Offshore for Farmers: What It Can and Cannot Do

Offshore does not protect a farmer's land. The farm must stay in the owner's personal name or in a Brazilian holding company, because Law No. 5,709/1971 (Lei 5.709/1971) restricts rural land purchases by foreigners and by Brazilian companies with majority foreign capital.

An offshore company serves what is left over: cash, export revenue, and a hard-currency reserve.

Can I put the farm in an offshore company?

No. Law 5,709/1971 says that a foreigner resident in Brazil and a foreign legal entity authorized to operate in Brazil may acquire rural property only in the manner the law provides (art. 1). Paragraph 1 goes further: a Brazilian legal entity in which foreign individuals or companies hold the majority of the capital and reside or are headquartered abroad is subject to the same regime.

On a reading of the text, an offshore company that is the majority partner of the holding company that holds the property registrations could subject that holding company to the law's restrictions, even if the final owner is Brazilian. That is why the usual structure keeps the land in a personal name or in a holding company controlled by Brazilian residents. Confirm the design with a rural real estate lawyer before any transaction.

What does an offshore company do for a farmer?

It organizes the money that does not need to stay in Brazil. Three uses are the most common:

• •Export revenue. Law 14,286/2021 amended Law 11,371/2006 and now allows residents to keep abroad the foreign-currency proceeds received from Brazilian exports of goods and services (art. 26 of Law 14,286, which amends art. 1 of Law 11,371). A farmer who exports can keep part of what is received in an account outside the country.
• •Liquidity reserve. Money in an account or investment abroad reduces the need to sell land or machinery at a bad moment to meet a dollar obligation.
• •Purchase of imported inputs and equipment. Holding a foreign-currency balance avoids repeated conversions.

For the banking side, see the offshore banking service. For the corporate structure, see corporate structures.

Does an offshore company protect land from creditors?

No. Someone with debt, a labor lawsuit, or a tax enforcement action does not solve the problem by sending money abroad. Brazilian law provides two responses to that maneuver. The Civil Code lets creditors seek the annulment of a free transfer of assets made by a debtor who is already insolvent, or who becomes insolvent because of it (art. 158). The Code of Civil Procedure treats a transfer as fraud on enforcement when it is made while a lawsuit capable of reducing the debtor to insolvency is already pending (art. 792, IV).

The protection that exists for the farmer is in Brazil, and it is limited: the Constitution says that a small rural property, as defined by law, worked by the family, will not be subject to seizure to pay debts arising from its productive activity (art. 5, XXVI). Whether your property fits that definition is a question for your lawyer, not for the offshore company.

Lawful risk planning is done before the debt exists, with assets compatible with the liabilities and documentation of the origin of each resource. For an overview of the tools, read the offshore asset protection guide.

How does Law 14,754/2023 tax a farmer's offshore company?

It depends on what the offshore company is and what it does. The law separates three situations:

A controlled entity is one in which the Brazilian holds, directly or indirectly, more than 50% of the capital or of the rights to profits, or preponderance in decisions (art. 5, § 1). Own active income is the revenue obtained by the entity itself from its own economic activity, excluding revenue that consists exclusively of royalties, interest, dividends, equity interests, and rents (art. 5, § 6).

In practice: an offshore company that only holds cash tends to fall into the first or second row and pay 15% every year. A trading company with real operations may land in the third row, but the classification needs a tax opinion case by case. None of the three rows exempts the farmer from tax. Details in international tax planning.

How does an offshore company fit into rural property succession?

It fits as a liquidity reserve for those who will not run the farm. The biggest problem in rural succession is dividing the land among heirs who do not want to, or do not know how to, operate it. If the estate is almost entirely land, whoever keeps the operation has to buy out the others' shares, and the farm ends up sold or fragmented.

Two provisions of the Civil Code frame the planning. The forced share, which is half of the estate, belongs by full right to the forced heirs (art. 1,846). And a division made by the ancestor during life or by will is valid, as long as it does not harm that forced share (art. 2,018). Financial assets held abroad can help compensate non-operating heirs without selling land, as long as they are declared and taxed as the law requires.

If a trust is part of the conversation, first read offshore trust: is it worth it for Brazilians, which explains when it makes sense and when it does not. On probate, see offshore succession and probate.

What obligations does a farmer take on by opening an offshore company?

Declaring everything, every year. Assets and income abroad go into the Annual Adjustment Tax Return, separately from other income (Law 14,754/2023, art. 2).

At the Central Bank, the Brazilian Capital Abroad report (CBE) is mandatory for anyone holding US$ 1 million or more abroad on December 31, considering all assets and values together. The annual filing period runs from February 15 to April 5 of the following year, according to the BCB manual.

Financial institutions abroad also ask for proof of the source of funds. For the farmer, sales invoices and export documents are usually the basis of that proof. The compliance routine is covered in international compliance.

Offshore or just a rural holding in Brazil: which to choose?

For those with land and operations only in Brazil, a Brazilian rural holding company is usually enough. An offshore company starts to make sense when there is revenue in foreign currency, a need for a reserve outside the country, or heirs who will live abroad.