VISTA Trust in the BVI: How It Works and What Changes for Brazilians

A VISTA trust is a British Virgin Islands trust that holds shares of a BVI company without the trustee interfering in management, which stays with the directors. The local law is from 2003. For Brazilian residents, Law No. 14,754/2023 (Lei 14.754/2023) still treats the assets as the settlor's and the company as a possible controlled company.

What is a VISTA trust and what is it for?

VISTA is the acronym of the BVI law that created this type of trust, the Virgin Islands Special Trusts Act (Act No. 10 of 2003, in force since March 1, 2004). The law says its main purpose is to allow a trust of company shares in which "the shares may be held indefinitely" and the company's management is carried out by the directors, with no power of intervention by the trustee (section 3).

In practice, VISTA solves a specific problem: an ordinary trustee has duties over the assets it holds, and that clashes with the idea of a business owner keeping an operation running for decades, under the management of people who know it. The law removes some of those duties only for the designated shares.

For the general context of trusts in Brazil, see trusts: settlor, trustee and beneficiary.

What conditions does BVI law require for a trust to be a VISTA?

The trust only becomes a VISTA if it meets the conditions of section 4. The law requires a written instrument, testamentary or inter vivos. At least one of the trustees must be a "designated trustee" throughout the whole period, and the instrument must provide for this. The instrument must also say that the law applies to the shares (all of them or those indicated).

Two definitions limit the scope:

• •Designated trustee: holder of a trust license under the Banks and Trust Companies Act, or a private trust company under the terms of the Financial Services (Exemptions) Regulations (section 2).
• •Virgin Islands shares: shares of a company registered under the BVI Business Companies Act, with exceptions. Companies with a banking or trust license, insurers, registered or recognized funds, fund administrators and companies licensed under certain financial services laws are left out (section 2).

In other words, VISTA applies to shares of an ordinary BVI company, not to just any asset. To understand the company itself, read how to open a BVI company and why choose the BVI.

Can the trustee of a VISTA trust really not intervene in the company?

It can, in limited cases. If an interested person (for example, a beneficiary) has a complaint about the conduct of the business and the reason is a permitted one, they can ask the trustee in writing to intervene. The instrument may list the permitted reasons, but is not required to (section 8, items 1 and 2).

Once it receives this "intervention call", the trustee assesses whether the complaint is valid and acts as it considers appropriate, which may include changes to the board (section 8, items 3 and 4). The instrument may also contain rules on how the trustee votes to appoint, remove and compensate directors (section 7).

Selling the shares is also possible. The trustee has the power to sell the designated shares but, unless the instrument provides otherwise, needs the consent of the directors and any other consents provided for (section 9, items 2 and 3). Whoever designs the structure should review these points of the deed, because almost everything depends on what is written in it.

How does Law 14,754/2023 treat a VISTA trust held by a Brazilian resident?

Brazilian law ignores the VISTA label. It looks at the trust as a "contractual arrangement governed by foreign law" (art. 12, I) and applies the general rule: the assets remain under the settlor's ownership after the trust is created and pass to the beneficiary on distribution or on the settlor's death, whichever comes first (art. 10, I and II).

Consequences provided for in the text:

• •Income and capital gains from the trust's assets are considered the holder's and subject to individual income tax, IRPF (art. 10, § 3).
• •If the trust holds a controlled company abroad, it is considered held directly by the holder, and the rules on taxation of controlled companies apply (art. 10, § 4).
• •Profits of a controlled company are taxed on December 31 of each year when it is in a favored-taxation country or dependency or has its own active income below 60% of total income (art. 5, § 5). The IRPF rate in the annual adjustment for this income is 15% (art. 2, § 1).
• •Brazil's Federal Revenue Service (Receita Federal) lists the British Virgin Islands in art. 1 of RFB Normative Instruction 1,037/2010 (IN RFB 1.037/2010), which lists countries or dependencies with favored taxation.

In other words, the VISTA structure does not take the BVI company out of the reach of these rules. How much tax results depends on the company: whether it is operating or passive, its profit and its classification under art. 5. Confirm with an accountant before implementing. See also offshore trust: is it worth it for Brazilians.

Does a VISTA trust avoid probate and set aside the forced heirship share?

There is no basis in Brazilian law to presume that. Succession by death follows the law of the country where the deceased was domiciled, whatever the nature and location of the assets (LINDB, art. 10). For those who die domiciled in Brazil, half of the estate belongs to the forced heirs (descendants, ascendants and spouse), which is the forced heirship share (legítima) (Civil Code (Código Civil), arts. 1,845 and 1,846), and a donation is void to the extent it exceeds what the donor could dispose of by will (art. 549).

Law 14,754/2023 treats the change of ownership of the trust as a donation, if during life, or as a transfer causa mortis, if resulting from the settlor's death (art. 10, § 2). It does not set aside the Civil Code rules on the forced share and on inofficious donations. If the idea is to avoid probate abroad or to organize the succession of a company, discuss the design with a succession lawyer. For the general picture, see offshore and succession and succession with assets in several countries.

What does the Brazilian need to declare?

• •Federal Revenue Service. The holder declares the trust's assets and rights directly in the DAA, at acquisition cost (Law 14,754/2023, art. 11, in relation to the base date of December 31, 2023). The holder must ask the trustee for the information and resources to pay the tax (art. 10, § 5), and the trustee's refusal does not release the settlor or the beneficiary from the obligation (art. 10, § 8).
• •Central Bank (CBE). The annual declaration is mandatory for residents whose assets abroad total US$ 1,000,000.00 or more on December 31. The deadline runs from February 15 to April 5 of the following year, and the penalty for not declaring ranges from BRL 2,500.00 to BRL 250,000.00, according to the Central Bank of Brazil (BCB) page on the CBE.

When does a VISTA trust make sense, and when does it not?

It makes sense in one specific case: the family wants to keep a BVI company operating, with directors in charge, inside a trust, without the trustee having to follow the business or answer for its performance. For those who only want generic asset protection, compare with an asset protection trust offshore and with a family holding company in Brazil.

It does not make sense when the asset is not shares of an eligible BVI company, when tax savings in Brazil are expected (Brazilian law taxes the holder), or when the goal is to escape an existing debt: the transfer can be annulled for fraud against creditors (Civil Code, art. 158).

What should you check before hiring?

1. •Deed. Ask for the draft and confirm the invocation of the VISTA law, the permitted reasons for intervention and the rules on directors.
2. •Trustee. Confirm that it is a "designated trustee" and ask for the license.
3. •Company. Check that the company falls outside the exceptions of the "Virgin Islands shares" definition.
4. •Law 14,754/2023. Confirm that the deed provides for the trustee's cooperation with Brazilian obligations (art. 10, § 6), and which information it will provide each year.
5. •Succession. Review the forced heirship share and the donation with a Brazilian lawyer.
6. •Costs. Ask for a written proposal. This article does not estimate amounts.