There are various reasons why Brazilians are investing their savings abroad. Some do it as a retirement plan, others to protect their assets and still others to generate new income. Research by real estate companies has shown that 30% of the properties purchased by Brazilians, especially in Florida, were made by first-time buyers abroad. The benefits chosen by investors are: a strong currency and the possibility of investing in a more competitive and favorable environment for doing business, as well as a lower risk rate.
For the Head of International Taxation and Estate Planning, Rodrigo Martins, from the Miami office of Ronaldo Martins & Advogados, investments in the United States, one of the favorite addresses for Brazilians, are a good opportunity, but you need to be careful and pay attention to the tax planning of the entire operation.
Investments can be made as individuals or as legal entities, but each scenario needs to be evaluated. According to Rodrigo Martins, as an individual – leaving aside current discussions such as the initial MPs (Provisional Presidential Decrees) 1,171/1,172 and now PL (Bill) 4.173/2023 presented by the Executive to Congress, when new attempts were made to change the tax rule for investments by individuals abroad – by adopting the use of an Offshore company as an investment vehicle, a tax deferral is obtained until there is a distribution of profits and dividends from the Offshore company to the individual, which not only simplifies control, but also the moment of calculation and calculation of the tax due – Cash Regime. In the case of investments made by legal entities, all their investments must be recognized and recorded in Brazil, and even if the investment is made in exactly the same way as above through the use of an offshore company as a vehicle, on account of equity equivalence, the results of this subsidiary will have to be recognized in the accounts of the Brazilian company, and therefore subject to income tax. In terms of the tax itself, considering the above scenarios, the income tax rates also differ, and can reach a rate of 27.5% for individuals and 34% for companies.
Another point to be considered is the possible succession impacts of not adopting appropriate planning and the tax cost on the sale of real estate by foreigners. The US inheritance tax, also known as the “estate tax”, is a federal tax on the transfer of property from a deceased person. The way in which inheritance tax is levied on non-resident foreigners differs from that of US citizens and residents. “Succession aspects should always be looked at from the broadest perspective, taking into account Brazilian legislation, as this is what most Brazilian investors are subject to because they reside in Brazil. It is also important to consider the legislation of the country where the investment is being made, as there may be specific treatments that impact foreign investors, as is the case in the USA. It is important to observe any conflicts of legislation and, where possible, the existence of a Double Taxation Avoidance Agreement (Brazil and the USA, for example, do not have one). For this reason, when drawing up estate and succession plans, solutions such as Holding Companies, Offshore Companies, Wills and Trusts are often used, but always on a case-by-case basis, as there is no ready-made recipe that meets the needs and characteristics of clients in the same way,” emphasizes Rodrigo Martins.
Further information is available from
Rodrigo Alonso Martins, (rodrigo.martins@ronaldomartins.adv.br), (USA) +1 (786) 641-8880 /
+1 (305) 357-2063 and (BRA) +55 (11) 99965-3908 / +55 (11) 3066-5932 / +55 (11) 3066-4800
