Legal International Tax Planning: A Guide for Individuals

Legal international tax planning means organizing an individual's residence, investments and structures, before the taxable event, to pay the tax due under current rules, with everything declared. It is lawful tax avoidance (elisão) when there is real purpose and transparency.

It becomes evasion (evasão) when there is omission, falsehood or concealment, and that is where the CTN (Brazil's National Tax Code) and Law No. 8,137 (Lei 8.137) come in.

What is international tax planning?

It is the process of choosing, among the paths the law allows, the one that best organizes the tax burden of someone whose income, assets or residence are tied to more than one country. For a Brazilian individual, planning involves four fronts: where tax residence is, how each asset abroad is taxed, which declarations are mandatory and which documents support the decisions.

This guide explains the concept and the steps. For a comparison of concrete ways to reduce the tax burden, read how to legally reduce taxes with an offshore.

What is the difference between tax avoidance and tax evasion?

Elisão (tax avoidance) is the legitimate choice of a less costly legal path. Evasão (tax evasion) is suppressing or reducing tax through unlawful conduct. Brazilian law does not use these two words, but two texts show where the line falls: the sole paragraph of art. 116 of the CTN and arts. 1 and 2 of Law 8,137/1990.

• •CTN, art. 116, sole paragraph: the tax authority may disregard acts or legal transactions carried out to conceal the occurrence of the taxable event or the nature of the elements of the tax obligation, following the procedures set by ordinary law.
• •Law 8,137/1990, art. 1: it is a crime against the tax order to suppress or reduce tax through conduct such as omitting information or giving a false declaration to the tax authorities, defrauding inspection or using a document known to be false. The penalty is imprisonment of 2 to 5 years and a fine. Art. 2, I, covers making a false declaration or omitting a declaration about income, assets or facts in order to avoid tax.
• •Law 7,492/1986, art. 22, sole paragraph: keeping deposits abroad that were not declared to the competent federal agency carries imprisonment of 2 to 6 years and a fine.

Which Brazilian rules shape an individual's planning?

Law 14,754/2023 (Lei 14.754/2023) is the core of the topic. It sets 15% income tax (IRPF) at the annual adjustment on income from financial investments abroad and on profits and dividends of controlled entities, with no deduction from the tax base (art. 2, § 1). Each type of asset has its own treatment:

Each row has its own guide. The international asset holding article details controlled entities and the transparency option, and the article on international succession planning covers trusts and inheritance.

What obligations come with planning?

Planning is only legal if it comes with the declarations. The main ones are:

• •DAA: income from capital invested abroad is declared separately from other income and capital gains (Law 14,754/2023, art. 2, caput).
• •CBE: the annual declaration of Brazilian capital abroad is mandatory when it totals USD 1,000,000.00 or more, or the equivalent in other currencies, on December 31 (BCB Resolution 279/2022, art. 10). The quarterly declaration starts at USD 100,000,000.00 (art. 11). The resolution also requires keeping the documentation for 10 years (art. 3, sole paragraph).
• •CRS: the Common Reporting Standard, from the OECD, is a standard for the automatic exchange of financial account information. Brazil appears on the OECD's list of signatories to the CRS multilateral agreement, and Normative Instruction RFB 1,680/2016 (Instrução Normativa RFB 1.680/2016) governs the identification of financial accounts in line with the CRS. In practice, banks abroad in participating countries may report to the authorities of the country of residence the accounts a Brazilian holds there.

For that reason, every account, asset and structure abroad must appear in the Brazilian declarations, and the documentation must be kept organized in case of a request for clarification.

How do you do international tax planning step by step?

1. •Define tax residence: Law 14,754/2023 applies to individuals resident in Brazil (art. 2, caput). Changing residence changes the set of rules, and that requires its own analysis.
2. •Map income, assets and countries: list where each asset is, in whose name, and what income it generates.
3. •Classify each asset: financial investment, controlled entity, trust or another asset, following the table above.
4. •Compare legal alternatives by simulation: calculate the tax of each path before deciding, including the effect of irrevocable options such as the one in art. 8.
5. •Test the purpose: ask whether the structure has an economic or estate rationale beyond tax, because the CTN allows acts carried out to conceal the taxable event to be disregarded.
6. •Document: contracts, statements, balance sheets and minutes that explain each decision.
7. •Comply with the declarations: DAA, CBE and the obligations of the country where the structure is located.
8. •Review every year: residence, amounts and rules change.

OffshoreProz's tax planning and corporate structures team can help organize this map, together with your accountant and lawyer.

What signs show that "planning" has become evasion?

Be wary when any of these signs appear:

• •The proposal depends on not declaring the account, asset or structure in Brazil.
• •It promises "zero tax," "100% legal" or "total shielding."
• •It uses documents that do not reflect the real operation.
• •The structure has no function beyond hiding ownership.
• •No one explains which law supports the result.

These points bring the case closer to what arts. 1 and 2 of Law 8,137 describe and to the sole paragraph of art. 116 of the CTN. If there is already a past omission, consult a tax lawyer to assess regularization before any contact with the tax authorities.