Taxation of Irrevocable Trusts from the Perspective of the Brazilian Tax Authorities

In today’s globalized environment, the use of international trusts has gained importance as a tool for estate and succession planning among individuals with assets abroad. However, the complexity of Brazilian tax legislation—particularly following Law No. 14,754/2023—demands careful attention to the tax treatment of these structures.

As of January 1, 2024, trusts have been expressly regulated for tax purposes in Brazil, with the adoption of a fiscal transparency regime that directly affects settlors and beneficiaries who are Brazilian tax residents. In line with this, the Brazilian Federal Revenue Service (Receita Federal do Brasil – RFB) has issued interpretative rulings to clarify its position.

Fiscal Transparency Regime

Law No. 14,754/2023 disregards, for tax purposes, the separate legal personality and patrimonial autonomy of the trust, attributing ownership of assets and rights directly to the settlor or beneficiaries, depending on the type of trust:

(i) Revocable trust – The assets remain under the ownership of the settlor, who must include them in their Individual Income Tax Return (IRPF) and report income and capital gains as if they were personally held.

(ii) Irrevocable trust – According to Ruling COSIT No. 75/2025, the RFB understands that when there is an irrevocable waiver of rights over the assets, ownership is transferred to the designated beneficiaries, even if there is no vested right or actual distribution. The RFB also considers that the mere expectation of benefit is sufficient for an individual to be treated as a beneficiary for tax purposes.

Reporting and Tax Obligations

(i) Income Tax Return and DCBE – Brazilian-resident beneficiaries must declare trust assets as their own, and, if applicable, include them in the Declaração de Capitais Brasileiros no Exterior (DCBE – Declaration of Brazilian Capital Abroad).

(ii) Taxation of income and gains – Income tax (IRPF) applies to income and capital gains derived from the trust’s assets, following the same rules applicable to foreign investments.

(iii) Distribution of assets – If assets from a revocable trust are distributed during the settlor’s lifetime, such transfer may be treated as a donation and subject to the Imposto sobre Transmissão Causa Mortis e Doação (ITCMD – Inheritance and Gift Tax), depending on the tax residency of the parties involved.

Despite the complexity of the applicable legislation and the strict interpretation adopted by the Brazilian tax authorities—which attribute ownership of trust assets and rights to the settlor for tax purposes—the establishment of a trust remains a highly advantageous tool for international estate and succession planning.

Therefore, the choice between a revocable and an irrevocable trust should consider not only tax aspects but also other relevant criteria, such as the level of control desired by the settlor, asset protection objectives, management flexibility, and specific succession goals.

Aurora, as a licensed trust and corporate services provider, is fully equipped to assist in the structuring and administration of trusts—from feasibility analysis to implementation and ongoing management.