The First Year Under Law No. 14,754/23
This is the first year in which Brazilian residents who control passive investment offshore companies will be subject to taxation on the net income earned by their offshore companies.
The new tax legislation, known as Law No. 14,754/23, introduced significant changes to the taxation of international structures held by Brazilian tax residents.
Foreign Taxes May Be Credited
Law No. 14,754/23 (Article 5, Paragraph 15) allows Brazilian taxpayers to deduct certain foreign taxes paid by their offshore companies from the tax due in Brazil.
This deduction may include taxes paid or accrued by the offshore company itself, as well as withholding taxes imposed on income earned outside Brazil.
The Case of Investments in the United States
For passive investment companies holding investments in the United States, withholding tax is commonly applied to dividends and certain other types of income.
Information regarding these taxes is typically made available by March 15 of each year and may be relevant for the proper calculation of taxes due in Brazil.
The Importance of Obtaining Tax Information
We recommend obtaining this information directly from the bank or financial institution where the offshore company maintains its investments.
In many cases, the details necessary to identify taxes paid or withheld may not be clearly reflected in the company’s bank statements.
Obtaining this information will allow taxpayers to properly assess available foreign tax credits and utilize them when calculating taxes due in Brazil.
How Dartmouth Can Help
Dartmouth International provides accounting services for offshore companies and international structures, preparing financial statements and reports in accordance with applicable regulations.
Our team can assist in organizing the company’s financial information and provide the support necessary to comply with the new requirements applicable to Brazilian residents with international structures.
Final Considerations
The new rules introduced by Law No. 14,754/23 represent a significant change for Brazilian controllers of offshore companies.
For this reason, it is important that taxpayers obtain the financial and tax information relating to their international structures in advance, ensuring the proper calculation of taxes and the utilization of any foreign tax credits permitted under the legislation.
This article is provided for informational purposes only and does not constitute legal, tax, or accounting advice. Each situation should be analyzed individually, taking into account the characteristics of the structure and the applicable legislation.
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