Time for a Move? Why Brazil’s New Rules Make “Fiscal Exit” a Strategic Option for HNWIs
In the last couple of years, Brazil has changed the game for wealthy residents with foreign investments. For Brazilian-resident HNWIs (high-net-worth individuals) who hold offshore assets, control foreign companies, or are planning a major liquidity event, the question is no longer if but when they should consider a fiscal exit or significant restructuring. Here’s why, and how to think about it.
1. What’s changed: Key regulatory shifts in Brazil (2023-25)
Several important developments mean that staying tax-resident in Brazil while holding or building offshore wealth is now more burdensome and risk-intensive. Notably:
a) Law No. 14.754/2023 (effective 1 Jan 2024)
This law significantly expanded taxation on individuals’ foreign-held investments, offshore companies, and trusts. Key elements:
It brings a flat 15% rate on many foreign financial investments and controlled entities owned by Brazilian taxpayers.
It enforces an “automatic” or annual taxation of profits in controlled foreign entities (CFCs) for individuals, even if no dividends are distributed. In other words, the tax is triggered on 31 December each year for qualifying entities.
It clarifies that trusts abroad will be treated as owned by the settlor, meaning transfers will be seen as donations or inheritance, and associated taxation applies.
It provides an optional “step-up” of the value of foreign assets (as at 31 December 2023) with a special 8% tax rate if elected.
b) Enhanced reporting & compliance
The update to the federal income tax return (IRPF), changes to the assets & rights section, and clearer fields for foreign investments and controlled entities in 2024-25 mean that the Brazilian tax authorities have more automated data and higher visibility into overseas assets.
The expansion of the concept of “financial investments abroad” to include a broad spectrum (crypto, digital wallets, foreign bank accounts, foreign insurance) increases exposure.
c) Broader international tax alignment
Brazil is moving toward implementation of global minimum tax standards (OECD Pillar Two, GloBE rules), and the local legislation demonstrates alignment with anti-deferral rules.
The increased focus on substance and controlling foreign companies means structures relying on “paper” holding companies or tax-haven entities will be under more scrutiny.
2. Why this matters for HNWIs (and why fiscal exit makes sense)
Given the above, here are the core reasons a wealthy Brazilian with international assets should consider stepping back from Brazilian tax residency or at least repositioning structures:
• Loss of deferral
Previously many Brazilians used offshore companies (in low-tax jurisdictions) to accumulate investment income without annual Brazilian tax — tax was only due when money was repatriated. The new law ends much of that deferral. So if wealth is locked in a controlled foreign entity, tax is triggered annually.
• Rising compliance and uncertainty
The cost of compliance has increased (reporting, accounting, documentation, audit risk). Also, tax planning strategies that were acceptable may now be under challenge. The visibility to the authorities is higher.
• Efficiency in exit/liquidity events
If you anticipate a sale, transfer or major wind-down in the next few years, moving residence before that event may significantly improve net proceeds (or at least preserve deferral).
• Succession, lifestyle & jurisdiction stability
For families with global lives, the ability to choose residence in a stable jurisdiction with favourable tax and legal rules offers planning advantages (succession, asset protection, diversification of risk).
• Treaty access and jurisdiction credibility
By relocating to or using a jurisdiction with strong treaties and substance, you reduce the risk of being treated as “tax-haven exploit” and can benefit from planning with more legal comfort.
3. Which jurisdictions make sense — and for whom
Here are some of the leading options, with high-level pros/cons and suitable client types:
• Portugal
Pros: Language/cultural affinity with Brazil; historically attractive tax regimes (NHR); EU membership.
Cons: Regime changes may reduce benefits; relocation lifestyle and cost considerations.
For whom: HNWIs seeking a European base, comfortable with moving, and wanting moderate tax exposure.
• Switzerland
Pros: Cantons with low effective corporate tax; strong legal infrastructure; treaty network incl. Brazil.
Cons: High cost of living and operations; non-EU VAT regime may complicate business.
For whom: Business owners relocating personally, or holding/treasury functions seeking stable jurisdiction.
• Luxembourg
Pros: Excellent holding/fund infrastructure; participation exemptions; substance-friendly.
Cons: Not focused purely on low personal tax; costs and compliance for real substance.
For whom: Families with sizeable holdings, cross-border enterprises, fund/private equity exposures.
• Ireland
Pros: 12.5% corporate tax for trading income; English language; EU membership; good infrastructure.
Cons: Substance requirements strict; personal tax may not be as favourable.
For whom: Operating companies relocating business functions to Europe; owners wanting an efficient corporate base.
• Netherlands
Pros: Excellent tax treaty access; participation exemption; logistics & holding hub.
Cons: Higher trading tax rate than Ireland; operations cost still significant.
For whom: Groups with multiple operating subsidiaries in Europe, or centralised holding/treasury needs.
• Alternative lifestyle/pro-tax bases (Malta, UAE, etc.)
Pros: Potential for very favourable personal tax regimes.
Cons: Treaty depth, substance scrutiny and reputational/operational considerations vary widely.
For whom: Individuals prioritising personal tax and mobility over traditional substance-heavy structures.
4. How to use this in planning
Model scenarios: Sell locally vs migrate first, compare net after exit tax, residency, and new jurisdiction tax.
Timing matters: Make sure any move is done before a major liquidity event if possible, and consider Brazilian exit tax triggers.
Structure check: Are you using offshore companies that now trigger annual taxation? Are you compliant with new IRPF reporting fields?
Substance plan: Any new jurisdiction must be real (office, management, decision-making, payroll) to be respected.
Continue compliance in Brazil: Even if moving, there are DCBE/IRPF obligations up to date of residency cessation.
Partner ecosystem: Brazilian international tax counsel + local advisor in the destination jurisdiction + corporate services provider = minimum team.
5. Final thought
The threshold for “should I do something” has shifted. What was once “nice to plan” has become “urgent to review.” If you are a Brazilian resident with offshore assets, controlled entities, or a business planning an exit, ignoring the new rules could mean paying more tax, facing increased risk, or losing flexibility. On the flip side, careful planning now—especially before major events—can save significant tax and open real global mobility options.
“In a world of rising global transparency and more aggressive anti-deferral rules, staying put often carries hidden cost. For globally minded Brazilian HNWIs, relocating residency or restructuring proactively isn’t a compromise—it’s strategic optimisation.”
(This article is for informational purposes only and does not constitute legal or tax advice. Specific planning must involve qualified professionals in Brazil and the jurisdiction concerned.)
Double-Layer Offshore Structures: Do They Make Sense for Brazilians?
In recent years, more and more Brazilian families have been looking for ways to internationalize and structure their wealth. The goals are, among others:
Diversify investments abroad,
Protect wealth from local risks,
Plan succession efficiently,
And optimize taxation.
One of the solutions that frequently comes up is the double-layer offshore structure.
What is a double-layer structure?
Essentially, there are two levels:
Bottom layer: An investment fund (such as a Luxembourg SICAV, Irish UCITS, or even an international insurance product like PPLI).
Top layer: A holding company (for example, a Luxembourg SARL or Dutch BV) that owns the interest in the fund.
The logic is straightforward: the fund or insurance, if properly structured, can enable tax deferral in Brazil (tax is only triggered upon redemption). The holding company provides governance, succession planning, and sometimes access to tax treaties.
Why not just use a holding company?
Brazil’s CFC rules (Controlled Foreign Company) require Brazilian tax residents to pay tax each year on the profits of the foreign companies they control.
That means if you only set up a holding company abroad, it will be taxed annually in Brazil — even if it does not distribute dividends. This can lead to tax being paid on unrealized gains, which can later disappear if market conditions deteriorate.
By contrast, if the holding company sits on top of a fund, the holding only records profits when the fund distributes or redeems. As long as the fund reinvests, there is no annual tax in Brazil.
Practical examples
Luxembourg SARL → SICAV/UCITS
Pros: Works well if the fund is truly collective, with many investors.
Cons: If it’s a “family-only fund,” the Brazilian tax authorities may reclassify it and tax annually.Cayman/BVI → Broadly held funds (Luxembourg/Irish UCITS)
Pros: Can work for families that already have structures in Cayman or BVI.
Cons: Since these jurisdictions are blacklisted in Brazil, the risk of challenge is higher.International insurance (PPLI / Unit-Linked)
Pros: Not subject to CFC rules. Taxed only on redemption or payout.
Cons: Must be genuine insurance, issued by an independent insurer.Foundations (Panama, Liechtenstein, etc.)
Pros: Useful for succession.
Cons: Often disregarded by Brazilian tax authorities, who attribute income directly to the founder.
When does it make sense?
For families and individuals with significant wealth (USD 2 million +).
For those seeking international succession planning.
When investing in regulated European funds, seen as secure and reputable.
Key considerations
Structures must be properly designed, with legal and tax advice.
There is no one-size-fits-all: each case has different needs and objectives.
Brazilian tax authorities are increasingly vigilant — transparency and continuous compliance are essential.
Conclusion
Double-layer offshore structures can provide deferral, governance, and succession benefits, but they are not suitable for everyone. The key is to align the structure with the family’s goals while respecting Brazilian tax rules.
Before making a decision, seek professional advice to determine whether this strategy fits your situation.
This article is for informational purposes only and does not constitute legal or tax advice.