Tax Haven, can Brazil be a good destination?

“Tax Haven” is a subject that many investors and businesspeople avoid because they believe it is an illegal practice.

Because of this “assumption,” many people miss out on the opportunity to benefit from the tax advantages that these tax havens offer.

Firstly, it is important to clarify that this fear is unfounded, since this is a practice that is recognized worldwide and regulated by several countries.

Just to give you an idea, all 9 largest European countries have a microstate that is a tax haven, not to mention Switzerland itself.

Knowing this, we have prepared this article with the essential information about tax havens that you should know to take advantage of this opportunity. Check it out!

If you need assistance from a specialized legal team, click here to access our service area to request yours.

Author: Bianca Noronha

Can Brazil be considered a tax haven?

The Bahamas, Panama, Lebanon, and the Maldives are some countries that are considered “tax havens” around the world, but did you know that Brazil is also on this list?

Many people are unaware of this fact because of the perception that the Brazilian tax burden is high.

Although this is sometimes true for the middle class, Brazilian taxation for the upper class and companies is in a situation that does not exist in any other country.

This is because some common taxes worldwide have low percentages in Brazil.

If you want to know what these taxes are, continue reading below.

Which taxes in Brazil are lower than in the rest of the world?

As already mentioned, there are some taxes in Brazil that are lower than in the rest of the world, but what are they?

Income tax

Foremost, Brazil is a country where income taxes are lower than average when compared to developed countries.

The United States (USA), which is always mentioned as a country with low taxes, taxes its taxpayers’ income and assets at up to 50%.

Brazil, however, has established more lenient rules for Income Tax, setting progressive rates of up to 27.5% for individuals and rates of up to 15%, depending on the tax regime chosen, for legal entities.

Aiming to encourage companies and industries, Brazilian legislation has selected to direct its revenue towards consumption, meaning that, in practice, consumers collect much more tax than entrepreneurs.

Furthermore, Brazil is the only country in the world that does not tax citizens who live abroad until these funds are sent to Brazil.

In other words, if a Brazilian sets up a company declared in any country, he or she will not pay any taxes until these amounts are sent to Brazil.

Unlike other countries, which, every year or month, will have to pay taxes on income earned outside the country.

Inheritance or Gift Tax

The Inheritance and Gift Tax charged in Brazil is much lower than in countries such as the United States or Europe.

In most Brazilian states, the ITCMD (Inheritance and Gift Tax) is equivalent to only 4% of the inherited or donated assets.

In addition, as there is no regulatory Complementary Law, Brazilian states cannot tax inheritance or donations when:

• The deceased “de cujus” owned assets located abroad;
• The deceased was a resident, domiciled, or had his/her probate processed abroad; or
• The donor was domiciled or resided abroad.

In other countries, such as the USA, inheritance and donation taxes are up to 30%, 40%, or even 50%.

The difference in taxation that Brazil offers in these cases is clear.

Wealth Tax

Another advantage that Brazil offers when compared to other countries is the lack of regulation of the Wealth Tax.

Norway, Switzerland, Argentina, France, Spain, Italy, Belgium, the Netherlands, Luxembourg, Uruguay, and Colombia are just a few Western countries that have the IGF, which ranges from 0.1% to 1% on anything over R$5 million (with large variations from country to country).

This tax is common around the world, and is even legally provided for in the Constitution, but pressure from the super-rich in Congress prevents it from being taxed.

However, since it has not been regulated for decades, it’s not applied in Brazil.

Does Brazil offer any other tax benefits?

In addition to all the advantages already presented, if you are a businessperson, you can take advantage of several other benefits and tax incentives that Brazil offers.

As already mentioned, Brazil has a policy of promoting companies and industries and, for this reason, it also offers tax exemptions in certain operations and segments.

Tax exemption is a way of extinguishing tax credits, consisting of a situation in which there is a tax obligation, but it is exempted from payment.

An example is the exemptions granted by the Federal Government to importers and exporters of certain goods, such as bicycles, medical supplies, solar energy equipment, and others.

In relation to Brazilian states, specific determinants, sectors, or products may be granted an exemption from ICMS, for example.

The ideal is for you to seek legal advice to map out and guide you on all the exemption hypotheses and other benefits your company would be entitled to.

But what is considered a tax haven?

Tax havens are countries or states that have differentiated, almost non-existent taxation.

Because they offer attractive tax conditions, especially for foreign companies and citizens, they are widely used in Tax and Succession Planning.

Whether to set up a company or maintain a bank account in one of these countries, their use is a great alternative for those who want to reduce costs.

But, finally, what are the advantages and benefits that tax havens offer?

What are the benefits that tax havens offer?

By using a tax haven in your planning, you can benefit from:

• Minimal or almost zero taxation;
• Assured banking secrecy for financial transactions;
• Reduced bureaucracy;
• Diversity in the types of transactions offered; and
• Simplified company formation.

It’s possible to see that tax havens offer advantageous conditions when compared to some countries such as France, Germany, Mexico, and others.

Now that you know what benefits tax havens offer, see which countries are recognized as “tax havens”.

How can Koetz Advocacia help you with Tax Havens?

As mentioned, setting up a company or opening a bank account in a tax haven – such as Brazil – can be a great alternative for those who want to expand their business.

Because they have reduced bureaucracy and offer simplified ways to set up companies and open bank accounts, many people choose to start these procedures without the necessary assistance.

However, using a tax haven such as Brazil must be preceded by Tax Planning or advice provided by an experienced professional.

This is because a lack of knowledge or poor planning can result in a crime instead of generating profit or reducing the tax burden.

Since it is a tax haven, the professional must be aware of several rules established by the international community to prevent the operations from being seen as crimes of tax evasion, money laundering, corruption, and others.

For this reason, we recommend the need for specialized advice to guide you on these operations.