Foreign individuals with property in Brazil may be subject to local succession laws and probate if they hold property in their name or are married to a Brazilian spouse or have Brazilian children.
Probate in Brazil is always necessary for assets held in the deceased’s name as Brazilian courts have exclusive jurisdiction to process probates with Brazilian assets. The rule applies to any property, including real estate, shares in Brazilian companies, vehicles, bank accounts, etc.
As for the succession laws, the general rule is that the law of the deceased’s domicile shall govern, with only one exception.
The Brazilian succession laws shall govern the succession of assets in Brazil owned by a nonresident individual if the succession laws of the deceased’s domicile are less favorable to the Brazilian spouse, companion, or children.
Nonresident individuals married to a Brazilian citizen or with Brazilian children may be exposed to local succession laws, especially when foreign succession laws do not contemplate forced heirship rules or the other country allocation rules entitle the heirs smaller share in the estate compared to Brazilian succession rules.
Countries that require some careful considerations regarding their resident individuals’ exposure to Brazilian succession laws concerning their assets in Brazil are the United States, Canada, Spain. Mexico, the United Kingdom, Germany, and France.
Another critical issue is that Brazilian probate must initiate within 60 days from the passing or a fine may apply based on the value of the inheritance tax (ITCMD) due in the probate. ITCMD is a state tax which rates vary on average between 4% and 8% of the market value of the decease’s estate. The fine for late filing of the probate proceedings also varies from state to state and can reach up to 20% of the ITCMD due. This deadline is short if one considers probate with assets in Brazil and heirs residing in a foreign country.
Besides, probate in Brazil involves several costs, such as translations, probate court fees (1%), property registration fees, notary fees, attorney’s fees, not to mention the tax costs of ITCMD, and withholding tax. Since late 2018, Brazil’s Federal Revenue Department understands that donations and inheritances remitted abroad are subject to the withholding tax at the rate of 15%, or 25% if the beneficiary resides in a tax haven.
Probate is a costly and time-consuming process in Brazil, especially for a foreign heir not fluent in Portuguese or versed in Brazilian laws.
Whenever possible, nonresident individuals should avoid holding Brazilian property in their name and consider having a foreign entity as the owner of record of such property. By doing so, one avoids the need for local probate and the application of the Brazilian succession laws, not to mention the savings with probate costs and local taxes.
David Roberto R. Soares da Silva, expert in tax, estate and succession planning, founding partner of do Battella, Lasmar & Silva Advogados, and coauthor of Planejamento Patrimonial: Família, Sucessão e Impostos. He also authored Brazil Tax Guide for Foreigners and Tributação da Economia Digital no Brasil, published by Editora B18.