of the Theme of General Repercussion No. 1,214 has not yet been scheduled to take place.

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