Advantages of Family Succession in Brazil – a comparison to China

After the death of a person, a process must start to allow the transfer of that person’s property to those who are entitled to receive them, who are the heirs or beneficiaries of the inheritance.

This process, however, may be different depending on the country where the death took place because each place has its own laws and specificities.

In this article, we are going to establish a comparison between the proceeding of family succession in Brazil and in China, as well as highlight the advantages that Brazil offers for the succession process started in its territory.

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Author: Lucas Gomes Furtado

How much is the inheritance tax rate in Brazil and in China?

Generally, after the death of a relative, the heirs, or beneficiaries who will inherit their estate are also responsible for the payment of inheritance tax. 

This usually happens in several countries around the world, and each of them has their own specific rules regarding the payment and charging of this tax.

In Brazil, the inheritance tax is named ITCMD (Imposto sobre transmissão causa mortis e doação) and must be paid whenever there is the transfer of goods or transfer of rights, in case of death or donation.

In our country, each federative state determines its inheritance tax rate and how it will charge it, but the percentage must not be higher than 8% of the market value of the property.

This means that, according to Brazilian law, there cannot be an inheritance tax rate higher than 8% in relation to the value of the property transmitted to the heirs after death.

In China, however, the reality is quite different.

As of now, for the legal heirs to be able to inherit the deceased person’s property, there is no unique and specific inheritance tax rate imposed by the Chinese government.

However, there are several other types of taxes in China that may be charged as a consequence of the transmission of property ownership after death, depending on each scenario.

It is the case of the deed tax, for example, which must be paid by the person or company who receives the right of use of land or property, whether by acquisition, sale, exchange, or donation.

Therefore, in certain situations, whoever receives immovable property through inheritance in China must pay this tax, which usually happens when the deceased person leaves property in a will to someone who was not their relative.

That happens because the legal heirs of the deceased are exempt from paying the deed tax within Chinese territory.

The deed tax rate varies in the country and may reach 5% on the value of the estate, and it must not be charged from the spouse or relatives of the deceased, or on movable property.

Besides, at times, it may be necessary for an heir to prove their condition as an heir to the deceased’s estate in order to receive them, which can be done by requiring a notary certificate from a Chinese notary office.

If this is the case, the heir will have to pay an amount that varies from 0.5% to 2% on the value of the property to obtain this notary certificate, which is common in situations regarding immovable property or bank deposits that belonged to the deceased.

Although these two are among the most common taxes to be charged on inheritance, there may be other taxes in different cities and regions across the Chinese territory.

How does the division of property work in China?

In a similar way to how it works in Brazil, in China there is also an order of preference that must be followed when the division of the deceased’s property has not been determined by them while they were alive, in a will.

In this situation, in Chinese reality, the relatives are divided between first and second levels of priority, according to the following:

1. first level of priority: spouse, children, and parents;
2. second level of priority: siblings, paternal grandparents, and maternal grandparents.

 

Therefore, first-level heirs will inherit all the deceased’s property, and second-level heirs will only receive any property if there is no surviving spouse, children, or parents.

In general, Chinese law also determines that same-level heirs must receive equal shares of property, with no distinction as to gender, or whether the children were born in or out of wedlock.

However, in regard to the community property acquired by the couple, the surviving spouse usually receives one half of the estate and will also receive another amount together with the children and parents of the deceased, related to the other half.

Are there any obstacles or prohibitions to inheriting in China?

Chinese law has determined that one heir may be considered unworthy when it comes to receiving their deceased relative’s estate in certain scenarios, similar to how it happens in Brazil and in other countries.

In Brazil, heirs may lose their right to inherit in specific situations, such as unworthiness, disinheritance, and the existence of debts.

An heir will be considered unworthy if they commit any act against the life or the honor of the owner of the estate, or even against their freedom to make a will. For this to happen, an unworthiness lawsuit must be filed in court.

Besides that, an heir can also be disinherited for the same situations mentioned above, or if they physical offenses, or serious injury, have illegal relations with a stepparent, or fail to assist their ascendants in case of disease.

On the other hand, heirs may also be prevented from inheriting in case of debts made by the deceased, if the payment of these debts uses all the property left by them and there is nothing left to inherit.

Likewise, in China, an heir may be considered unworthy if they cause the death of the decedent or any other heirs, or if they prevent other heirs from inheriting their shares, whether by force or fraudulent actions.

Also, there are judicial rulings in Chinese courts to prevent children from inheriting their parents’ estate in cases of abuse, theft, or assault to them.

What are the advantages of starting a family succession in Brazil?

We can say that there are advantages to starting a family succession in Brazil in comparison to China.

First, it is clear that in Brazil there is only one way to charge inheritance tax, and that the tax rate is limited to 8% on the market value of the property.

At the same time, although China has not determined one specific tax rate related to inheritance tax, other taxes may be charged depending on each specific case and each region in the country.

Therefore, it is not uncommon for Chinese citizens who have inherited property to pay for other taxes whose percentages may be equal to or even higher than the Brazilian tax rate limit.

Another benefit of Brazilian law is the possibility that the estate owner may get a private pension plan.

That is because the private pension plan holder can define how the division of this money will happen after their death by naming any person they want as a beneficiary to receive them.

According to Brazilian law, most federative states do not charge ITCMD on the amount of money left in private pension plans because it is not part of the inheritance and does not need to be included in the inventory proceeding.

In other words, this amount of money related to private pensions can be received by the beneficiaries irrespective of the course and the conclusion of the inventory proceeding.

Holding Company

Another interesting possibility to be considered is the creation of a holding company by the owner of the estate.

In this kind of company, it is possible to plan the management of property and/or other companies by the company partners.

There, particular goods belonging to natural people will be gathered and start belonging to the holding company, although still managed by the partners.

An advantage of holding companies is having more safety and better planning of the property that belongs to it, which will also be divided according to the owner of the estate’s wishes, after their death.

Another positive aspect of this kind of company is related to the taxation on the holding, which is usually considerably lower than what the law determines on natural people.

In both scenarios, a holding company allows for a less expensive, less bureaucratic, and more simplified way to conduct the succession family process, as everything has been planned in advance.

Thus, bringing property from other countries to Brazil with the intention of planning a family succession may be an attractive decision for whoever owns property abroad, given these benefits of the Brazilian legislation.