Investment by Guedes via offshore is within the law, but flees from good international practices

Lawyers heard by sheet they state that, from a tax point of view, investment in the United States by opening a company in a tax haven, as done by Minister Paulo Guedes (Economy), is the most recommended path.

This is a way to escape the high taxation of inheritances in that country for those who invest as an individual, take advantage of the lower tax in the succession process here in Brazil and still escape the taxation of profits in our country while the investment is not repatriated.

Experts point out that Brazilian legislation on offshore companies held by individuals does not follow the most recent recommendations from the OECD, an entity that brings together more developed countries and which Brazil has tried to join without success so far. A proposal for a change made by the Ministry of Economy was rejected by the Chamber this year.

The disclosure that the minister has funds invested abroad through an offshore company raised discussions about conflicts of interest and led Guedes to a committee of the Chamber, this Tuesday (23), to answer questions from deputies.

This type of operation is within Brazilian law, as long as certain requirements are met. Among them, that the money is remitted abroad through legal channels and is the result of a lawful activity in Brazil. It is also necessary to declare the resources to the Federal Revenue and the Central Bank.

The minister’s maintenance of offshore was also informed to the Ethics Committee of the Presidency of the Republic, which recommended actions to mitigate and avoid conflicts of interest.

After the revelation, however, questions arose that are still unanswered and that motivated, in addition to the summons by Congress, the presentation of news-crime against the minister, later filed with the STF (Supreme Federal Court).

In Congress, the minister highlighted the advantages of investing in the US through a company for equity succession issues, that is, to reduce the taxation of their heirs.

Fernando Zilveti, from Zilveti Advogados, states that investment through an individual in the American market can be taxed at rates from 18% to 40%, in most cases, in the case of succession.

If the investment is made through a company, this problem does not occur, as the heirs own the offshore quotas, which in the event of death would be taxed in Brazil at a rate of 4% to 8% of ITCMD (Transmission Tax Cause of Death and Donation).

“If it is money that you have legally earned here in Brazil and it has already been taxed, the companies in the financial market themselves recommend that you open an offshore for investment. There is nothing illegal”, says the lawyer.

“There is nothing amazing, apart from the ethical aspect. It is not recommended, from an ethical point of view, that the Minister of Economy has offshore”, he says.

In case of capital gain with the investment, even if the result is only due to the exchange rate appreciation, there is taxation with Income Tax at the time of repatriation, says Daniel Miotto, partner in the tax area of ​​the PNST office. The money, however, can be retained abroad to avoid collection.

Miotto states that there is a movement to avoid this type of business structuring, as recommended by the OECD. It seeks, for example, to give more transparency to the income obtained through these companies and to promote the taxation of retained earnings in other countries.

“It’s one of the ways you defer taxation and end up reducing tax collection in Brazil. There is already a worldwide movement, led by the OECD, for countries to adopt measures to avoid this type of deferral or retention of profits in tax havens”, claims.

The lawyer recalls that the Ministry of Economy’s original income tax reform bill had a provision in this regard, but that fell during the course of the Chamber.

“It’s even a way of providing equality. The taxpayer who has less possibility of carrying out international planning ends up being unequal with the one who can better structure the investments.”

In July, Guedes defended the removal of the offshore rule from the IR reform. This Tuesday, he suggested that the withdrawal occurred under pressure via Congress and that he thinks it is correct and fair to have taxation.

The offshore of Guedes, of his wife and daughter in the British Virgin Islands, known as a tax haven, was revealed by reports published by vehicles such as Piauí magazine and the newspaper El País, which participate in the project of the International Consortium of Investigative Journalists (the ICIJ).

Offshore is an English term used to define an open company in other countries, usually places where the tax rules are less strict and it is not necessary to declare the owner, as well as the origin and destination of the money.

It is not illegal to have an offshore company, as long as it is declared to the Internal Revenue Service, but the lack of transparency of this type of company often makes them serve illicit purposes, such as hiding assets.

Guedes’ lawyers stated that the minister’s documentation about the company was sent to the Public Ethics Commission and other competent bodies at the beginning of the mandate, with no record of conflicts with the exercise of the position.