The Federal Supreme Court decided in February to declare the constitutionality of the progressive rate of the ITCMD established in the State of Rio Grande do Sul. The unprecedented decision was taken under the general repercussion system, and is expected to establish precedent for the other states to adhere to the same progressiveness system, which will put a heavier tax burden on inheritances and donations.

In a session held on February 6, when judging Extraordinary Appeal n. 562.045-RS, the majority of the justices in the Supreme Court expressed opinion to the effect that the progressiveness – which in the case of the State of Rio Grande do Sul goes from 1% to 8% - is constitutional. The votes by justices Marco Aurélio Mello and by the reviewer Ricardo Lewandowski were defeated. In his vote Justice Mello stated that the issue must be analyzed based on the principles of the contribution capacity, because the rule established in the State of Rio Grande do Sul admitted progression of the rates without considering the economic situation of the heir, but only the official market value. According to the Justice, the rate progression could even compel someone to waive the inheritance simply to avoid being subject to the tax. However, most of the justices voted for granting relief to the State‟s extraordinary appeal.

(Extraordinary Appeal n. 562.045-RS).