A friend of a friend of my cat is a Brazilian resident and came to me with the following problem. He's got a e-commerce/software company in a classic tax haven and a Transferwise account with a six figures balance, and is in the process of opening a bank account. He wasn't aware of CFC rules and was under the wrong assumption that he wouldn't have to pay Brazilian taxes on this setup. As a resident of Brazil, my understanding is that he does.
- Will Transferwise exchange information with Brazil?
- Does anyone have knowledge about CFC rules in Brazil and whether they apply to persons owning offshores, or only to domestic companies owning foreign companies? (I tried translating the law and it seems it's the later option, but frankly it's cryptic and it'd make no sense not to apply to persons as well)
- In the event that he has to pay taxes on dividend distribution as per CFC rules, how can he safely minimize taxation? I suggested the following for consideration: A) Have a foreign shareholder not subject to Brazilian taxes; B) Minimize company profits artificially increasing his expenses, payroll, etc. What are the risks of each solution?
Thanks everyone
- Will Transferwise exchange information with Brazil?
- Does anyone have knowledge about CFC rules in Brazil and whether they apply to persons owning offshores, or only to domestic companies owning foreign companies? (I tried translating the law and it seems it's the later option, but frankly it's cryptic and it'd make no sense not to apply to persons as well)
- In the event that he has to pay taxes on dividend distribution as per CFC rules, how can he safely minimize taxation? I suggested the following for consideration: A) Have a foreign shareholder not subject to Brazilian taxes; B) Minimize company profits artificially increasing his expenses, payroll, etc. What are the risks of each solution?
Thanks everyone
