The Brazilian government has published plans to introduce tax changes, including the taxation of tax residents’ foreign income, covering investments, controlled entities and trusts.
The taxation of foreign trusts is a new feature of the Brazilian tax system, according to law firm, Baker McKenzie.
“Since the trust is not an institute recognised by the Brazilian legal system, there was no tax regulation on this matter before and, therefore, there were many doubts regarding the taxation of Brazilian individuals involved in trusts,” the firm commented.
Baker McKenzie also pointed out that the proposed changes do not distinguish between revocable and irrevocable trusts, requiring a case-by-case approach.
Brazilians will now be taxed on a sliding scale of rates, up to 22.5%, on earnings and income from investments held abroad and on profits from foreign-controlled entities. Deductions will not be permitted.
The new rules are expected to take effect from 1 January 2024.
