In Brazil, wealth does not circulate easily; it tends to concentrate. According to the most recent data from IBGE (PNAD Contínua 2024), the richest 1% of the population receives the equivalent of 36.2 times the income of the poorest 40%.
This scenario affects not only the economy, but also philanthropy and the funding capacity of social organizations, which operate in an environment with few structural incentives for donation.
Part of this concentration is a historical legacy, in the most literal sense. Assets are passed down from generation to generation almost untouched by the tax system, while the third sector continues to struggle to access resources consistently.
This is no coincidence; it is the result of a tax system that, in practice, was not designed to encourage the voluntary redistribution of wealth or a culture of giving. Understanding this mechanism is fundamental for anyone who believes that philanthropy can be a real instrument of social transformation.
How does inheritance taxation work in Brazil?
When someone dies and leaves assets such as real estate, investments, and businesses, these assets are transferred to the heirs through probate. It is at this point that the ITCMD, the Inheritance and Gift Tax, which is a state tax, is levied.
One issue lies in the tax rate. Since 1992, Federal Senate Resolution No. 9 has limited the maximum ITCMD (Inheritance and Gift Tax) rate to 8%, and in practice many states charge even less. This scenario can be further reduced by estate planning strategies used to decrease the tax burden on the transfer of large estates.
The Brazilian ITCMD (Inheritance and Gift Tax) also lacks real progressivity. Although the Federal Constitution foresees this possibility and the 2023 tax reform (EC 132) made it mandatory, most states still apply uniform rates regardless of the size of the transferred assets. São Paulo, for example, charges a fixed rate of 4% both for those who inherit R$ 100,000 and for those who inherit R$ 100 million, as if the tax system viewed these two situations as equivalent.
Adjusting the maximum tax rate to align with progressivity would correct this distortion, ensuring that each taxpayer bears a tax burden commensurate with their wealth and respecting the constitutional principle that those who are able to contribute more should contribute more.
Why does this matter for inequality?
Inheritance is not just an emotional or family. It is also a powerful and little-discussed economic mechanism for transmitting opportunities. Those who inherit significant wealth inherit not only assets, but also access to credit, quality education, networks, and capital to start businesses. Those who start from a smaller base face a structurally more difficult path, regardless of individual effort.
Discussing inheritance taxation means acknowledging that the market, by itself, does not correct the inequalities that accumulate over generations and that the State has a role to play in this rebalancing, ideally by creating conditions so that part of this wealth generates social impact before or during the transfer.
What does inheritance taxation have to do with philanthropy?
This is a connection that is still little explored in the Brazilian public debate. The design of the inheritance tax system directly affects the culture of giving and the capacity of the third sector to act. In other words, it helps define whether or not the wealth accumulated throughout life can be transformed into social impact.
In the United States, this arrangement works differently. The so-called Estate Tax is a federal tax levied on the total assets left at the time of death, unlike inheritance tax, which applies to what each heir receives. It is progressive, with rates between 18% and 40%, and is associated with a significant incentive.
Donations made during one's lifetime or through a will to qualified social organizations are fully deductible from the tax base. In practice, this allows the donor to direct part of their assets to causes they believe in, while simultaneously reducing the tax owed. This gives them greater control over the destination of these resources, enabling them to incorporate them into building a legacy aligned with their values, which would otherwise automatically go to the State.
The result of this incentive is impressive. In 2023, donations to American organizations totaled US$557 billion, while in the same period Brazilian organizations raised R$479 million (or US$98.5 billion based on the December 2023 dollar selling price).
This difference is not just cultural, it's structural. In Brazil, there is a lack of tax incentives that would make donation a strategic choice in estate planning. Today, in states like São Paulo, donating to a civil society organization can be taxed the same as a regular inheritance. In other words, the system does not create incentives for part of one's assets to be allocated to social causes.
Tax reform and opportunities
Brazil is in the midst of a tax reform process, a rare moment in which the country's legal framework is under discussion and open to change. This window represents an opportunity to bring the Brazilian system closer to international best practices, especially in how inheritance taxation can encourage donation.
It is in this context that the Alliance for the Strengthening of Civil Society, a coalition of which the Bem Maior Movement is a part, works to improve the Brazilian philanthropic environment. One of the achievements of this advocacy work was to guarantee, through tax reform, that donations to civil society organizations will no longer be taxed by the ITCMD (Inheritance and Gift Tax). The victory is significant, but it still depends on regulation by state legislative assemblies to take effect in practice.
With goals set for 2026, the Coalition brings together organizations and legal experts who, in addition to working at the federal level, are drafting bills to present to state legislative assemblies with the aim of ensuring that the non-incidence of ITCMD (Inheritance and Gift Tax) on donations to civil society organizations, already provided for in the Federal Constitution, is exercised in a simple and accessible way, without the bureaucratic barriers that prevent most organizations from enjoying this right in practice
Furthermore, the Coalition is developing proposals for the creation of tax incentives for lifetime donations, inspired by international models but adapted to the Brazilian reality and improved by lessons learned from these experiences. The goal is to create a concrete path for donations to become a strategic choice within estate planning, recognized and valued by the tax system of each state.
A conversation we need to have
Every generation of business leaders reaches a point where they need to think about their legacy. What will remain? What will be passed on? To whom?
In countries with more developed philanthropic cultures, the question is not just "how much tax will I pay," but "what legacy do I want to leave and how can the system help me achieve it?" In Brazil, we are still building the conditions for this second question to become part of estate planning.
Changing this scenario depends not only on legislators, but also on business leaders and investors who understand the role they can play, whether as active voices in public debate, as conscious legacy planners, or as donors who help build a more favorable environment for philanthropy in the country.
The transmission of wealth is inevitable. The question is: what can we do, collectively, to ensure that it also becomes an opportunity for social transformation?
This article is based on the academic paper “Inheritance Taxation and Institutional Innovation: Paths to Fiscal Justice and the Strengthening of the Third Sector in Brazil”, published in the journal Direitos Democráticos & Estado Moderno (PUC-SP), v.1, n.16, Jan/Apr 2026.
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This post was written by:
Natalia Cordeiro, Lawyer for the Bem Maior Movement
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