Private Wealth 2024 Comparisons

Tax residents in Brazil are those who reside in Brazil on a permanent basis, have been sent abroad on official government duty, or enter with a permanent visa. Additionally, individuals who enter with a temporary visa and obtain a permanent visa, complete 184 consecutive or non-consecutive days in the country within a 12-month period or start working with an employment contract will also be considered tax residents.

A Brazilian individual who left Brazil and acquired non-resident status in Brazil and returns to the country with the intention of staying permanently will also be considered a tax resident upon arrival.

An individual who has left Brazilian territory and has not properly formalised their departure for tax purposes will remain a tax resident in Brazil for 12 months from the date of their departure.

Brazil does not impose an exit tax.

Individuals who are tax residents in Brazil are subject to taxation under the country's income tax legislation, which is based on the worldwide income system established in the universality principle, whereby all earnings are considered as taxable regardless of the territory in which they were acquired. There is no income taxation at the state or municipal level.

For income tax purposes, there is a regime for ordinary income (such as employment and rental income) which is subject to progressive rates ranging from 0% to 27.5% (annually):

• 0% for up to BRL26,963.20;
• 7.5% for BRL26,963.21 up to BRL33,919.80;
• 15% for BRL33,919.81 up to BRL45,012.60;
• 22.5% for BRL45,012.61 up to BRL55,976.16; and
• 27.5% over BRL55,976.16.

Medical and educational expenses for the taxpayer or their dependents are deductible for income tax purposes. There are various restrictions and specific qualifying expenses for deductions, requiring a case-by-case analysis. Additionally, a fixed amount of BRL2,275.08 per dependent can be deducted annually.

Capital gains are also subject to progressive rates ranging from 15% to 22.5%, as follows:

• 15% for up to BRL5 million;
• 17.5% for over BRL5 million up to BRL10 million;
• 20% for over BRL10 million up to BRL30 million; and
• 22.5% for over BRL30 million.

Capital gains obtained abroad by individual tax residents in Brazil are taxed at the same rates mentioned above. Regarding non-resident individuals, capital gains obtained in Brazil are taxed at the same rates mentioned above, except in the case of non-residents located in tax havens, in which case taxation will be based on a flat rate of 25%.

Individual tax residents in Brazil investing in the local financial market are subject to specific tax regulations. Generally, variable income, such as investments in stock markets, is taxed at a rate of 15%. Fixed income investments are subject to a regressive tax rate that depends on the investment period, with rates ranging from 22.5% to 15%.

Additionally, a semi-annual automatic tax regime (come-cotas) applies to some investment funds (such as fixed income and multimarket funds). From 1 January 2024, this regime includes closed-end funds (fundos exclusivos).

From 1 January 2024, income earned abroad by individual tax residents in Brazil derived from financial investments, controlled foreign entities (PICs) and trusts are subject to a new tax regime introduced by Law 14,754/2023. Income tax on these earnings is charged at a 15% rate.

Under the new regime, the general rule is that PICs domiciled in a low or null tax jurisdiction or subject to a privileged tax regime, or if passive income exceeds 40% of total income, will have their profit taxed annually regardless of any distribution. PICs are subject to an automatic taxation regime, which includes companies and other entities, whether incorporated or not, comprising investment funds and foundations, controlled individually by a resident individual or in combination with related parties, such as close family members, in which they hold rights ensuring a predominant influence in corporate deliberations or the power to elect/dismiss managers, or more than 50% of the share capital or in the rights to their profits or to receive their assets in the event of their liquidation.

The legislation establishes that the profit calculation of the controlled foreign entity should follow: (i) international accounting standards (IFRS) or Brazilian accounting standards (BRGAAP), at the taxpayer's discretion; or (ii) BRGAAP, mandatorily, if the company is in a country or dependency with favoured taxation or is a beneficiary of a privileged tax regime.

Law 14,754/2023 also introduced a “check-the-box” regime (transparency). Thus, optionally, a PIC can be treated as a disregarded entity for Brazilian tax purposes, with assets held through the structure being reported and taxed directly by the individual tax resident in Brazil that holds interests in the structure.

The concept of disregarded entities presents a significant opportunity in tax planning for PICs: treating such an entity as transparent for tax purposes has the consequence that the taxpayer will report the assets and rights held by the PIC as if they were directly owned by the individual, thereby subjecting them to individual tax regimes and taxation on a cash basis.

This treatment can be applied selectively for each controlled entity, whether directly or indirectly held. If the PIC has multiple partners or shareholders, the decision to treat the entity as transparent must be unanimously adopted by all involved individual tax residents in Brazil. However, once chosen, this option becomes irrevocable and irreversible while the individual holds the controlled entity abroad.

In terms of asset reports on the Income Tax Return (DIRPF) under the “check-the-box” regime, the individual tax resident in Brazil must replace their interest in the entity for the assets and rights at their acquisition cost, implying a detailed and meticulous reporting process, ensuring that each asset and right is individually accounted for at its original purchase value.

Also relevant is the novel possibility of losses offset. Previously, the offset of losses was completely forbidden. With the new legislation, individuals may offset losses on financial investments abroad with income generated by foreign financial investments or profits generated by PICs. Losses generated by a PIC from 2024 onwards may be used to offset future profits also generated by the same PIC. In this sense, losses generated from 2024 onwards may be carried forward for subsequent utilisation.

The new legislation also introduces a new approach to the transfer of assets and rights by Brazilian resident individuals, or by PICs, to other PICs. As specified in the law, these assets and rights, when transferred to another PIC, must now be assessed at their market value at the time of transfer. This change is relevant, as it implies that the difference between the market value and the acquisition cost will be considered taxable income by the individual at the time of transfer, applying the tax rate in accordance with the nature of the income (eg, financial investment, 15%; capital gains, progressive rates ranging from 15% to 22.5%).

Another relevant aspect of the legislation is the fact that Law 14,754/2023 established a very broad definition of the concept of “financial investment abroad” and “income”. From now on even virtual assets like bitcoin will be considered financial investments abroad in some situations.

The transfer of assets derived from inheritance rights and donations is entirely subject to state-level taxation through the Inheritance and Gift Tax (Imposto sobre Transmissão Causa Mortis e Doação, or ITCMD) with rates commonly ranging from 2% to 8%. Some states charge ITCMD with progressive rates, while others establish fixed rates. In certain circumstances involving low-valued goods, lower tax rates or exemptions may apply.

There is no wealth tax in Brazil, but there are taxes on real estate and motor vehicles, which are collected annually.

Regarding corporate tax, Brazil has certain specificities that facilitate the operation of local corporate structures as instruments for asset management and succession planning, preserving neutrality, and potentially achieving tax efficiency.

Corporate Income Tax (Imposto de Renda sobre Pessoa Jurídica, or IRPJ) is assessed at 15% with a surcharge of 10% on the annual taxable income that surpasses BRL240,000. A Social Contribution on Net Profit (Contribuição Social sobre o Lucro Líquido, or CSLL) is also charged on profits at a general rate of 9%. Taxable income is typically calculated based on the adjusted net profit using the Actual Profit Method, which can be applied either annually or quarterly. However, for companies that are not obligated to use the Actual Profit Method, there is an alternative regime known as the Presumed Profit Method. The adoption of the Presumed Profit Method is subject to certain restrictions, such as gross income not exceeding BRL78 million annually. 

Brazil imposes not only Corporate Income Tax and Social Contribution on Net Profit but also other taxes that are calculated based on a company’s gross revenue (PIS and COFINS). These taxes must be considered in any tax analysis, as they can have a significant impact on the overall tax burden.

Currently, the payment of dividends by a Brazilian company is neither subject to withholding tax nor considered as taxable income of resident individuals or companies.

Brazil has an extensive network of tax treaties that, in some cases, may modify the general taxation regime for assets held abroad and can also affect the credit offset for taxes paid abroad.

Certain types of investments in the financial and capital markets, provided they meet specific criteria imposed by the Brazilian authorities, are exempt from taxation for non-residents who are not resident in tax havens.

Regarding exemptions to income and succession taxation, VGBL (a type of supplementary private pension plan) and insurance policies are valuable tools in estate planning. These financial instruments allow individuals to accumulate funds over time for future benefits for themselves or chosen beneficiaries, potentially avoiding ITCMD. It is important to note that the income generated by the capital paid in a VGBL is subject to income taxation upon redemption. Income tax rates applied vary depending on the tax regime chosen by the investor, with rates from 35% to 10% (for the regressive regime based on duration of investment) or from 0% to 27.5% (for the standard progressive regime). It is crucial for individuals to choose the appropriate tax regime that aligns with their financial goals and circumstances. 

There may be a significant income tax exemption on capital gains resulting from the sale of residential property, provided that these gains are reinvested in the purchase of another residential property within a specified timeframe (for instance, the acquisition of a new home through an upfront payment or the settlement of an outstanding mortgage on an existing residential property). Additionally, even if the funds are not reinvested, there are factors that can reduce the overall capital gains based on the duration of time the property remained under the ownership of the taxpayer. 

There are no substantial or relevant exemptions regarding ITCMD that may impact high net worth families.

Brazilian tax authorities adopt a rigourous and conservative approach towards tax planning. Despite the presence of anti-abuse provisions in the legislative framework, there remains a pressing need for regulatory norms in this area. Consequently, a notable level of uncertainty persists with respect to tax planning, regardless of the specific context.

Potential savings may be achieved regarding capital gains arising from real estate transactions, as mentioned in 1.2 Exemptions.

Transfers by way of donation or inheritance may be conducted based on either the cost or the market value of the assets involved. The market value option triggers income tax on the capital gains, computed as the difference between the cost value and the market value.

Irrespective of their residency or citizenship status, all individuals and entities are liable to pay taxes on capital gains arising from real estate situated in Brazil. For individuals and foreign entities, the tax rates for such gains range from 15% up to 22.5%.

Brazil maintains a blacklist of tax havens. If a non-resident individual or entity is in one of these jurisdictions, the tax rate for capital gains on real estate transactions will be charged at a flat rate of 25%.

Property taxes are applicable to both residents and non-residents in relation to real estate ownership. The Urban Property Tax (Imposto Predial e Territorial Urbano, or IPTU) is charged on urban properties, including houses, apartments, and commercial buildings. The Rural Property Tax (Imposto sobre a Propriedade Territorial Rural, or ITR) applies to rural properties such as agricultural lands and rural estates. These taxes are imposed without distinction between residents and non-residents.

There are numerous ongoing legal and judicial discussions on tax matters, and the newly elected government that took office on 1 January 2023 has introduced ideas and initiatives that, if approved, will have a significant and deep impact on taxation in Brazil.

ITCMD

One theme that will undergo relevant changes is related to the ITCMD, levied at the state level.

Some states have already implemented progressive tax rates, with maximum rates of 8%, while others still charge 2% based on the value of the estate. Changes are anticipated for this year, and it is likely that states currently applying reduced rates will increase them up to the maximum rate of 8%.

On 5 June 2024, Bill No 108/2024 was presented to the National Congress. This bill, in addition to regulating the Tax on Goods and Services Management Committee (under Constitutional Amendment No 132, 2023 –“Tax Reform”), aims to set national guidelines for ITCMD to establish a uniform base for states to follow.

Under Article 155 of the Federal Constitution (CF), states have the competence to charge ITCMD. However, a Complementary Law must establish general rules on tax legislation, including taxable events, tax basis, taxpayers, and situations involving donors, decedents, or assets held abroad.

Among the most relevant items in the bill, the regulation of ITCMD on situations involving taxation of VGBL in some situations, assets abroad, and the requirement for states to impose progressive rate regimes in their legislation should be highlighted.

It is expected that the final version of Bill No 108/2024 results in a considerable increase in the tax burden involved in donations and successions

Taxation of Legal Entities

Significant changes are also anticipated regarding the taxation of legal entities, particularly impacting the taxation of dividends, which are currently exempt from withholding income tax. The extent to which this taxation will be imposed remains uncertain.

Regarding matters related to transparency and increased global reporting, it is undeniable that Brazil has highly efficient, proactive and technologically advanced authorities, which greatly encourage taxpayer compliance.

Internally, there are several ancillary obligations provided by banks, notaries and credit card companies that allow for almost all individual transactions to be monitored by tax authorities. The same applies to companies.

In the income tax return submitted to the authorities, not only income and expenses, but also all assets, rights and debts must be reported according to criteria established by law.

Likewise, although there are no rules that control or restrict the inflow and outflow of capital, which greatly facilitates individuals’ diversification of investments abroad, in addition to the income tax return, there is an annual mandatory return that individuals with more than USD1 million abroad must submit to the Brazilian Central Bank; this return must be submitted quarterly when this value exceeds USD100 million.

Brazil has actively engaged in international tax compliance initiatives by signing an Intergovernmental Agreement (IGA) with the United States of America as part of the Foreign Account Tax Compliance Act (FATCA). 

Brazil is also a participant in the Common Reporting Standard (CRS). The CRS is a global standard developed by the Organisation for Economic Co-operation and Development (OECD) for the automatic exchange of financial account information among participating jurisdictions.

For most Brazilians, the topic of death is considered taboo. There is a prevailing concern that engaging in succession planning may inadvertently expedite the unwanted event of passing away.

During the COVID-19 pandemic, this concern was directly confronted, resulting in a significant surge in the execution of wills. However, the cautious approach towards implementing inter vivos asset transfers in favour of prospective heirs persisted. This cautiousness stems from a profound fear of relinquishing control over the donated assets. 

Recent media attention has shed light on the subject as a potential response to the impending rise in ITCMD rates. Presently, these tax rates vary across different states in the country, reaching a maximum rate of 8%. Its prospective elevation, coupled with potential modifications to the calculation methodology for determining its taxable base, has sparked heightened interest in succession planning. 

Therefore, in addition to the paramount concern about safeguarding the welfare of their families, fiscal efficiency stands as a crucial factor guiding Brazilian individuals in their deliberations on matters pertaining to wealth organisation and succession planning.

The internationalisation of families results from various factors, such as the residence of certain family members outside of Brazil, the acquisition of assets abroad, the possession of dual or multiple citizenships, marriage to foreign individuals, or even marriages between Brazilian citizens conducted outside of Brazil. These connections involving multiple countries require careful consideration due to the diversity of applicable legal rules.

There is no uniform system of private international law that universally applies to all countries regarding succession matters. Instead, each country determines the appropriate jurisdiction for conducting succession procedures and the applicable law. Consequently, the initial step in succession planning concerning international elements involves identifying the jurisdictions in which succession should take place, as well as understanding the matrimonial and succession rules that are applicable to each family member. Essential information for this purpose includes a comprehensive assessment of the involved assets, the nationality and domicile of the parties, their marital status, and the location where their marriage or steady union was established.

Under Brazilian law, the national courts have jurisdiction over the succession of assets located within Brazil. In such cases, the law applicable to the succession is determined based on the deceased individual’s last domicile. However, it is noteworthy that Brazilian descendants or surviving spouses who hold Brazilian citizenship have the right to invoke the application of Brazilian law, irrespective of whether the last domicile of the deceased was situated outside of Brazil. Furthermore, even if the succession is governed by a foreign law due to the deceased’s last domicile, its application may be set aside by the Brazilian court when it offends national sovereignty, public order or good conduct. 

In the realm of taxation, international succession planning requires a thorough examination of the nationality and tax residency status of all family members. A particular concern is the taxation implications related to ITCMD. While Brazil has entered into tax treaties with several countries to mitigate the risk of double taxation on income, no such agreements exist specifically addressing Inheritance and Gift Tax. Consequently, individuals may face the prospect of potential double taxation in these circumstances.

Given the complexities associated with planning for international succession, there is a growing interest among Brazilians in exploring foreign legal instruments that provide greater flexibility and responsiveness in transferring assets to heirs. Trusts and private foundations offered by foreign jurisdictions are particularly valuable in this regard, as they facilitate the transfer of assets to beneficiaries without demanding probate procedures in various jurisdictions where the assets are situated. Moreover, these instruments enable the establishment of comprehensive regulations governing beneficiaries’ access to the assets, thereby safeguarding against their premature dissipation. 

For a comprehensive analysis of the tax implications pertaining to these fiduciary instruments, please refer to 3. Trusts, Foundations and Similar Entities.

Brazil adopts a forced heirship system. The Brazilian Civil Code sets forth that half of the estate assets, the so-called legitimate portion (legítima), shall be necessarily transmitted to certain classes of heirs: (i) descendants and any surviving spouse (depending on the marital property regime), (ii) if there are no descendants, ascendants and any surviving spouse (irrespective of the marital property regime), and (iii) if there are no descendants or ascendants, the surviving spouse inherits alone. The remaining half is called the “available” portion (disponível) and can be freely allocated in a will. If the deceased does not leave a will, all property shall be distributed amongst the legitimate heirs.

It is not possible for spouses or heirs in general to waive their right to inherit during the deceased’s life, but any of the heirs can renounce the heirship upon death of the deceased.

In exceptional situations, legitimate heirs may be deprived of their legal share, or disinherited by the testator with an express declaration of its cause. The exclusion of the heir or the disinheritance shall be decided by the court upon the request of the person who benefits from it.

The Brazilian Civil Code establishes the following regimes for marital property.

• Universal community of property – all combined property is considered common, including assets inherited and received in donation (except if received with a “do not commingle” clause). Neither of the spouses are allowed to sell immovable assets, make donations out of the community property or grant guarantees without the written consent of the other spouse. Debts are also shared unless they are incurred for the sole benefit of one spouse. This was the default marital regime until 1977. Upon death, the surviving spouse keeps half of the common property, but they will not receive any part of the inheritance if no legacy was made in their favour and the deceased had children.
• Partial community of property – this is the regime currently applicable by default in cases where parties do not choose a different one. All the assets onerously acquired during a marriage are considered part of the community property, while all assets that each spouse acquired prior to the marriage or those received by donation or inheritance are excluded from the common estate and considered separate property. Any assets that replace the separate property shall also be put outside of the common estate. However, proceeds from the common or separate property of each spouse received during marriage will also be considered part of the common estate. Through donations or last wills, it is possible to exclude those proceeds from the common estate. Improvements made to the separate property of each spouse usually belong to both. Neither of the spouses are allowed to sell immovable assets, make donations out of the common estate or grant guarantees without the written consent of the other spouse. Debts are also shared unless they are incurred for the sole benefit of one spouse. Upon the death of one spouse, the surviving spouse keeps half of the common property and inherits part of the deceased’s separate property together with their children, in equal shares.
• Voluntary separation of property – each spouse has their own separate property, but they may choose to acquire assets in co-ownership. Each spouse is responsible for the debts individually incurred. One spouse does not take part in the administration of the other spouse’s assets. Hence, the separate property can be freely sold without the consent of the other spouse. Upon the death of one spouse, the surviving spouse inherits part of the deceased’s property together with the surviving children, in equal shares.
• Mandatory separation of property – this regime is applicable under specific circumstances (pending division of property after a divorce, one of the spouses being over 70 years old, etc). However, in 2024, the Federal Supreme Court has decided that, when one of the spouses is over 70 years old, the couple can waive the application of this regime and opt for a different arrangement through the signing of a public deed. The main peculiarities of this regime are: (i) upon death, the surviving spouse will not receive any part of the inheritance if the deceased had children; and (ii) although the regime name refers to “separation”, Precedent 377 of the Brazilian Federal Supreme Court established that assets acquired onerously during the marriage in this regime are considered common property. The couple may sign a prenuptial agreement establishing that they do not want to have community property.
• Final sharing of acquests – one spouse does not take part in the administration of the other spouse’s assets. However, neither of the spouses are allowed to sell immovable assets, unless there is express authorisation in the prenuptial agreement. In case the marriage is dissolved, the acquests must be partitioned. In the regime of final sharing of acquests, each spouse is responsible for any debts incurred, unless they were incurred for the benefit of the couple.

If the parties are willing to choose a regime other than the default, they must sign a prenuptial agreement before a notary public. In this document, parties may combine different rules from each of the regimes.

The same legal regimes apply to a steady union, which is defined as a public, continuous, and long-lasting affectionate relationship that has a family constitution as one of its main objectives. Some of these requirements are subjective and often give rise to judicial disputes. There is plenty of case law that seeks to differentiate a boyfriend/girlfriend relationship from a steady union.

The default marital property regime is also applied to the steady union. Hence, in the absence of a written contract stating otherwise, the regime of partial community of property applies. The mandatory regime of separation of property may apply in specific circumstances.

Upon the death of one partner, due to a recent ruling of the Federal Supreme Court (REXT 876.694 in May 2017), the surviving partner has the same rights of inheritance as a surviving spouse. 

Income Tax

In the context of donation and succession, it is possible to choose to maintain the acquisition cost of the transferred assets, as indicated in the deceased’s or donor’s income tax return. If the option to preserve the acquisition cost is chosen, no immediate taxation on the capital gain will occur.

If the transfer is conducted for a value exceeding the amount specified in the income tax return, this surplus difference becomes subject to taxation as capital gain.

ITCMD

For the purpose of assessing this tax, the transfer of assets must be evaluated at fair market value.

ITCMD is governed by state law. In Brazil, there are 27 distinct legislative regimes that regulate this matter: one per state. Each state has specific provisions regarding exemptions, which generally do not hold significant value in the context of high net worth families.

There are no specific mechanisms for transferring assets with complete tax exemption. However, there are measures that can result in tax efficiency, such as the following.

• In anticipated partition of assets amongst heirs, the inheritance is advanced; the ITCMD is paid at that time, and upon the donor’s death, there will be no additional taxation on the already transmitted assets. If there is an increase in the tax rate or a change in the tax base for the ITCMD, the recipients will not be subject to the payment of any additional tax. Furthermore, if the donor does not retain usufruct, the recipients will have immediate access to the income that, if still received by the donor and not spent during their life, would later be subject to ITCMD. Thus, by allowing the recipients to receive the income from the donated assets immediately, the incidence of inheritance tax on that income upon the donor's death is prevented.
• The marital property regime has an impact on the formation and transfer of marital assets and succession rules. Therefore, special attention should be given to this choice before marriage or cohabitation. Additionally, if necessary, the marital property regime can be changed during the relationship through a specific judicial procedure.
• Holding companies may establish a framework that facilitates a seamless transfer of assets within a family, thereby ensuring the preservation of continuity and control. Moreover, currently they present potential tax advantages, including diminished taxation on dividends and the opportunity to consolidate tax obligations, thus acting as a comprehensive tool for succession planning that is both family-oriented and tax-efficient in Brazil.

Currently, there are no special rules applicable to the transfer of digital assets, although many are under discussion. Until a bill is approved, the succession of these assets and rights is guided by the Civil Code.

Recently, a specific law was passed to regulate the services provided by brokers of cryptocurrencies (Law No 14.478/2022). However, there is no mention of the succession of these assets. The expectation is that the law will help in tracking the assets and preventing fraud.

There is no specific legislation in Brazil that encompasses trusts, (for-profit) private foundations and other similar fiduciary structures. 

While foundations do exist within Brazilian law, their usage is restricted to specific public, social or charitable endeavours as defined by the Civil Code.

In Brazil, the legal concept of a trust does not exist either. However, the lack of regulation in Brazil does not prevent the use of fiduciary structures in foreign jurisdictions by Brazilian residents. 

There is a bill currently under discussion that aims to regulate fiduciary contracts, inspired by the English law on trusts. With the imminent regulation of the subject in Brazil, it is certain that access to these estate planning instruments will be democratised, thereby promoting the use of local contracts that can be tailored to the reality of Brazilian families. Nevertheless, even if the possibility of Brazilian fiduciary contracts arises, the preference for foreign jurisdictions as a means of diversifying investments and protecting assets may still prevail.

Given the lack of a legal framework for trusts and (for-profit) foundations in Brazil, individuals and professionals engaged in trust arrangements should be mindful of the associated complexities. Regarding tax implications, Law 14,754/2023 introduced tax regulations that make the use of these structures more secure for individual tax residents in Brazil.

Please refer to 3.1 Types of Trusts, Foundations or Similar Entities.

The enactment of Law 14,754/2023 brought significant changes to the legal treatment of trusts in Brazil, particularly concerning taxation and assets ownership reporting.

Under the new legal framework, following the trust’s formation, assets and rights held through a foreign revocable trust are deemed to be owned by the settlor. Additionally, the trust structure, when controlling a controlled foreign entity, is transparent for tax purposes, deeming the controlled entity to be directly owned by the settlor of the trust.

This ownership status remains for tax purposes until either the distribution of the trust’s assets to the beneficiaries or the settlor’s demise, whichever comes first. In an irrevocable trust, however, a transfer of ownership from the settlor to the beneficiary can occur earlier than typically prescribed, conditional upon the settlor irrevocably renouncing their rights over the trust’s assets.

The distribution of assets by the trust to the beneficiary, starting from 1 January 2024, is legally characterised as a gratuitous transfer being subject to ITCMD, a state-level tax due at rates ranging from 2% to 8% depending on the state where the settlor or beneficiaries are tax residents.

Income and capital gains related to the trust’s assets and rights, accrued from 1 January 2024, will be considered earned by the settlor on the respective date and subject to income tax according to applicable rules. The settlor or beneficiaries (tax residents in Brazil), according to the case, must include these assets and rights in the Income Tax Return (DIRPF) at the acquisition cost.

Under the requirements of Law 14,754/2023, it is the duty of the settlor or of the beneficiaries if they are aware of the trust, to request from the trustee the provision of necessary financial resources for paying any income tax due, and information to correctly report their interests in the trust. This provision is essential to facilitate the payment of taxes and to ensure compliance with other tax obligations within Brazil.

Law 14,754/2023 does not stipulate specific penalties for trustees who fail to comply with the established requirements. However, trustees must be aware of potential legal responsibilities in their respective jurisdictions, as well as the fact that any damages caused to beneficiaries or the settlor may be subject to judicial litigation aimed at damages that may have been caused. In the Brazilian context, the prognosis for such disputes is uncertain due to the absence of judicial precedents related to this matter.

This lack of clear legal consequences places an implicit emphasis on the necessity of the settlors and beneficiaries to ensure that trustees are adequately informed and understand the importance of adhering to the new legal obligations. This approach suggests a reliance on the proactive engagement of all parties involved in the trust to ensure adherence to the law’s provisions, recognising the potentially complex nature of international trust administration and the challenges in enforcing such obligations across jurisdictions.

Please refer to 3.3 Tax Considerations: Fiduciary or Beneficiary Designation.

In marriage or in a steady union, the choice of a total separation of property regime is an important way to protect assets. In this property regime, debts are assumed to belong solely to the person who incurred them, without affecting the other spouse’s/partner’s assets.

Additionally, donations can be used as a means to protect assets. By transferring real estate and financial assets in advance to heirs, while still maintaining ownership of business ventures, the donor reduces the risk of future business contingencies affecting the transferred assets. Furthermore, donators, as well as testators, may constrain the transfer of property with restrictive clauses (eg, do not commingle, absence of pledge and, less often, inalienability), thus protecting the asset from the receiver of property’s standpoint. 

Corporate structures and shareholder agreements are also valuable tools for asset protection, as they prevent the seizure of ownership interests and the interference of third parties in family businesses.

When it comes to liquid assets, such as cash, Closed-end Investment Funds (Fundos Exclusivos) are commonly used. These funds offer excellent governance.

Furthermore, foreign fiduciary structures, like trusts and private foundations, are often utilised to safeguard assets held outside of Brazil.

The following legal instruments can be useful in succession planning for family businesses, all with the purpose of perpetuating family control over companies.

• Establishment of family holdings to prevent the dilution of political power amongst individual shareholders of the operating company. This also aims to mitigate the effects of family and succession disputes on operational activities. Depending on the desired sophistication and the tax considerations involved, a similar objective can be achieved using foreign fiduciary structures to hold voting rights.
• Contracts, by-laws, and shareholders’ agreements designed to prevent the entry of third parties into the companies, ensure company continuity by family members and enable efficient administration. It is important to regulate the sale of equity interests and anticipate scenarios involving the death, divorce or incapacity of shareholders.
• Donations to descendants with specified conditions and obligations, preserving the family’s concerns.
• Family protocols including rules regarding family members’ relationships with each other and matters involving the companies.
• Wills to better guide the succession of shareholders.
• Declarations regarding the event of shareholders’ incapacity and the designation of individuals to be appointed as curator.

As for tax aspects, the nature of business activities should be analysed so as to ensure that any corporate reorganisation does not result in a substantial increase in applicable taxes or act as a trigger for a taxable event.

Depending on the characteristics of the family and the business, corporate structures can be replaced by Share Investment Funds (Fundos de Investimentos em Participações, or FIPs), which may generate tax efficiencies in some cases.

The transfer of partial interests does not have the ability to affect the valuation of an asset for tax purposes, whether in relation to income tax or ITCMD.

As such, regardless of the nature of the asset (shares, real estate, etc) and its market liquidity, its tax value will be determined based on the rules specified in 2.5 Transfer of Property.

Most asset-related disputes revolve around the violation of forced heirship rules and the validity of will provisions. A huge number of lawsuits have been filed to investigate potential violations of forced heirship resulting from donations or other forms of property transfers. In addition, legitimate heirs may make claw-back claims when anticipated gifts are given to other legitimate heirs during the testator’s lifetime. This process can be quite slow, especially when it involves multiple heirs and different types of assets donated over several years. Comprehensive succession planning encompassing all legitimate heirs can substantially reduce the potential for disputes amongst them regarding the violation of the legitimate portion of the estate due to forced heirship.

As for legal disputes regarding the validity of wills, most cases seek to challenge the testator’s capacity. Proof is established through expert examination aimed at assessing the state of the testator’s mental faculties at the time of drafting the will. To minimise such disputes, it is recommended that the testator undergoes neurological examinations shortly before signing the will and obtains medical statements confirming their full capacity to engage in civil acts.

Regarding foreign fiduciary structures challenged before the Brazilian courts, ongoing legal discussions are still at an early stage, and there is no established jurisprudence.

Regarding disputes involving the division of assets located outside of Brazil, the Brazilian judiciary has consistently ruled that it has no power to intervene in such matters. Its exclusive competence lies in the division of assets located within Brazil.

Heirs who intentionally withhold estate assets or fail to bring them into probate procedures may forfeit their corresponding rights. If the concealed assets are not returned, the individual concealing them may be required to provide compensation for the value of the hidden assets, in addition to any resulting losses and damages.

During the process of adding anticipated gifts to the probate procedure, all legitimate heirs must assess the value of any donations they have received to equalise the rights of the legitimate heirs. The donor/testator has the option to exempt certain donations from being included in the evaluation if they were taken from the available portion of the assets (half of the total estate). However, if the total value of the donations exceeds the available portion in the estate, the donated assets must be individually assessed. If the recipient no longer possesses the donated assets, their value at the time of the gift should be considered. See also 5.1 Trends Driving Disputes.

The use of corporate fiduciaries is not applicable in Brazil. Please refer to 3.1 Types of Trusts, Foundations or Similar Entities.

Fiduciary liabilities are not applicable in Brazil. Please refer to 3.1 Types of Trusts, Foundations or Similar Entities.

Fiduciary regulation is not applicable in Brazil. Please refer to 3.1 Types of Trusts, Foundations or Similar Entities.

Theories of fiduciary investment are not applicable in Brazil. Please refer to 3.1 Types of Trusts, Foundations or Similar Entities.

Residency

Brazil is a receptive country, formed by immigrants. Accordingly, there are several possibilities for obtaining a residency permit or even citizenship. 

The granting of visas in Brazil is governed by the principle of reciprocity. If the country in question requires a visa from a Brazilian citizen, Brazil will also require a visa from a foreigner coming from that country. The period in which it is permitted to stay in Brazil without a visa also varies according to the principle of reciprocity. For a stay that exceeds this period, it is necessary to apply for a temporary visa (VITEM) or for a permanent visa (VIPER). 

There are several types of VITEM. The basis for the main categories is as follows.

• Work – issued for a maximum period of two years. The Brazilian employer must submit the application for approval at the Brazilian Ministry of Labour. After that, the request is sent over to the Brazilian embassy or consulate. There are different types of work visas for each profession and situation. Furthermore, it is also possible to request the digital nomad visa (a one-year visa requiring proof of employment and of income/assets, and no work relationship in Brazil).
• Study – candidates must be enrolled in a university in Brazil for a period longer than 90 days and present a letter of acceptance.
• Family reunification with a foreigner living in Brazil – eligible individuals include spouses, steady union companions, children, stepchildren, grandchildren, grandparents, and minor or financially dependent siblings.
• Retirement.

VIPER are granted to foreigners who intend to live in the country on a permanent basis. Criteria for issuing such visas include:

• marriage (or steady union) to a Brazilian citizen or permanent resident;
• having Brazilian children;
• family reunion; 
• investments (consisting of a minimum of BRL500,000 or the hiring of ten Brazilian workers; the minimum is lowered to BRL150,000 if the business involves innovation); or
• retirement (with a minimum monthly income of BRL6,000).

Citizenship

According to the Federal Constitution, a Brazilian is:

• an individual who was born in Brazilian territory, even if the child of foreign parents; or
• an individual who has a Brazilian mother or father, regardless of whether the individual was born abroad.

Children of Brazilians born abroad are entitled to Brazilian citizenship when registered after birth at Consular Posts or, in cases where they return to live in Brazil, upon confirmation after reaching the age of 18.

Furthermore, a foreigner may also apply for citizenship after four years of holding a permanent visa. Citizenship will be granted when the candidate has resided continuously in Brazil and demonstrates ties with the country, acceptable Portuguese skills, and knowledge of the country’s culture and history. 

Dual Citizenship

Brazilian law establishes two types of citizenship. 

• Originary citizenship – by the place of birth (jus soli) or citizenship of an ancestor (jus sanguinis). The latter must be recognised by foreign law (such as in the case of descendants of foreigners).
• Derived citizenship – acquired by voluntary act after birth.

Until 2024, Brazilian authorities could initiate a proceeding aiming to revoke an individual’s Brazilian citizenship whenever a derived citizenship was acquired. However, after the Constitutional Amendment 131/2023, such proceeding can only be initiated (i) in case of fraud related to the naturalisation process or to an attack against the constitutional order and the Democratic State (in those cases, the revocation is not automatic and has to follow several procedural rules); and (ii) when the Brazilian citizen requests it to be revoked, with the exception of situations involving statelessness. Accordingly, dual citizenship is allowed in cases of both originary and derived citizenship.

It is worth mentioning that renouncing a citizenship does not prevent the person from reacquiring their originary citizenship.

Currently, Brazil does not have a special expeditious citizenship programme, but the periods of residency demanded as a requisite for requesting Brazilian citizenship (as a rule, four years) may be shorter in certain specific cases. Examples include individuals originating from Portuguese-speaking countries, individuals who are married to (or part of a steady union with) a Brazilian citizen, individuals with Brazilian children, stateless individuals, and individuals who have rendered relevant services to Brazil or are skilled in the arts, sciences or a profession.

Brazil has no specific provisions regarding a special needs trust. However, there are mechanisms aiming to protect adults with disabilities and minors. 

Curatorship and Assisted Decision-Making

The Statute of Persons with Disabilities provides that persons with disabilities are assured the right to exercise their legal capacity on equal terms with other persons and, when the person does not have the intellectual, psychological or psychiatric conditions to manage their assets, will be submitted to a curatorship related to the rights of a patrimonial and business nature. 

Priority is given, however, to another arrangement called “assisted decision-making”, when possible (ie, when the disabled person has a certain degree of cognition). In this system, the person with a disability chooses at least two people to be named as assistants, and these two people will need to review and sign any patrimonial act executed by the assisted person (purchases, sales, leases, rents, loans and contracts in general). This is a less invasive system that protects the assisted persons from disadvantageous decisions and bad-faith third parties. At the same time, it prevents the nominated curators from making decisions for them alone. The assisted person will always need to act jointly with the assistants. 

Both the curatorship and the assisted decision-making depend on a court decision. The main difference is that, in the assisted decision-making proceeding, the assisted person is the claimant themselves and there is no conflict/litigation. Accordingly, the court proceedings tend to be faster. 

Wills

Wills are often used as a planning instrument for minors and individuals with special needs. A testator could: 

• indicate a trusted person (or group of persons) to be responsible for managing the inherited estate of a minor or an adult heir with disabilities;
• determine that the “available” portion of the estate is received by an heir in tranches and over a longer time span (ie, when the heir completes an undergraduate or a postgraduate degree, or after a certain age). Note that the legitimate portion of the estate must be available when the minor is 18 years old; 
• create restrictive clauses governing the inherited estate (eg, “do not commingle”, absence of pledge and, less often, inalienability clauses); or
• indicate individuals to be guardians of minor heirs, as well as indicate a curator for heirs with disabilities, as mentioned in 8.2 Appointment of a Guardian.

Financial Instruments

There are a range of financial products offered by banks, insurance companies and private pension funds that can be useful in a situation involving special needs. One of the most common instruments is a private pension that grants the beneficiary a fixed income upon death of the grantor, for life or for a specific period. Such private pension products are widely used because, in most of the states, they are currently not subject to succession taxes or to being part of probate proceedings, being paid directly by the financial institution to the beneficiaries. 

A guardian must always be appointed by the court. In conflict situations, courts may consult underage children about their wishes and consider the desires of a deceased parent about who the guardian should be, as defined in a will. 

As for people who are disabled and/or incapacitated, the courts may also consider the person’s wishes when there is register of the same (a living will, or diretivas antecipadas de vontade/testamento vital, as explained in 8.3 Elder Law). 

Statute of the Elderly

The Statute of the Elderly was sanctioned in 2003. It created several legal mechanisms of protection, such as exemptions from property tax in some cities, cultural discounts, preferential service in queues and public authorities, free public transport, designated spaces in private and public parking lots, a larger income tax exemption range, retirement benefits, and free continuous-use medications.

Financially Preparing for Aging

The most usual instruments for financial planning are:

• private pension funds (there is also a public pension system, but the amounts paid are in the lower range);
• insurance policies; and
• retaining of usufruct, in case of donations or anticipated distribution of assets.

Other Instruments – Incapacity and Assisted Decisions

Elderly individuals (or any person) may register, in a written public or private document, their wishes for what is to be done in the event of their incapacity (ie, who will be responsible for business, patrimonial and health decisions). A court will take such a document into consideration when appointing a curator, although it is not binding.

Vulnerable elderly individuals who may, due to non-incapacitating illnesses, feel insecure about taking patrimonial decisions by themselves, may also make use of the “assisted decision-making” system (tomada de decisão apoiada), as discussed in 8.1 Special Planning Mechanisms. 

The Equality of Children

The Federal Constitution sets forth the legal equality of children, regardless of the nature of filiation (civil, natural or socio-affective). The children inherit under equal conditions. 

The Right of Children to Inherit

Descendants are forced heirs pursuant to the Civil Code, along with spouses/partners (in a steady union) and ascendants. 

Definition of Conception

According to Brazilian law, only children that are born or have already been conceived at the time the succession opens have the right to inherit. However, the definition of “conception” is increasingly controversial due to assisted reproduction techniques. Some understand the term “conceived” to apply only to an unborn child in the womb, while others argue that embryos, even if not implanted, should be considered already conceived. Furthermore, there are debates arising from postmortem fertilisation, with embryos being formed with frozen sperm/eggs after a parent’s death. Case law and legislation still do not reflect such discussions.

In a will, the testator may indicate as heir a child not yet conceived, but the birth must occur within two years of the testator’s death. 

Inheriting From Biological Parents

Children adopted in a regular judicial process do not inherit from their biological parents, but solely from the adopting parents. 

In cases of heterologous fertilisation (when the semen/egg donor is a third party), provided that both parties agree and that the procedure is carried legally through the health system, the child will be considered an heir of the couple or individual and will not inherit from the donor. 

The courts also recognise the possibility of more than two mothers and/or fathers being registered in the birth certificate of a child in cases of socio-affective affiliation or same-sex relationships between the parents. The child may inherit from all the parents: biological/birth, and socio-affective.

Surrogacy

There is no legislation regarding surrogacy, which creates situations of uncertainty in relation to legal issues related to filiation. However, there are rules issued by the Federal Council of Medicine regarding the medical requirements for the procedure itself, and administrative rules for the registration of births resulting from surrogacy (rules of the Federal Council of Medicine must be observed and a statement from the director of the medical clinic responsible for the surrogacy must be presented). In this case, the name of the parturient will not appear in the record. In addition, the Brazilian legal system prohibits paid surrogacy.

There is no legislation on marriage or steady unions between people of the same sex. However, in 2011, the Federal Supreme Court recognised that a family entity could be formed by two people of the same sex and, as of 2013, based on an administrative ruling by the National Council of Justice, notaries began to perform and register same-sex marriages.

As in heterosexual marriages and unions, the spouses or partners can, through contracts, opt for a marital property regime. If one is not chosen, the regime of partial community of property will be in force. The mandatory regime of separation of property may apply in specific circumstances.

Non-profit organisations established as associations or foundations that meet legal requirements and are structured to serve the public interest are covered by specific tax benefits, which can take the form of tax immunity or tax exemptions. Entities that are not eligible for tax immunity may still be entitled to specific tax exemptions in certain situations.

Tax immunities are constitutional prohibitions on the collection of taxes in specific situations and provide extensive tax relief. To qualify for immunity, a non-profit organisation must meet several requirements, such as exclusively conducting social activities within Brazilian territory, maintaining accounting records in accordance with the law, and prohibiting the distribution of profits or assets to its members.

On the other hand, tax exemptions are limitations on the collection of taxes established at an infra-constitutional level, restricting certain and specific taxes. 

In practice, a detailed analysis of both formal and practical aspects of an entity is necessary, along with an examination of the applicable legislation, to determine the appropriate tax treatment in each case.

Regarding tax incentives related to donations to non-profit organisations, there are specific rules regarding the possibility of deducting donated amounts from taxable income by legal entities established in Brazil. In the case of donations made by legal entities to non-profit organisations, deductions of up to 2% of the operating profit and up to 6% of the income tax due may be claimed, provided certain legal requirements are met. 

Individuals can allocate a portion of their due income tax to non-profit organisations, thereby directly channelling resources to entities of their choice.

A non-profit organisation can be incorporated in Brazil as an association or a foundation. Both corporate types have advantages and disadvantages, depending on the purpose to be achieved.

An association is a non-profit legal entity. It is self-governed and voluntarily formed by at least two members who aim to achieve non-profitable goals. The purpose of the association can be freely amended at any time. Associations are not subject to public authorities’ control.