Trusts: What Brazilian Tax Transparency Changed

For years, the trust occupied a grey zone in Brazilian law: the tax authority recognised its existence, but there was no clear rule on who, and when, should report and pay tax on assets held in the structure. Brazilian families used trusts established abroad on the expectation — not always correct — that interposing the structure would defer taxation indefinitely.

Law 14,754/2023 closed that grey zone. And it did so in a way that requires reviewing any structure built before it. The principle matters beyond Brazil: several home jurisdictions have been adopting equivalent transparency logic.

The core mechanism: tax transparency

The law introduced what the tax authority itself calls a tax transparency regime for trusts — in practice, the trust’s legal structure is disregarded for tax purposes, and ownership of the assets is attributed directly to an individual: the settlor or the beneficiary, as the case may be.

General rule, while the trust subsists: the assets and rights are treated as owned by the settlor, and it is the settlor who reports and is taxed on income and capital gains generated by those assets — as though holding them directly, without the trust in between.

When assets are distributed to a beneficiary, or on the settlor’s death (whichever comes first), ownership passes to the beneficiary — characterised as a gift in the first case, or as a transfer on death in the second.

A significant exception: the irrevocable trust. Where the settlor expressly renounces any right over the assets, the tax authority has clarified, in Cosit Ruling 75/2025, that beneficiaries are treated as the tax owners of the assets from the trust’s establishment — not only at the moment of actual distribution.

The detail that surprises most beneficiaries

The authority was emphatic: the mere existence of an expectancy is enough to establish beneficiary status for tax purposes, even in discretionary trusts — those where distribution depends on the trustee’s decision and may never happen. The beneficiary need not hold a vested and certain right; it is enough to be formally named in the trust instrument or in the settlor’s letters of wishes.

That means a potential beneficiary — “to be used only in situations of extreme need”, as in one case already examined by the authority — can be obliged to report and pay tax on income from a trust from which they may never receive a penny.

Note on scope. The exact characterisation of a specific structure — whether the trust is revocable or irrevocable, who counts as settlor where the original instrument is unclear, how “expectancy” applies in your case — depends on technical analysis of the trust deed. This article describes the law’s general mechanism; it does not replace that analysis.

Taxation and reporting: the numbers

Income and capital gains on the trust’s assets are taxed on the tax owner (settlor or beneficiary, depending on the stage), at a uniform 15% rate, in the annual return — the same treatment given to foreign financial investments and to profits of controlled entities under the same law.
Transfer to a beneficiary, whether by distribution during life (a gift) or on death, may attract estate or gift tax, depending on the jurisdictions involved and the structure’s design — a further consideration on top of income taxation.
Mandatory reporting: the structure and its assets must be reported in the annual income tax return and, above USD 1 million, also in the Central Bank’s Declaration of Brazilian Capital Abroad (CBE).

Why the structure still makes sense — when well designed

The law did not prohibit trusts. It removed the indefinite tax deferral that, for many, was the only reason to use one. What remains as a legitimate reason to keep or establish a trust is what was always the instrument’s original function:

Succession governance across generations, with distribution rules set during life by the settlor, independent of current taxation.
Protection against fragmentation of wealth in families with multiple heirs, across different jurisdictions, needing centralised administration.
Legitimate privacy, with the instrument keeping the ownership structure out of public probate — while fully reported to the tax authority.

What no longer makes sense is expecting to defer taxation simply by interposing the structure — that specific advantage has not existed since 2024.

What to review in existing structures

Establish whether the trust is revocable or irrevocable. That classification decides who the tax owner is, and from when.
Confirm who is technically the settlor. In older structures built before the law brought clarity, that figure is sometimes poorly defined — and the absence of a definition relieves nobody of the obligation, it merely creates uncertainty over who reports.
Check the obligation to request information from the trustee. The law provides that the settlor or beneficiary must obtain from the trustee the funds and information needed to meet tax obligations — which can be a practical challenge in discretionary trusts with multiple potential beneficiaries or minor beneficiaries.
Assess whether the structure still performs a real governance and succession function, or whether it was built solely on a deferral rationale that no longer exists.

Frequently asked questions

Does a trust still protect wealth from creditors or litigation?

Asset protection depends on the specific legal design and the trust’s jurisdiction, and is not automatically removed by Law 14,754/2023 — which addresses taxation, not the structure’s civil validity. But the protective-effectiveness analysis is distinct from the tax analysis, and both need doing.

If I am only a potential beneficiary, having never received anything, must I still report?

Under the position already stated by the tax authority, an expectancy — being formally named as a beneficiary, even subject to a condition — is enough to trigger reporting and taxation obligations.

Does the 15% tax apply to the trust’s total value or only to income?

It applies to income and capital gains generated by the trust’s assets in the period — not to the principal value of the wealth itself.

The starting point

The trust did not die with Law 14,754/2023 — but the reason to have one changed. Anyone who kept the structure purely for expected tax deferral is now exposed without the advantage they were seeking. Anyone who designed it for genuine succession governance still holds a valid instrument, now with clear tax rules.

If you have — or are considering establishing — a trust, the next step is to review its classification (revocable or irrevocable), identify precisely the tax owner at each stage, and confirm whether the structure still performs the function it was built for.

One conversation is enough to review where your structure stands today.

Informational content. It does not constitute legal or tax advice. The rules cited were verified against official sources in July 2026 and may be amended or further regulated. Individual situations should be analysed case by case.