Brazil’s Supremo Tribunal Federal (STF) has consolidated its understanding that Personal Income Tax (IRPF) does not apply to the advancement of inheritance (antecipação de legítima), that is, the lifetime transfer of assets from an ascendant to their heirs. This is because, in such transactions, there is no increase in wealth for the donor, which is a constitutional requirement for the imposition of income tax.
The Court further emphasizes that taxing powers are divided among the different levels of government, and that the advancement of inheritance is already subject to the Tax on Inheritance and Gifts (ITCMD), which falls under state jurisdiction. The simultaneous imposition of IRPF by the Federal Government on the same taxable event constitutes double taxation, in violation of the constitutional principles of legality, ability to pay, and the prohibition of bis in idem.
In recent decisions, such as in the judgment of ARE No. 1,387,761, the STF reaffirmed that the appreciation of an asset does not, in itself, generate taxable income for the donor, as there is no realization of income or profit—only a transfer of wealth. Attempts to tax this difference as capital gains exceed the constitutional limits of the taxable basis of income tax.
This understanding represents an important precedent for taxpayers and professionals involved in estate planning, helping to avoid undue tax burdens and ensuring legal certainty in lifetime asset transfers.