Hybrid Holding Company with Offshore: How Brazil Taxes It

A hybrid holding company combines a Brazilian family holding company, which concentrates assets and equity interests in Brazil, with an entity abroad controlled by the same family. It eliminates neither tax nor reporting: in Brazil, the controlled entity's profits can be taxed before any distribution, and capital kept abroad must be reported to the Central Bank.

What is a hybrid offshore family holding company?

It is a two-layer structure. The family controls a holding company in Brazil, and that holding company (or the family itself) controls an entity abroad. Each layer has a role:

This article covers only the combination of the two layers. To understand the holding company as a tool for protection and succession, read the guide on the international family holding company. For how a holding company works inside Brazil, see how a family holding company works.

When does the hybrid structure make sense?

It usually comes up when assets are already split between Brazil and abroad and the family wants a single governance for both sides. Some signs:

• •there are real estate and companies in Brazil and financial investments abroad;
• •succession involves heirs in more than one country;
• •the entity abroad will have its own activity and documentation, not just exist on paper.

It tends not to pay off when the only goal is to pay less tax. Resolution BCB 279/2022 requires that flows and stocks of Brazilian capital abroad meet legal requirements and have an economic rationale (art. 3). A structure with no economic purpose is hard to sustain against that requirement.

How does Brazil tax the entity abroad that the holding company controls?

It depends on who controls the entity. The law treats individuals and legal entities differently:

For an individual, the income is reported separately from other income and bears 15% in the annual adjustment, with no deduction from the base (Law 14,754, art. 2, § 1). The law considers controlled an entity in which the individual has, directly or indirectly, a majority of the votes or more than 50% of the capital or profits, also counting the interest of relatives up to the third degree (art. 5, §§ 1 and 3).

One point remains open: Law 14,754 speaks of "direct or indirect" control, and Law 12,973 taxes the Brazilian holding company. How the two rules combine in a layered structure is a matter of interpretation. Confirm the design with a tax lawyer before incorporating any entity.

What is a passive controlled entity and how does the 60% test work?

A passive controlled entity is an entity abroad whose own active income is below 60% of total income. In that case, the individual pays tax on the profit on December 31 of each year, even without having received anything (art. 5, § 5, II). The same applies to a controlled entity located in a favored-taxation country or with a privileged tax regime, under arts. 24 and 24-A of Law 9,430/1996 (art. 5, § 5, I).

Own active income is revenue obtained directly from carrying out its own economic activity. The law excludes from this concept revenue that comes exclusively from (art. 5, § 6, I):

1. •royalties;
2. •interest;
3. •dividends;
4. •equity interests;
5. •rents;
6. •capital gains, except on the sale of interests or permanent assets acquired more than 2 years earlier;
7. •financial investments;
8. •financial intermediation.

For that reason, an entity that only holds an investment portfolio tends to fall under the December 31 regime. There are exceptions, such as dividends and interests received from investees with own active income above 60% (§ 8). It is worth checking case by case.

The profit is determined in the controlled entity's annual balance sheet and converted into reais at the Central Bank selling rate on the last business day of December (§ 10). When the money is distributed later, profit that was already taxed does not pay tax again (§ 11), and tax paid abroad can be deducted, as long as it does not exceed the tax due in Brazil on the same profit (§ 15).

What if the controlled entity is not passive?

Profits determined from January 1, 2024 by controlled entities that do not fall under the December 31 regime are taxed when actually made available to the individual (art. 6, II). The law considers profit made available on payment, credit, delivery, use or remittance, whichever occurs first, and also in credit operations with the individual or with a related person, if the lender has profits or reserves (art. 6, sole paragraph).

The individual can opt to tax these profits under the December 31 rule (art. 6-A, added by Law 14,789/2023). A sale, write-off or liquidation of the investment generates a capital gain, and the exchange-rate variation on the principal is part of that gain (art. 7).

How are dividends from the Brazilian holding company to the family treated?

The general rule remains exemption: profits and dividends paid by legal entities under the actual profit, presumed profit or arbitrated profit methods are not part of the income tax base of a beneficiary domiciled in the country (Law 9,249/1995, art. 10). Law No. 15,270/2025 (Lei 15.270/2025) added two caveats:

• •Monthly withholding: from January 2026, the payment of profits and dividends above BRL 50,000.00 in the same month, by the same legal entity to the same resident individual, is subject to 10% withholding on the total (Law 9,250/1995, art. 6-A, as worded by Law 15,270).
• •Minimum taxation: an individual whose total income in the calendar year exceeds BRL 600,000.00 is subject to minimum taxation from tax year 2027, calendar year 2026 (Law 9,250, art. 16-A).

Dividends from results determined up to 2025, with distribution approved by December 31, 2025, have a transition rule. Dividends remitted abroad are subject to 10% withholding tax (Law 9,249, art. 10, § 4). Because the transition rule has conditions, read the text of the law and confirm your case.

How does ITCMD enter the calculation?

ITCMD, the state inheritance and gift tax, reaches the transfer of the holding company's quotas to heirs. The Constitution sets the jurisdiction (art. 155, § 1):

• •real estate: the State where the asset is located;
• •movable property, securities and credits: the State where the deceased was domiciled or where the donor is domiciled;
• •when the donor lives abroad, or the deceased had assets, residence or probate outside the country, jurisdiction is regulated by complementary law;
• •the tax is progressive according to the value of the share, legacy or gift, and the Senate sets the maximum rates.

The effective rate and the treatment of assets abroad depend on your State's law and the applicable complementary law. Confirm the rule in force before planning a gift of quotas. For the complete succession design, see the guide on international succession planning.

What ancillary obligations does the structure create?

• •Brazilian Capital Abroad report (CBE): the annual report is mandatory when Brazilian capital abroad totals USD 1,000,000.00 or more on December 31 (Res. BCB 279/2022, art. 10). Units of investment funds in the country with assets abroad and BDRs do not count toward that threshold (art. 12). The annual deadline stated by the Central Bank runs from February 15 to April 5 of the following year, and the fine for failing to report ranges from BRL 2,500.00 to BRL 250,000.00. Check the current amounts on the CBE page.
• •Annual Adjustment Tax Return: the controlled entity goes on the Assets and Rights form, with the dividend receivable and the year of origin of the profit (Law 14,754, art. 5, § 10, IV).
• •Documentation: proof of flows and stocks must be kept for 10 years counted from the completion of the operation (Res. BCB 279, art. 3, sole paragraph).

To set up and maintain the entity, see the corporate structures service and the international tax planning service.

What mistakes should I avoid in the hybrid structure?

1. •Treating the entity as invisible: it is controlled under Brazilian law, and the profit can be taxed on December 31.
2. •Forgetting the CBE: the USD 1,000,000.00 threshold counts Brazilian capital abroad, and the deadline is annual.
3. •Distributing dividends without checking withholding: the BRL 50,000.00 limit is per month, per paying entity and per individual.
4. •Setting up the structure after a debt or an enforcement action: gratuitous transfers made by an insolvent debtor can be annulled by creditors (Civil Code, art. 158).
5. •Ignoring governance: without minutes, contracts and accounting for the entity, the balance sheet required by Law 14,754 does not exist.