The Federal Revenue Service now requires beneficiaries of irrevocable and discretionary trusts established abroad, even if created by offshore entities, to declare their assets and taxes on their Personal Income Tax (IRPF). Irrevocable trusts are asset structures in which the settlor transfers assets to a trustee, relinquishing direct control over them, and the beneficiaries only have access according to previously established rules.
The IRS understands that, even without current access to the assets, the mere expectation of receipt makes the person a beneficiary for tax purposes. Based on Law No. 14,754/2023, the agency adopts a tax transparency regime, attributing income and gains to the beneficiary from the moment the trust is established.
In our understanding, the IRS’s interpretation goes beyond the legal limits and may affect situations not covered by the regulation, especially when there is no direct link between the individual resident in Brazil and the contributed assets. We recommend that taxpayers who feel unduly affected by this requirement consider seeking legal redress to protect their rights.
