Brazil Now Taxes Offshore Companies and Trusts: A Warning Before You Become a Resident

For years, Brazilians and foreigners moving to Brazil could hold wealth in offshore companies and trusts and defer Brazilian tax indefinitely — profits were taxed only when brought home. Lei 14.754/2023 ended that. If you are tax-resident in Brazil, your controlled foreign company's profits and your trust are now taxed here, often at 15% every year, whether or not anything is distributed. Plan before you move.

We are an English-speaking, OAB-licensed Brazilian law firm, and pre-arrival tax planning for people relocating to Brazil is core work for us. This briefing explains what Lei 14.754/2023 changed for offshore companies, financial investments, and trusts, why the timing of your move is decisive, and what a prospective resident should do before becoming taxable on worldwide income.

What Lei 14.754/2023 changed

Lei 14.754/2023 was enacted on 12 December 2023 and took effect on 1 January 2024. It overhauled how Brazilian tax residents are taxed on three things: offshore financial investments, controlled foreign entities (CFCs), and trusts. The unifying theme is the end of deferral — the feature that made offshore structures attractive to Brazilian residents in the first place.

Before this law, a resident could hold an offshore company, let profits accumulate inside it, and pay Brazilian tax only when the money was actually distributed. That indefinite deferral is gone. Now, in the cases the law targets, Brazil taxes the income annually, as it accrues, regardless of distribution.

Controlled foreign companies: taxed every 31 December

The CFC rules are the sharpest change. A Brazilian resident who controls a foreign entity — holding more than 50% of the capital or voting rights, alone or together with related parties — can be taxed at a flat 15% on the entity's annual profits every 31 December, even if nothing is distributed.

This automatic annual taxation does not hit every foreign company. It applies where the controlled entity is either:

• located in a tax haven or privileged tax regime (a low-tax or favoured jurisdiction as defined by Brazilian rules), or
• earning mostly passive income — specifically, where its own active income is less than 60% of its total income.

In other words, an offshore holding company sitting in a zero-tax jurisdiction, or one whose income is largely dividends, interest, royalties, and capital gains, will typically fall into annual Brazilian taxation at 15% on its profits — the deferral that was the whole point of the structure disappears. A genuine active operating business abroad may fall outside the automatic rule, but that determination requires care.

The 60% active-income test is where much of the real analysis happens. Many structures foreigners bring with them are, in substance, holding vehicles: a company that owns investments, receives dividends from other entities, holds intellectual property, or collects rent. That kind of income is passive, and if it makes up more than 40% of the total, the entity is caught even if it sits in an ordinary-tax country rather than a classic haven. Conversely, a company that genuinely trades — manufacturing, selling services, running an active business with its own operations abroad — may keep its active income above the 60% line and stay outside the automatic annual charge. The label on the company matters far less than what it actually earns, and that is a factual inquiry to run before you rely on any particular outcome.

Trusts: now transparent for Brazilian tax

Brazil historically had no clear statutory treatment of trusts, which are not a Brazilian legal institution. Lei 14.754/2023 filled that gap by making trusts transparent. For Brazilian tax purposes:

• Trust assets are treated as belonging to the settlor (the person who established the trust) — as if the trust did not interpose itself;
• The trust's income and gains are taxed to the settlor at 15%, on the same annual basis as other offshore income;
• The assets are treated as passing to the beneficiaries only on distribution or on the settlor's death — the point at which the tax and succession consequences shift to them.

For a foreigner who has built an estate plan around a trust — common in the US and UK — this is a significant reframing. Once you are a Brazilian tax resident, the trust does not shelter income from Brazilian tax the way it may in your home country, and its interaction with Brazilian succession rules for foreign heirs needs specific advice.

The tension is that a trust is a common-law instrument with no native equivalent in Brazilian civil law, and Brazilian succession law has its own mandatory rules — including forced heirship, which reserves a portion of an estate for certain heirs regardless of a will. A structure that works cleanly for tax and succession in New York or London can collide with those rules once the settlor is resident and, on death, Brazilian succession principles come into play over Brazilian-connected assets. The transparency rule in Lei 14.754/2023 addresses the income-tax side; it does not resolve the succession side, which is why anyone relocating with a trust should have both the tax and the estate-planning consequences reviewed together rather than assuming the home-country plan simply travels intact.

Offshore financial investments: annual or on realisation

The third pillar concerns offshore financial investments held directly by residents — foreign bank deposits, funds, bonds, and similar. Gains are now taxed at 15%, on an annual or realisation basis depending on the asset, and the old indefinite deferral is gone. Where a resident previously paid Brazilian tax only when repatriating gains, the timing has moved forward.

Taken together, the three pillars close what used to be the standard playbook: hold assets abroad, let them compound untaxed inside a company or trust or investment account, and deal with Brazilian tax only if and when you brought money home. After Lei 14.754/2023, a Brazilian resident is broadly taxed on that offshore income as it arises, at 15%, whether or not a single real crosses back into Brazil. The law does not forbid offshore structures — plenty remain legitimate and useful — but it removes the tax deferral that was often their main attraction for someone living in Brazil.

The one-time 8% update — mostly history now

To ease the transition, the law offered a one-time option: residents could elect to update the value of their offshore assets to market value as at 31 December 2023 and pay a reduced rate of only 8% on the built-in gain, with a deadline falling in 2024. That window has largely closed and is mostly of historical interest now. But it signalled the direction of travel unmistakably — Brazil wanted this income on its books and was willing to price an amnesty to get there. Anyone assuming the rules will soften should read that signal the other way.

The offshore structure that shelters income beautifully in your home country can become a 15%-a-year liability the moment you become a Brazilian tax resident.

Why timing is everything: worldwide income and the residency trigger

All of the above turns on a single status: Brazilian tax residency. Brazil taxes residents on their worldwide income. A non-resident is generally taxed only on Brazilian-source income; a resident is taxed on everything, everywhere — including the offshore companies, trusts, and investments this law targets.

You generally become a Brazilian tax resident on the earlier of:

1. Obtaining a permanent visa

   Acquiring a permanent or residence visa generally makes you a tax resident from arrival — including through the investor visa and family-based routes.

2. Spending more than 183 days here

   Being physically present in Brazil for more than 183 days within a 12-month period triggers residency even on a temporary status.

The moment you cross that line, the CFC, trust, and offshore-investment rules apply to you. Everything you do to arrange your affairs afterward is remedial; the leverage is before the trigger. The two triggers also interact with how people actually move: someone who spends long stretches in Brazil on a temporary status can cross the 183-day line without intending to become resident, while someone who obtains a residence visa is treated as resident from arrival regardless of days counted. Knowing which trigger applies to your plan — and when it fires — is the difference between arranging your offshore affairs in calm and discovering the rules have already attached.

What a prospective resident should do

If you are planning a move to Brazil and hold offshore wealth, the work happens in the months before you arrive.

• Map your structures against the new rules — identify which entities are CFCs caught by the haven or passive-income tests, and how any trust will be treated.
• Model the annual cash-flow cost of 15% on undistributed CFC profits, so an unexpected December liability does not surprise you.
• Consider pre-arrival distributions or restructuring while you are still a non-resident and outside the charge.
• Reset the cost basis where advantageous, so future gains are measured from your arrival value, not decades of accrual.
• Coordinate with your home country. For Americans there is no treaty — see our US–Brazil double-taxation guide — so the interaction with US CFC and trust rules needs joint advice.
• Fix the timing of your move deliberately, understanding both the permanent-visa and 183-day triggers.

This planning also connects to how you will hold and protect assets once resident — see our asset protection work — and to the broader 2026 changes, including the new 10% dividend withholding on distributions from Brazilian companies.

How Brazil Legal Shield can help

We advise foreigners before they become Brazilian tax residents — the point at which the important choices are still available. We map your offshore companies, trusts, and investments against Lei 14.754/2023, identify which structures fall into annual 15% taxation, model the cash-flow consequences, and design a pre-arrival plan that resets basis or restructures where it helps, in coordination with your home-country advisers. For US clients, we work around the absence of a treaty and the overlap with US anti-deferral rules.

Brazil is a rewarding place to live, but its tax net for residents is wide and now reaches offshore wealth that used to sit untouched. The difference between planning before and after arrival can be substantial. Explore our tax services and asset protection work, or get in touch well ahead of your move.