Inheritance taxation has a great influence on philanthropy. In different countries, rules on wealth transfer and donations vary widely, affecting how people donate and contribute to social causes. In this article, we will analyze how these laws work in Brazil and other nations, highlighting opportunities for improvement in the Brazilian scenario.
The numbers are part of the survey of the “International Comparative Study on Inheritance Taxation and Tax Incentives for Philanthropic Donations” , commissioned by Movimento Bem Maior and prepared by SBSA Advogados .
Comparing inheritance taxation around the world
In the United States , inheritance taxes can reach 40% for amounts above US$13.61 million . In the UK , a 40% rate applies to inheritances over £325,000 . In Canada , although there is no direct inheritance tax, taxation on capital gains can reach 50%, representing a significant cost for heirs.
In contrast, Portugal , Singapore and the Philippines take a softer approach. In Portugal, inheritances between parents and children are not taxed. Singapore abolished inheritance tax in 2008. In the Philippines, the rate is just 6%.
In Latin America, Chile presents an intermediate case. The inheritance tax rate is progressive, varying from 1% to 25%, depending on the amount transmitted, the purpose of the transfer and the degree of kinship between the beneficiary and the author of the inheritance. 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, gifts made by will reduce the tax base. In Canada, donations generate tax credits to deduct the donor's income tax.
A study by the Impact Institute reveals that in the US, people between the ages of 65 and 79 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 with an immediate deduction in the taxes they need to pay.
Challenges of the Brazilian reality
When analyzing Brazilian legislation, it is clear that there is a significant difference in relation to other countries. In Brazil , inheritance taxation varies between 4% and 8% , depending on the state, and tax incentives for donations are limited. The rules for gift tax exemption are complex and vary from state to state. Additionally, there are no deductions or tax credits for living donations, which makes philanthropy less attractive to many people. This discourages potential donors and creates barriers that hinder the growth of the third sector.
To improve the philanthropy scenario in Brazil, it is necessary to propose reforms that increase tax incentives for donations . The creation of tax deductions for living donations, similar to the North American model, is an efficient measure. It is also essential to simplify donation procedures, reducing bureaucracy and making the process easier for donors and organizations. These changes would strengthen the culture of donation and direct more resources to social causes, helping to combat inequalities in the country.
While countries like the United States, United Kingdom and Canada use a combination of high inheritance taxes and tax incentives to encourage philanthropy, Brazil faces major challenges . The review of Brazilian legislation, with a focus on simplifying processes and expanding tax incentives, is essential to create 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 topic and propose improvements. Movimento Bem Maior 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 Movimento Bem Maior (MBM) and prepared by SBSA Advogados , which was the basis for this article. Share your reflections on the impact of these propositions on the future of Brazilian philanthropy.
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This post was written by:
Natalia Cordeiro, Lawyer for Movimento Bem Maior
