Recommended article: Brazil’s tax treatment of foreign trusts

🌎 This Monday, the cover piece of Tax Notes International is an article titled “The Evolution of Brazil’s Tax Treatment of Foreign Trusts” and written by Caio Malpighi. In his article, the author reviews some of the (federal and state) consultation rulings and (administrative and judicial) court decisions discussing the tax treatment of trusts in Brazil. He also explains the antideferral rules established by Law 14,754/2023 for earnings emanating from foreign trusts. The article is available here: https://bit.ly/3NnMHHP

Malpighi brings up an important point about the adaptation of civil law systems to common law institutions like the English trust. LatAm countries have had different experiences dealing with the tax implications of trusts abroad. Law 27,430 of 2017 in Argentina, for example, replaces the text of Article 133 of the Income Tax Law with its Article 71, which says that trust “earnings” (equivalent in their view to the earnings of “fideicomisos”) will be attributed to the resident person that controls them in the relevant fiscal year (https://bit.ly/3XW5gI0). Article 55, § 1st, of Law 2010 of 2019 in Colombia states that, for purposes of the local “normalization tax”, foreign trusts shall have the same treatment of domestic “derechos fiduciarios”, meaning a transparent tax treatment and the valuation of trust assets considering their historical tax cost (https://bit.ly/4h5GgXk).

If you are interested in reading more about the tax treatment of trusts or “fideicomisos inmobiliarios” in LatAm, here are a few articles recommended by the Latin American Tax Policy Forum (LATPF):

➡ “Calificación de ‘Entidades’ Extranjeras: Saliendo de la Encrucijada” (“The Qualification of Foreign ‘Entities’: Getting Out of the Crossroads”), by Carlos Chirinos Sota. Published by Asociación Fiscal Internacional (IFA) Grupo Peruano (2018). Available in Spanish: https://bit.ly/403DNql

➡ “El Fideicomiso Inmobiliario en la Legislación Dominicana: Su Aporte al Desarollo de la Vivienda” (“The Real Estate Trust in Dominican Legislation: Its Contribution to Housing Development”), by Maridalia Rodriguez. Published by Universidad Católica de Colombia (2022). Available in Spanish: https://bit.ly/3YpGVMk

➡ “El Fideicomiso Inmobiliario: Herramienta de Estrategia Financiera y Fiscal” (“The Real Estate Trust: A Financial and Tax Strategy Tool”), by Ileana del C. Moreno Alamina. Published by Universidad de Xalapa, A.C. (2020). Available in Spanish: https://bit.ly/3U1Mj5l

➡ “A Tributação da Renda e na Transferência de Bens a Beneficiários (Domiciliados no Brasil) Provenientes de Trust Constituído no Exterior: o Problema da Qualificação Jurídica” (“Taxation of Income and Assets Received by Beneficiaries (Domiciled in Brazil) from a Trust Established Abroad: a Legal Qualification Problem”), by Tiago Albuquerque. Published by IBDT – Instituto Brasileiro de Direito Tributário (2021). Available in Portuguese: https://bit.ly/4dEF2j2