Brazil: Provisional Measure 1.171/2023 – new tax rules on foreign investments

The presidency of Brazil published Provisional Measure 1.171/2023 on Sunday, April 30, which imposes income tax on controlled foreign (non-Brazilian) corporations owned by Brazilian tax residents.  It also clarifies the tax treatment of trusts with respect to both income and capital gains produced by trust assets and the tax treatment of distributions made to beneficiaries.

We are working closely with our Brazilian counterparts to understand the application and potential impact of the proposed new rules on trust structures established by our Brazilian clients.  These typically do involve foreign (non-Brazilian) entities, including entities formed in U.S. jurisdictions such as LLCs that may fall within the Provisional Measure’s definition of controlled foreign corporations as well as trusts formed in U.S. jurisdictions that may or may not be tax resident in the United States. 

We will continue to monitor the most recent developments closely, and will take those into consideration when providing cross-border tax planning advice to our clients.

Please do not hesitate to contact us if you have any questions or concerns. 

Withers Latin and South America Group