International Family Holding Company: Brazilian Tax and CBE

An international holding company is a company abroad that owns the family's assets. For someone living in Brazil, it does not eliminate tax: if the Brazilian controls it, Law No. 14,754/2023 (Lei 14.754/2023) taxes the profit on December 31 (passive or favored-jurisdiction controlled entity) or when made available. The Brazilian Capital Abroad report (CBE) applies from USD 1 million.

What is an international holding company?

It is a company incorporated outside Brazil whose main function is to own assets: equity interests, financial investments, real estate, rights. The Brazilian owner holds the quotas or shares of the holding company, and not each asset directly. The structure serves to organize management and the division among heirs, but it does not change the owner's tax residence.

This article covers the holding company abroad. Two neighboring topics have their own guide: the Brazilian family holding company and the hybrid structure, with a Brazilian holding company and an offshore one.

When is a holding company abroad considered controlled by an individual?

Law 14,754/2023 considers controlled the companies and other entities, with or without legal personality, including investment funds and foundations, in which the individual holds rights that ensure a majority of the votes or the power to elect most of the directors, or owns more than 50% of the capital or of the rights to profits and assets (art. 5, § 1, I and II).

Two details matter for families:

• •Joint ownership: the calculation of more than 50% considers the individual together with related persons, such as spouse, partner and relatives up to the third degree (art. 5, § 1, II, and § 3, I).
• •Indirect control: direct or indirect ownership counts. A holding company on top of another holding company does not remove the rule.

When is the profit of a holding company abroad taxed in Brazil?

It depends on how the holding company is classified. Law 14,754/2023 separates two situations, and the difference changes the timing of the tax.

The taxpayer can opt to apply the art. 5 regime also to a controlled entity that does not fall under those cases, taxing profits from January 1, 2024 onward on December 31 (art. 6-A).

Why does a family holding company usually fall under the annual regime?

Because the income of a family holding company is generally passive. The law defines own active income as revenue obtained directly by the entity through its own economic activity, and excludes revenue that comes exclusively from royalties, interest, dividends, equity interests, rents, capital gains (with exceptions), financial investments and financial intermediation (art. 5, § 6, I).

If this revenue makes up most of total income, own active income falls below 60% and the controlled entity enters the annual regime (art. 5, § 5, II). The passive income list has carve-outs for authorized financial institutions, for interests in entities with own active income above 60%, and for real estate development or construction companies, in the case of rents (art. 5, §§ 7 to 9). Confirm the classification with an accountant before finalizing the design.

How is the profit taxed on December 31 determined?

The profit is determined individually in the controlled entity's annual balance sheet, based on IFRS or Brazilian accounting standards, and converted at the closing rate of the last business day of December (art. 5, § 10, I and II). It goes into the DAA in proportion to the interest, and the taxed amount becomes the acquisition cost of a dividend receivable. When the dividend is distributed, it is not taxed again (art. 5, §§ 10 and 11).

What is the transparency option for a holding company abroad?

It is an alternative provided in art. 8 of Law 14,754/2023: instead of following arts. 5, 6 and 7, the individual reports the controlled entity's assets, rights and obligations as if they were held directly.

Rules of the option:

1. •It can be exercised entity by entity (art. 8, § 1, I).
2. •It is irrevocable and irreversible while the individual holds that controlled entity (art. 8, § 1, II).
3. •If there is more than one partner, it must be exercised by all who are individuals resident in the country (art. 8, § 1, III).
4. •For interests acquired from 1/1/2024, the option is exercised in the first DAA after the acquisition (art. 8, § 3).
5. •Income after the option follows the rules for financial investments abroad or the legislation applicable to the nature of the income (art. 8, § 2, IV).

Because the option cannot be undone, it is worth simulating the effect before exercising it.

What if a Brazilian company controls the holding company abroad?

If the controller is a legal entity domiciled in Brazil, Law 14,754/2023 does not apply; Chapter IX of Law No. 12,973/2014 (Lei 12.973/2014) does, covering worldwide taxation of legal entities (arts. 76 to 92).

The central point: the Brazilian parent records, in sub-accounts of the investment account, the result equivalent to the profits or losses of the direct subsidiary and of its subsidiaries (art. 76). The portion equivalent to profits earned before income tax, without exchange-rate variation, enters the actual profit (lucro real) and the CSLL (Social Contribution on Net Income) base of the Brazilian parent (art. 77). When there is no consolidation, the positive adjustment is added to the net profit in the December 31 balance sheet of the year in which the profits were determined (art. 79, I).

The rule for affiliates is different: profits are computed in the December 31 balance sheet of the year in which they are made available, if the conditions of art. 81 are met. Art. 92 applies part of these rules to a branch abroad. Because the legal-entity regime has its own conditions and exceptions, anyone with a Brazilian holding company on top of the offshore one needs a specific accounting opinion.

When must the holding company abroad be reported to the Central Bank (CBE)?

Assets held abroad by a Brazilian resident are "Brazilian capital abroad" (Resolution BCB 279/2022, art. 1). The annual report is mandatory when they total USD 1,000,000.00 or more, or the equivalent in other currencies, on the reference date of December 31 (art. 10). The quarterly report is required from USD 100,000,000.00, on the reference dates of March 31, June 30 and September 30 (art. 11).

The Central Bank's official CBE page states that the annual report is filed from February 15 to April 5 of the following year, and that the fine for failing to report ranges from BRL 2,500.00 to BRL 250,000.00, and can be increased by 50% in some cases. Deadlines and amounts can change, so confirm on the Central Bank page before filing.

The resolution also requires keeping the supporting documentation of flows and stocks for 10 years, counted from the completion of the operation (art. 3, sole paragraph).

Does a holding company abroad help with succession and asset protection?

It helps organize, not shield. The holding company's quotas are the owner's assets and enter the estate under the applicable law, as a rule that of the deceased's domicile (Brazilian Law of Introduction to the Rules of Brazilian Law, LINDB, art. 10), respecting the forced heirship share of necessary heirs when Brazilian law governs succession (Civil Code, CC, art. 1,846). To understand these limits, read the guide on international succession planning.

As for protection against creditors, no structure is a guarantee. Gratuitous transfers of assets made by a debtor who is already insolvent, or who is made insolvent by them, can be annulled by unsecured creditors (CC, art. 158), and the disposal of an asset can be considered fraud against enforcement in the cases of the Code of Civil Procedure (CPC), art. 792. Transferring assets to the holding company after the debt exists is the highest-risk scenario. If your goal is to design the complete structure, OffshoreProz's corporate structures and tax planning team can help.