How to Structure an Offshore Company Legally: Planning, Transparency, and Compliance

The incorporation of offshore companies is a legitimate tool for international estate and succession planning, provided that fiscal transparency, lawful origin of funds, and compliance with Brazilian and international regulations are duly observed.

This article aims to clarify how to structure an offshore company within the bounds of legality, outlining formal requirements, ancillary obligations, and best practices to prevent tax or judicial challenges.

1. Legal Basis and Use by Brazilian Residents

Brazilian law does not prohibit individuals or legal entities residing in Brazil from incorporating offshore companies.

However, the law requires that:

·         There is fiscal transparency (proper declaration to the Brazilian Federal Revenue Service);

·         The funds originate from lawful sources;

·         The taxpayer does not use the offshore for concealment, simulation, or tax evasion.

As long as these principles are observed, the structure can be lawfully used for:

·         International asset protection;

·         Succession planning with greater efficiency;

·         Facilitating global investments;

·         Tax optimization within the law (lawful tax avoidance, not evasion).

2. Steps to Structure a Legal Offshore Company

a) Choosing the Jurisdiction

The jurisdiction should offer:

·         Legal and economic stability;

·         Double taxation or information exchange treaties with Brazil;

·         A clear and reliable regulatory regime;

·         Adequate financial and corporate infrastructure.

Commonly used and legitimate jurisdictions include:

United States (Delaware, Nevada), Uruguay, Portugal, Estonia, and, with caution, some Caribbean jurisdictions.

b) Hiring a Specialized Corporate Service Provider

It is advisable to engage an experienced international firm to:

·         Draft the offshore’s articles of incorporation in compliance with local law;

·         Appoint directors or managers (nominee directors), if necessary;

·         Open international bank accounts;

·         Ensure local compliance (annual renewals, fees, and filings).

c) Identification of the Ultimate Beneficial Owner (UBO)

The structure must clearly identify all Ultimate Beneficial Owners, even when organized through trusts, holdings, or multi-layered corporate vehicles.

Both the Brazilian Central Bank (Bacen) and the Federal Revenue Service require such disclosure.

3. Obligations in Brazil

a) Declaration of Brazilian Capital Abroad (DCBE)

Mandatory filing before Bacen if foreign assets exceed US$ 1 million (annual declaration) or US$ 100 million (quarterly declaration).

b) Declaration of Assets in the Individual Income Tax Return (IRPF)

Brazilian residents must declare their equity interests in the offshore under “assets and rights,” indicating the acquisition cost in Brazilian reais and the corresponding foreign currency.

c) Offshore Profits (Rules Effective from 2024)

With the enactment of Law No. 14,754/2023, profits generated by offshore entities will be automatically taxed in Brazil, even if not distributed (automatic taxation regime).

4. Best Practices for Legal and Tax Protection

·         Ensure a real economic purpose (investment, asset management, business operations);

·         Avoid artificial or simulated structures;

·         Maintain proper accounting and documentary records;

·         Operate the structure transparently before regulatory authorities;

·         Avoid fraudulent appointment of third parties as directors.

5. Risks of Misuse

An offshore company may be judicially disregarded in situations such as:

·         Fraud against creditors or fraudulent execution;

·         Concealment of assets in divorce or inheritance proceedings;

·         Tax evasion or money laundering;

·         Simulated ownership to circumvent Brazilian law.

6. Conclusion

An offshore company is not inherently illegal. On the contrary, it is a sophisticated instrument widely used by major multinational groups.

However, its legality depends on its purpose, implementation, and the taxpayer’s transparency before tax authorities.

Well-structured international planning requires not only technical expertise, but also ethics, traceability of funds, and full tax compliance.