10 Mistakes Brazilians Make Setting Up a Company Abroad

The costliest mistakes Brazilians make with a company abroad are failing to report it, ignoring the controlled-entity regime of Law No. 14,754 (Lei 14.754) and choosing a favored-taxation jurisdiction without measuring the tax effect. Almost all have a written rule: DAA, CBE and foreign exchange rules. Below, 10 mistakes and the rule for each.

What are the 10 most common mistakes when a Brazilian sets up a company abroad?

They are listed here in the order of a structure's step-by-step setup. Each line points to the section that explains the rule.

1. Do I need to report the company abroad in my income tax return?

Yes. An individual resident reports, separately in the Annual Adjustment Tax Return (DAA), income from financial investments abroad and the profits and dividends of controlled entities (Law 14,754, art. 2). The interest in the entity goes on the assets and rights form, as the law shows when dealing with the dividend credit (art. 5, § 10, IV) and the transparency option (art. 8, § 2, II).

The mistake is treating the company as if it were "foreign" and therefore outside the return. The step-by-step for the form is in how to report offshore in income tax.

2. When does a company abroad require filing the CBE?

When Brazilian capital abroad totals USD 1,000,000.00 or more on December 31 (Resolution BCB 279, art. 10 and sole paragraph). Brazilian capital abroad means amounts, assets, rights and holdings of any nature held outside the country by residents (Law 14,286, art. 8, I).

The resolution includes equity interests in non-resident companies among the information to be provided (art. 7, I). The annual submission runs from February 15 to April 5 of the following year (art. 13). The mistake is adding up only the bank account balance and forgetting the value of the interest and the other assets.

3. Is the profit of a company abroad taxed only when I distribute it?

Not always. If the controlled entity is in a favored-taxation country or regime, or earns own active income below 60% of total income, the profit is taxed on December 31 of each year, without depending on any resolution to distribute (Law 14,754, art. 5, § 5 and § 10, III).

When the controlled entity does not fall under those cases, the profit determined since January 1, 2024 is taxed when actually made available (art. 6, II). The mistake is presuming the second case without testing the first. To see how the rule fits into planning without breaking the law, read how to legally reduce taxes with offshore.

4. How do I know whether a jurisdiction is a favored-taxation one?

Check IN RFB 1,037/2010. It lists the countries and dependencies that do not tax income or tax it at a rate below 17%, or whose legislation does not allow access to the corporate ownership, title or beneficial owner (art. 1). In the text in force as read on October 3, 2026, the list includes, for example, the British Virgin Islands and Seychelles.

Art. 2 of the same instruction lists privileged tax regimes. Law 9,430 defines as privileged, among other cases, a regime that does not tax income or taxes it at a maximum rate below 17% and one that does not allow access to information on corporate ownership, ownership of assets or operations (art. 24-A, sole paragraph, as worded by Law 14,596/2023).

The consequence is in art. 5, § 5, I, of Law 14,754: a controlled entity in a country or regime classified this way has its profit taxed on December 31, and the balance sheet must follow Brazilian accounting standards (§ 10, I, b). The mistake is choosing the jurisdiction by setup price and only afterward discovering the classification. Compare in jurisdictions and check BVI and Seychelles on the Receita Federal list before deciding.

5. Opaque or transparent company: which regime should I choose?

An individual can opt to report the controlled entity's assets, rights and obligations as if they were their own, instead of following arts. 5 to 7 of Law 14,754 (art. 8). This is the tax transparency option.

The option has rules that become traps: it applies to each controlled entity separately, it is irrevocable and irreversible while the individual holds the entity, and it must be exercised by all partners resident in the country when there is more than one (art. 8, § 1). For an entity acquired from January 1, 2024, the option is exercised in the first DAA after the acquisition (§ 3). The mistake is not deciding in time or deciding without simulating both regimes. The corporate structure can be designed under corporate structures.

6. Can I take money out of the company through a loan?

As a rule, a loan from the company to you or to a related person can be treated as profit made available. For controlled entities that do not fall under art. 5, § 5, the law considers profit made available in credit operations with the individual or with a related person, if the lender has profits or profit reserves (Law 14,754, art. 6, sole paragraph, II).

The same provision considers profit made available on payment, credit, delivery, use or remittance (item I). The mistake is thinking that "lending" avoids the taxable event. A related person includes spouse, partner and relatives up to the third degree (art. 5, § 3, I).

7. Can I put the company in someone else's name?

Not to avoid the control rules. Law 14,754 considers controlled the entities in which the individual holds, directly or indirectly, alone or together with related persons, a majority of the votes or more than 50% of the capital or of the rights to profits (art. 5, § 1). Spouse and relatives up to the third degree are related persons (§ 3, I).

There is an additional criminal risk. Law No. 7,492/1986 (Lei 7.492/1986) punishes with imprisonment of 2 to 6 years and a fine anyone who keeps abroad deposits not declared to the competent federal agency (art. 22, sole paragraph). The mistake is using a third party to hide the owner, instead of structuring and reporting transparently. See the compliance service.

8. Can I send money to the company by any means?

No. Foreign exchange is free and has no value limit, but it can only be done through institutions authorized by the Central Bank, and the client classifies the purpose of the operation (Law 14,286, arts. 2, 3 and 4, § 2). The same Law 7,492 treats as a crime an unauthorized foreign exchange operation aimed at evading currency (art. 22).

The mistake is using an informal channel to "save time" at setup. To organize remittance and account, see offshore banking and the article on a bank account for offshore.

9. Do I need to keep an annual balance sheet and documents for the company abroad?

Yes, when the controlled entity falls under art. 5, § 5. Profits are determined in the controlled entity's annual balance sheet, prepared under IFRS or Brazilian accounting standards, at the taxpayer's choice. If the entity is in a favored-taxation country or regime, the Brazilian standard applies (Law 14,754, art. 5, § 10, I).

The amounts are converted at the Central Bank selling rate on the last business day of December (§ 10, II) and computed in the DAA on December 31 (§ 10, III). Without a balance sheet, there is no basis to determine the profit. Offsetting losses on financial investments, in turn, requires proper and reliable documentation (art. 9). See the setup in how to open an offshore company.

10. Can I wait for the tax authority to act before regularizing?

Only until an inspection begins. A voluntary disclosure excludes liability for the infraction, but a disclosure is not voluntary if made after the start of an administrative procedure or inspection measure related to the infraction (National Tax Code, CTN, art. 138 and sole paragraph). In an assessment by the authority, the fine is 75% of the tax in cases of non-payment, failure to file and inaccurate returns (Law 9,430, art. 44, I).

Anyone who already has undeclared assets abroad should read regularization of undeclared offshore assets. How the Receita Federal finds these situations is covered in inspection of assets abroad.