Brazilian Tax Authorities’ blurred vision on the transparent regime applicable to trusts: Formal Consultation No. 75/2025 and Law No. 14,754/2023

The recently published Formal Consultation COSIT No. 75/2025 (“Consultation 75/2025”) sought to evaluate the tax implications of an irrevocable discretionary trust, established in Delaware (USA) by a foreign legal entity, in light of Law No. 14,754/2023. This is the first — and a controversial — official statement by the Brazilian Tax Authorities on the subject, following the enactment of the so-called “Offshores Law,” which established a transparency regime for the taxation and reporting of assets allocated to such fiduciary structures.

Under the provisions of the Offshores Law, trusts do not hold legal personality and do not constitute segregated assets for tax purposes. The legislation states that the assets, rights, and income allocated to a trust must be attributed directly to an individual — either the settlor or the beneficiary(ies) — depending on the specifics of the trust and the moment of the (presumed) transfer of ownership of the relevant property. The rule requires identifying the individual who will be considered, for tax purposes, the effective owner, and who must declare the assets and rights and pay the taxes due in Brazil on the income and capital gains. In short, this is the transparency regime created by Law No. 14,754/2023 for trusts.

The case submitted for consultation concerns a trust whose potential beneficiaries are descendants of a shareholder of a Brazilian company, indirectly held by a foreign legal entity, which granted economic rights (usufruct) to the foreign legal entity that created the trust. Access to the assets is, as informed, conditioned on a situation of “extreme necessity” by the beneficiaries, according to criteria detailed in the trust deed.

Consultation 75/2025 can be summarized as follows:

IRREVOCABLE AND DISCRETIONARY TRUST ESTABLISHED ABROAD. LAW No. 14,754 of 2023. TAX TRANSPARENCY REGIME. APPLICABILITY. DEFINITION OF SETTLOR AND BENEFICIARY.

Law No. 14,754 of 2023 defines the settlor as the individual who, through the trust deed, transfers ownership of assets and rights to the trust (Article 12, item II). When the trust is created with assets held by legal entities based abroad, it is necessary to investigate the ownership chain to identify the individual who ultimately holds the underlying assets, even if such ownership is indirect through legal entities. This individual will be regarded as the settlor for purposes of applying Law No. 14,754 of 2023.

The law also defines a beneficiary as the person designated to receive from the trustee the assets and rights forming the trust’s subject matter. The use of the verb 'designate' indicates that it is not necessary for the individual to have acquired a right to the trust’s assets to be considered a beneficiary. The mere existence of an expectation of receiving the trust´s assets is sufficient to establish beneficiary status.

Legal provisions: Civil Code (Law No. 10,406 of January 10, 2002), Articles 121 and 125; Law No. 14,754 of December 12, 2023, Articles 10, 11, and 12.

Despite the suspensive conditions provided in the trust deed, the position adopted by Brazilian Tax Authorities was that the potential beneficiaries should already be considered, for tax purposes, as holders of the assets allocated to the trust. By interpreting Articles 10, 11, and 12 of Law No. 14,754/2023, the Brazilian Tax Authorities concluded that these provisions — which established the transparency regime for trusts — would apply even when there is no vested right to the assets or income derived therefrom. As stated in the ruling, 'the [...] expectation of a right to the trust assets is sufficient to characterize beneficiary status.'

The position adopted in Consultation 75/2025 raises significant concerns. It is not just a matter of anticipating the moment of taxation, but of imposing a tax burden on individuals who may never be part of the legal tax relationship—or, worse, who may not even be aware of their status as potential beneficiaries. This is taxation based on the mere nominal indication, in the trust's documents, of a beneficiary subject to future and uncertain conditions which, because they are suspensive, cannot presume the existence of any legal or economic availability of assets or income.

The tax authorities' position is also worthy of criticism in relation to what appears to have been a new form of disregard of legal personality, combined with the already familiar concept of ultimate beneficial owner (UBO): when dealing with who should be qualified as the settlor of the trust, a fundamental aspect for the application of Law No. 14,754/2023, Consultation  75/2025 innovates by stating that, when the trust is established by a foreign legal entity, the asset chain must be investigated “in order to find the individual who is ultimately the owner of that asset.”

Among the many controversial aspects of Consultation 75/2025, the following stand out:

• Improper imposition of primary and ancillary obligations on individuals without a tax nexus: the ruling imposes, on one hand, the primary obligation to pay taxes on individuals who have not acquired legal or economic availability of income, in contradiction to Article 43 of the National Tax Code (CTN); and on the other hand, ancillary obligations (such as asset reporting) on individuals who are not, at that point, part of the tax relationship.

• Conflict between Brazilian law and the trust deed: Article 10, §5 of Law No. 14,754/2023 provides that, once characterized as the holder of the trust’s assets and rights, the beneficiary must request the trustee to release the funds necessary for fulfilling Brazilian tax obligations. However, in the case analyzed by Consultation 75/2025, the beneficiary’s status is subject to suspensive conditions. The trustee, bound by foreign law and the trust deed, does not recognize the existence of any actual beneficiary (or right) that would justify the release of funds before such conditions are met. This results in the individual resident of Brazil for tax purposes being required to pay taxes out of their own pocket, without any access to the assets that triggered the taxation.

• Application of transparency logic to a conditional and uncertain scenario: by treating the trust as a transparent structure, Consultation 75/2025 disregards the existence of suspensive conditions that prevent the consolidation of any right to the assets or income. As a result, it assigns ownership to beneficiaries who may never acquire a legal relationship with the assets or the income derived therefrom, clearly exceeding the limits of the regime established by Law No. 14,754/2023. It also disregards Article 117 of the CTN, which expressly addresses the tax effects of acts and transactions subject to suspensive conditions, but was not even mentioned in the ruling.

• Undue restriction of the settlor’s qualification to individuals: the requirement that the settlor be a natural person, even when the assets were lawfully contributed by a foreign legal entity, disregards the autonomy of the business and asset structures involved, dismisses the possibility of a legal entity acting as settlor, and applies a legal disregard mechanism not foreseen in the law, solely to identify the individual behind the settlor. In our view, this interpretation lacks legal foundation and artificially narrows the scope of the law.

• Disregard for the diversity of trust structures: the ruling ignored the significant legal and economic differences among various types of trusts — for example, revocable, irrevocable, discretionary, and non-discretionary models. The absence of such distinctions undermines the accuracy of the adopted interpretation in light of the reality of existing structures.

• Violation of the limits of tax fiction: Law No. 14,754/2023 already uses a legal fiction by attributing, under Article 10, ownership of trust assets to the beneficiary even before the assets or income are actually available. However, Consultation 75/2025 goes further by imputing income/assets to a supposed beneficiary still subject to an unfulfilled suspensive condition — i.e., without any legally recognized expectation of income/assets availability. In doing so, the tax authorities appear to violate the limits of legal fiction accepted in tax law, as per Article 43 of the CTN — particularly the concept of legal availability of income. Ignoring the absence of legally attributable income amounts to creating taxation on a merely fictitious event, disconnected from any actual taxable event.

Prior to the issuance of Consultation 75/2025, the Brazilian tax authorities’ primary formal position on trust taxation was pronounced in Formal Consultation No. 41/2020, which pertained to amounts received by a Brazilian resident from a foreign trust. At that time, the Brazilian IRS understood that the amounts received should be classified as taxable income subject to individual income tax (IRPF), under the carnê-leão regime and further reported in the individual tax return (DIRPF).

The primary concern with the referred consultation is that, in many cases, the amounts received from a trust are of a succession-related nature. This should result in their exclusion from the scope of IRPF and their inclusion under the jurisdiction of the states for the purposes of levying Inheritance Tax (ITCMD). This position of tax authorities was met with criticism, as it disregarded the structural and legal nuances of the trust, adopting an overly generic approach disconnected from the nature of the instruments involved.

Similarly, Consultation 75/2025 — although supported by a new legal framework — replicates the same logic of excessive simplification and, ironically, clouds the transparency created by Law No. 14,754/2023. It appears to rely on legislative gaps to impose tax and compliance obligations on subjects not contemplated by the law.

The interpretation adopted by the Brazilian tax authorities disregards the specificities of the trust structure under review — especially the existence of suspensive clauses — and misapplies legal provisions that would require contextual interpretation. Thus, despite the enactment of Law No. 14,754/2023, the taxation of trusts remains surrounded by significant uncertainty, with limited adherence to the peculiarities of fiduciary structures established in so many common law jurisdictions.

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