In Brazil, there are structures to minimize tax costs when we discuss about wealth planning.
It is an important tool for (i) enabling offshore investments; (ii) obtain tax benefits – whether with inventory or on the sale of assets; (iii) implement family corporate governance; and (iv) eliminate risks of future property disputes between heirs.
To structure a solid Planning, which actually meets the objectives involved, it is essential to identify which assets must be paid-in in the holding capital, as in some cases it is more beneficial to keep some assets outside the Planning structure. We highlight 2 points that shall be evaluated in the decision making:
1. Sale of Real Estate: When well organized, Planning can obtain exemption from paying transfer tax of assets, but only in cases where real estate revenue is lower than other revenues of the holding company. As a result, when there is an intention to sell properties in the short term, it is essential to assess whether these properties should be paid-in;
2. Equity in Other Companies: Still for the purpose of obtaining tax benefits, the paid-in of equity in other companies within the holding company can result not only in exemption from paying transfer tax of assets as mentioned above, but also in speeding up the transfer of the company’s shares from the first for the second family generation, avoiding the payment of others taxes due to the donation of these shares or in future inventory.
However, determining the revenues of the company you intend to pay-in, as well as whether it has partners outside the family structure is essential as it can significantly harm management and governance.
The assessment of these two items should not be done in an isolated form, but rather within a set of variables, among which the tax benefit to be obtained is just one pillar of Planning. When carrying out an asset reorganization, short and long-term objectives must be considered, as Planning can often be done in phases, thus allowing different purposes to be met.
