Opaque vs Transparent Offshore: Legal Guide 2026

In an opaque offshore, the company is a separate entity and the individual declares its profits: yearly if it is passive (art. 5 of Law No. 14,754/2023, or Lei 14.754/2023), or only when made available (art. 6). In a transparent offshore, the art. 8 option, you declare the company's assets, rights and obligations as your own.

What is an opaque or transparent offshore under Law 14,754?

Law 14,754/2023 created two ways for a Brazilian tax resident to treat a controlled entity abroad. The choice changes what appears on the Annual Adjustment Return (DAA) and when the tax is due.

• •Default regime (opaque): the entity is a separate person. You declare the ownership stake and, depending on the case, the profits it earns (arts. 5 and 6).
• •Transparency option (art. 8): instead of declaring the stake, you declare the assets, rights and obligations held by the entity as if they were yours.

The terms "opaque" and "transparent" are common market usage. The law speaks of a controlled entity and the art. 8 option.

When is an offshore considered controlled?

Paragraph 1 of art. 5 treats as controlled any company or other entity, with or without legal personality, including investment funds and foundations, in which the individual:

• •has, directly or indirectly, rights that secure a preponderant vote in decisions or the power to elect or remove the majority of the managers; or
• •holds, alone or with related persons, more than 50% of the share capital, or of the rights to profits or to assets on liquidation.

The law considers as related persons, among others, the spouse, partner and relatives up to the third degree (art. 5, § 3). If your stake does not reach that level of control, it follows the treatment of a financial investment abroad (art. 3).

How is the opaque offshore taxed?

It depends on whether the controlled entity is passive. Paragraph 5 of art. 5 defines as subject to the annual taxation regime the controlled entities that:

• •are in a country or dependency with favorable taxation (a low-tax jurisdiction), or benefit from a privileged tax regime (arts. 24 and 24-A of Law No. 9,430/1996, or Lei 9.430/1996); or
• •earn own active income below 60% of total income.

Passive controlled entity. The profit is taxed on December 31 of each year, even without distribution, at the 15% rate set in art. 2. The profit is computed on the controlled entity's annual balance sheet, under IFRS or Brazilian accounting standards, at the taxpayer's choice (art. 5, § 10).

Active controlled entity. The profit is taxed when actually made available to the individual (art. 6). The law considers profit made available when it is paid, credited, delivered, used or remitted, whichever happens first. Credit transactions with you or a related person also count, if the lender has profits or profit reserves.

Art. 6-A, added by Law No. 14,789/2023 (Lei 14.789/2023), lets the owner of a controlled entity outside § 5 choose to tax it under the annual regime of art. 5, for profits from January 1, 2024.

Exchange variation on the principal invested in the controlled entity goes into the capital gain when the investment is sold, written off or liquidated (art. 7).

How does the transparency option (art. 8) work?

Under art. 8, the individual may choose to declare the assets, rights and obligations of the controlled entity, direct or indirect, as if they were held directly by the individual. The law sets these conditions (§ 1):

• •the option can be exercised for each controlled entity separately;
• •it is irrevocable and irreversible for as long as you hold that entity;
• •if there is more than one partner or shareholder, it must be exercised by all of them who are individuals resident in Brazil.

Stakes held on December 31, 2023. The option was indicated on the DAA filed in 2024, calendar year 2023, with effect from January 1, 2024. In that DAA, the stake is replaced by the underlying assets and rights, with the acquisition cost distributed in proportion to the value of each asset. The underlying obligations enter at zero value. Income from 2024 onward is taxed according to its nature (art. 8, § 2).

Stakes acquired from January 1, 2024. The option must be made on the first DAA after the acquisition (§ 3).

If assets and rights move from a transparent entity to another passive controlled entity without the option, the transfer is valued at market value. The difference from the acquisition cost is the individual's income at the time of transfer (§ 4).

What is the practical difference between an opaque and a transparent offshore?

The table summarizes what the law says and does not replace an analysis of your case.

The law does not say which regime is better. The result depends on the assets, the entity's country, the partners and the plans of whoever controls it.

What obligations come with either option?

Regardless of the option, Law 14,754/2023 has rules that apply to both:

• •Credit for tax paid abroad: on controlled-entity profits taxed on December 31, art. 5, § 15, allows deducting the tax due abroad, within the limits of the law. Art. 4 covers the credit for financial investments, which requires a treaty or reciprocity.
• •Losses: § 14 of art. 5 only allows deducting losses from periods starting January 1, 2024. Art. 9 covers offsetting losses on financial investments abroad.
• •Central Bank: anyone with assets abroad above US$ 1,000,000 must file the Brazilian Capital Abroad report (CBE) with the Central Bank of Brazil (BCB). See the CBE Manual for current limits, deadlines and penalties.

To organize compliance with these routines, see our compliance service.

How do I choose between the two options?

Before deciding, answer these questions in writing with your accountant:

1. •Do you control the offshore, as defined in art. 5, § 1?
2. •Is it passive under § 5, because of a low-tax country or own active income below 60%?
3. •What does it hold: financial assets, equity interests, real estate or an operation?
4. •Are there individual partners resident in Brazil who must agree to the option?
5. •Do you accept that the art. 8 option is irrevocable for as long as you hold the entity?

Jurisdiction and entity type also matter. See our pages on corporate structures and on Delaware. For the tax side, talk to the tax planning team. Those who invest through funds can also read the article on Cayman funds and Law 14,754.