Inheritance taxation has a significant influence on philanthropy. In different countries, the rules regarding the transfer of assets and donations vary considerably, affecting how people donate and contribute to social causes. In this article, we will analyze how these laws function in Brazil and other nations, highlighting opportunities for improvement in the Brazilian context.
The figures are part of the "International Comparative Study on Inheritance Taxation and Tax Incentives for Philanthropic Donations ," commissioned by the Bem Maior Movement and prepared by SBSA Advogados .
Comparing inheritance taxation around the world
In the United States , inheritance tax can reach 40% for values above US$13.61 million . In the United Kingdom , a 40% tax rate applies to inheritances above £325,000 . In Canada , although there is no direct inheritance tax, capital gains tax can reach 50%, representing a significant cost for heirs.
In contrast, Portugal , Singapore , and the Philippines adopt a more lenient approach. In Portugal, inheritances between parents and children are not taxed. Singapore abolished inheritance tax in 2008. In the Philippines, the rate is only 6%.
In Latin America, Chile presents an intermediate case. The inheritance tax rate is progressive, ranging from 1% to 25%, depending on the amount transferred, the purpose of the transfer, and the degree of kinship between the beneficiary and the deceased. There are no deductions or tax credits for donations, but some donations to specific organizations are exempt from tax.
Tax incentives that encourage donations
In countries with high inheritance taxes, such as the United States and the United Kingdom, tax incentives play a crucial role. In the US, donations to NGOs are tax-exempt and can be deducted from inheritance tax. In the UK, donations made through wills reduce the tax base. In Canada, donations generate tax credits that can be deducted from the donor's income tax.
A study by the Impact Institute reveals that in the US, people between 65 and 79 years old plan to transfer 17% of their wealth – almost US$10 trillion – to foundations and charitable funds. This demonstrates the impact of tax incentives. Increasingly, people are donating money, stocks, or other assets to these funds. In addition to helping, they benefit financially from an immediate deduction in the taxes they have to pay.
Challenges of Brazilian reality
Analyzing Brazilian legislation reveals a significant difference compared to other countries. In Brazil , inheritance taxes range from 4% to 8% , depending on the state, and tax incentives for donations are limited. The rules for tax exemption on donations are complex and vary from state to state. Furthermore, there are no policies for deductions or tax credits for lifetime donations, making philanthropy less attractive to many people. This discourages potential donors and creates barriers that hinder the growth of the non-profit sector.
To improve the landscape of philanthropy in Brazil, it is necessary to propose reforms that increase tax incentives for donations . Creating tax deductions for lifetime donations, similar to the American model, is an effective measure. It is also essential to simplify donation procedures, reducing bureaucracy and facilitating the process for donors and organizations. These changes would strengthen the culture of giving and direct more resources to social causes, helping to combat inequalities in the country.
While countries like the United States, the United Kingdom, and Canada use a combination of high inheritance taxes and tax incentives to stimulate philanthropy, Brazil faces significant challenges . Revising Brazilian legislation, focusing on simplifying processes and expanding tax incentives, is crucial to creating a more favorable environment for philanthropy. This would strengthen the third sector and promote social justice in the country.
A window of opportunity
The current moment, with the discussion of tax reform, is an ideal opportunity for civil society to take ownership of the issue and propose improvements. The Bem Maior Movement is engaged in the Alliance for the Strengthening of Civil Society , in collaboration with law firms and other NGOs, seeking innovative ways to positively influence this and other issues that directly affect the sector.
Contribute to the future of philanthropy in Brazil
If you are interested in delving deeper into the topic and contributing to the debate on legislative reform in Brazil, we invite you to download the study commissioned by the Bem Maior Movement (MBM) and prepared by SBSA Advogados , which formed the basis of this article. Share your reflections on the impact of these proposals on the future of Brazilian philanthropy.
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This post was written by:
Natalia Cordeiro, Lawyer for the Bem Maior Movement
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