Offshore: How to Protect and Internationalize Your Assets
Brazil has one of the highest tax burdens on financial investments globally. Local equity investors pay up to 22.5% income tax on short-term gains, while exclusive funds are now subject to semi-annual taxation under the "come-cotas" regime. Given this scenario, the question is no longer "why internationalize?" but "which structure should I start with?". A well-structured offshore holding company answers this question — and goes beyond simple dollar diversification.
What an Offshore Structure Really Is
Technically, an offshore entity is any legal entity established outside the beneficiary's country of residence. In the Brazilian market, the term typically refers to companies incorporated in jurisdictions such as the Cayman Islands, British Virgin Islands (BVI), Luxembourg, or the United States — each with distinct characteristics regarding governance, cost, and tax treatment.
An American LLC, for example, is treated as a pass-through entity for IRS purposes, which allows Brazilian investors to declare assets directly abroad without automatic double taxation. A Cayman Islands holding company, on the other hand, offers flexibility to structure family funds with differentiated share classes, facilitating succession planning among heirs in different countries.
The choice of jurisdiction is not merely cosmetic. It determines how assets will be taxed in Brazil, how they will be declared to the Brazilian Federal Revenue, and how they will function in the event of probate.
Brazilian Taxation on Offshores: What Has Changed
Law 14,754/2023 completely reshaped the rules for individuals with foreign investments. As of January 1, 2024, income earned by offshore entities controlled by individuals residing in Brazil is now taxed annually, even if not distributed — under the so-called controlled foreign corporation (CFC) regime.
The unified tax rate is 15% on the profit realized by the offshore entity, calculated based on the change in net equity over the fiscal year. This eliminated the advantage of indefinite deferral that existed before the law.
There are, however, relevant exceptions. Offshore entities engaged in active economic activity — with operating revenue from the production of goods, provision of services, or genuine commercial activity — follow a distinct regime. In these cases, taxation occurs only at the time of actual dividend distribution to the Brazilian beneficiary, at a rate of 15% or according to the progressive tax table, depending on the nature of the income.
Planning that ignores this distinction between passive and active income will leave money on the table — or pay more tax than necessary.
Mandatory Declaration to the Central Bank
In addition to income tax, investors with more than US$1 million in foreign assets are obligated to declare them to the Central Bank via CBE (Brazilian Capital Abroad Declaration), with quarterly frequency for amounts above US$100 million and annually for others. Non-compliance subjects the declarant to fines ranging from R$2,500 to R$250,000, depending on the undeclared amount and the severity of the infraction.
Why the Dollar Matters More Than It Seems
Currency diversification is not just protection against the devaluation of the Brazilian Real. It's a rebalancing of exposure to systemic risks. An investor who keeps 100% of their assets in Brazilian Reals is, in practice, concentrated in a single economy, a single monetary policy, and a single fiscal risk.
Historically, the dollar has appreciated by an average of 8.5% per year against the Brazilian Real over the last decade — but this average figure conceals sharp short-term movements that directly impact local assets. During the 2015 crisis and the 2020 turbulence, the exchange rate acted as a negative amplifier for those without structured protection abroad.
An offshore entity allocating to short-term US Treasuries, for example, yielded returns close to 5.25% per year in dollars over the last two years — with US sovereign risk and daily liquidity. Converted to Brazilian Reals over the same period, this return outperformed a significant portion of domestic private credit products, with substantially lower risk.
Practical Structures for Internationalizing Assets
There is no single architecture. The design depends on the investor's profile, family composition, presence of international businesses, and long-term objectives.
BVI or Cayman Holding Company
Suitable for families with multiple heirs and diversified assets in different countries. The structure allows for the creation of share classes with distinct economic rights, segregation of assets by family line, and establishment of clear governance rules without going through the Brazilian probate process — which can last for years and consume 4% to 8% of the assets in costs.
Trust or Foundation
Tools designed for long-term asset protection and shielding in litigation scenarios. A trust transfers legal ownership of assets to a trustee, while the beneficiary retains usufruct. It is an estate planning tool, not for tax evasion — and must be declared to the Brazilian tax authorities according to the rules of Normative Instruction RFB 1.634/2016.
Offshore Account with Investment Structure
For those beginning their internationalization journey, opening an account with international brokers like Interactive Brokers or Schwab International and directly investing in US ETFs, REITs, and bonds can be the first step before establishing a corporate structure. The cost is lower, regulation is simple, and reporting follows GCAP rules for exchange rate variations.
The Most Common Mistake in Internationalization
Treating offshore as synonymous with secrecy or aggressive tax avoidance is a misconception that still persists — and creates unnecessary risks. Brazil has tax information exchange agreements with over 190 countries via CRS (Common Reporting Standard) and FATCA. Banks in Cayman, Switzerland, Luxembourg, and the US automatically report account data of Brazilian residents to the Brazilian Federal Revenue.
Efficient asset internationalization operates within the law, with a structure that balances tax efficiency, legal protection, and liquidity — not with opacity.
The combination of new tax legislation, a structurally volatile exchange rate, and still attractive US interest rates has made 2024 and 2025 years of redefinition for offshore strategies for Brazilian investors. Those who structured before Law 14.754/2023 need to review. Those who have not yet internationalized face an entry point with increasing opportunity cost.
Jera Capital supports every step of this process — from jurisdiction selection to integrating offshore structures with estate planning and active management of overseas assets. If you are considering how to internationalize your assets with structure, compliance, and tax efficiency, speak with our specialists.
