Offshore company: accounting and tax aspects of this type of investment abroad

The constitution of an offshore company can represent patrimonial, succession and fiscal advantages for the adepts of this investment model. In order to keep the practice in accordance with the legal terms, it is necessary to pay attention to the obligations that fall on the company and the individual.

Offshore company: what it is, objectives, advantages

Offshore is a company usually located in favored tax countries, known as "tax havens". This company does not need to hire labor or produce anything.

Although it often appears associated with situations where there is intent to launder money or hide assets, illegal cases are in the minority. Considering the purpose of legality, the objective is to seek a legitimate way to escape high taxation on financial operations, as well as to promote exchange protection of assets.

Opening an offshore company is also a way to expand investments and plan succession. The practice also keeps the identity of the owner confidential, except for the international agreements signed by Brazil to exchange financial information with over 100 countries.

As offshore is not a tax resident in Brazil, there is no tax collection from the Brazilian tax authorities on your income or capital gains, which is seen as one of the main advantages of the modality. Depending on the tax haven, there is tax collection, but the rate is small in relation to the Brazilian one.

The individual who opens an offshore company has his income taxed in Brazil only when he withdraws resources from the company directly (e.g. withdrawal of values) or indirectly (e.g. payment of personal expenses by the company).

Read more: Taxation on the withdrawal of funds by shareholders of offshore companies

Tax obligations of shareholders of offshore companies in Brazil

Individual Income Tax

Those who invest in offshores must inform the foreign assets in the Individual Income Tax Return, regardless of the amount.

Declaration of Brazilian Capitals Abroad

When the net worth or the market value of the offshore company, together with the other assets and rights held abroad by the Brazilian taxpayer, exceeds the equivalent of US$ 1 million, the individual resident for tax purposes in Brazil is also required to submit the Declaration of Brazilian Capital Abroad (CBE) to the Central Bank of Brazil, which may be annual or quarterly, depending on the volume of assets (assets and rights).

Offshore financial and accounting controls

Although tax havens, as a rule, do not require accounting records of those they are headquartered, tax residents in Brazil must keep offshore accounting within IFRS (International Accounting Standard), in case there is a requirement to present the Balance Sheet, either on account of a transaction, inspections or even for compliance issues.

The balance sheet enables the shareholder to demonstrate, in a correct manner, his/her position in the company's capital for Income Tax purposes in Brazil, as well as to present to the BACEN the data requested, such as the total value of net worth, total assets and liabilities, profit reserves, the result for the year, among other necessary information.

Specialized support for offshore company management

Domingues e Pinho Contadores has a specialized team to guide the client on the requirements for maintenance of offshores under the accounting and tax aspects.

DPC works in the elaboration of balance sheets of offshore companies and in the support to the individual investor in what concerns the fulfillment of the obligations due to the Brazilian tax authorities.