The changes brought about by the Brazilian tax reform, coupled with the new taxation on dividend distribution, make estate and succession planning even more relevant in Brazil.
They impose additional challenges for business families, requiring a more strategic and preventive approach to the organization and preservation of assets, in order to protect family holdings and corporate reorganizations, making a reassessment of the adopted model essential.
Structures designed based on the benefit of income tax exemption are those that deserve the most attention.
We highlight 5 initial points that need to be considered in this re-analysis by the families:
1. Distribution Policy: Reorganize the profit distribution policy, taking as a reference the amount that can still be distributed without taxation in Brazil.
2. Partner Compensation: Reassess the form of compensation for partners who actively participate in the company’s management.
3. Reinvestment and New Acquisitions: Identify alternatives for reinvestment and acquisition of assets, as many structures relied on the possibility of new investments and asset acquisitions being made directly by individuals after tax-free distribution,
4. Reorganization of the Partner Structure: Verify the need for the inclusion of new family members in the Brazilian corporate structures, in order to maximize the distribution of dividends without taxation, reflecting in the accounting records the distributions actually made between family members, such as between parents and children.
5. Succession Planning: The possibility of increased taxation on asset transfers, such as the ITCMD (Inheritance and Gift Tax), demands a well-structured succession plan aimed at reducing costs, mitigating family conflicts, ensuring business continuity, and providing predictability in the transfer of assets.
Given this new tax environment in Brazil, corporate planning – whether asset and/or succession planning – should be viewed as a continuous and strategic process, not as a one-off measure. Reducing tax impacts and ensuring peace of mind and sustainability for future generations should be the main focus of the business-owning family in Brazil.
