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Trusts, foundations and charities


Are trusts legally recognised in your jurisdiction? If so, what types are available and most commonly used?

Trusts are not recognised in Brazil, mainly due to its civil law system, whose legislation does not typify the trust structure. It is thus rather difficult to propose such structures to Brazilian individuals who have never had contact with them. Since the incorporation of trusts involves the remittance of proceeds abroad and having a capital structure outside of Brazil, they are used by Brazilian citizens with assets abroad or heirs living in other countries. In general, Brazilians usually prefer using more ordinary structures, such as local companies, or even setting up smaller companies abroad.

What rules and procedures govern the establishment and maintenance of trusts?

If an individual decides to set up a trust structure abroad, all relevant international rules and procedures govern the incorporation and establishment thereto, since Brazilian authorities do not locally recognise trusts. However, Brazilian authorities apply foreign legislation to trust structures, unless it conflicts with Brazilian law regarding forced heirship.

How are trusts taxed in your jurisdiction?

Not applicable. There is no trust legislation in Brazil. Foreign trusts are taxed in Brazil as non-resident entities. Foreign trusts may obtain deferral of taxes in Brazil like foreign vehicles.

Foundations and charities

Are foundations and charities legally recognised in your jurisdiction? If so, what forms can they take?

Yes. Brazil admits two legal forms of not-profit organisation: foundations and associations.

What rules and procedures govern the establishment and maintenance of foundations and charities?

Foundations are legal entities created through an endowment, made public by means of a will or deed for one or more special purposes of public interest, as defined by the Civil Code. Foundations may be created by either governmental entities (and therefore ruled by the public law regime) or private individuals (and therefore ruled by the private law regime). Foundations are governed pursuant to their own bylaws, established according to their founders’ will, and are supervised by the State Prosecutor’s Office. In the case of winding up a foundation, its assets are to be transferred to another foundation with a similar purpose, if not specified otherwise in its bylaws.

Charitable associations are legal entities formed by two or more persons for a non-profit purpose, and are governed by its bylaws, as per Brazilian legislation. In case of winding up of associations, its associates may recover the sums individually invested and the remaining assets must be transferred to another association with a similar purpose, as also happens with foundations.

Both foundations and charitable associations may obtain public titles and recognitions, which grant tax incentives and access to public funds.

How are foundations and charities taxed?

Foundations and charitable associations may qualify for exemption from all taxes. Charitable entities may also be qualified to provide tax benefits for those that contribute to their activities (eg, income tax reductions). Contributions to charities are treated as gifts and are thus subject to gift and inheritance tax. Contributions may be considered as deductible expenses for income tax purposes, although these are limited to certain amounts. However, several requirements should be met to qualify for an exemption or tax benefit. Tax authorities audit the entities to verify permanent compliance with the required conditions.

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