If you own an offshore company, or if you've consulted a fiduciary services specialist to start a company, you've certainly heard about Joint Tenancy with rights of survivorship as a form of succession planning.

Although the concept is unfamiliar to Brazilians, as our legal system is Roman-Germanic, the concept of Joint Tenancy is understood as a condominium of shares or shares. The legal provision is used more frequently in countries of the Anglo-Saxon system, despite having its origin in Roman Law.

By definition, Joint Tenancy guarantees that all the partners of the company will have ownership of all the shares or shares, being able to use, enjoy and even dispose of the whole, as if the total ownership were theirs.

And do you know the reason for “rights of survivorship”? In the event of the death of one or more of the company's partners, there will be no need to inventory the shares or shares of this company, as the other partners will already have their ownership through the Joint Tenancy.

​

How can people domiciled in Brazil use Joint Tenancy with rights of survivorship?

As stated, there is no mention of Joint Tenancy in Brazilian civil law. Thus, the only way to use this legal tool would be through the transfer of assets to an offshore company, including the spouse and their children in joint tenancy in relation to ownership of these shares. In this way, the patriarch is guaranteeing his heirs' access to the patrimony.

Thus, financial resources and assets that are accumulated during the matrimonial life and, consequently, contributed to an offshore company with the shares recorded with Joint Tenancy, will not be considered a donation.

Furthermore, it is worth mentioning the decision of the Federal Supreme Court (STF) on February 26, 2021 regarding the unconstitutionality of charging ITCMD on donations abroad. By 7 votes to 4, it established the thesis that the states and the Federal District are prohibited from establishing the ITCMD in the cases referred to in article 155, paragraph 1, III, of the Federal Constitution, without the intervention of the complementary law required by the aforementioned constitutional provision.

Vinícius Evangelista, CEO of E&G Financial Group LLC, reinforces the importance of the recent STF decision to use Joint Tenancy as a tax planning tool: "Removing the possibility of taxation as ITCMD in case of partnership with third parties in offshore companies, with shares recorded in Joint tenancy with rights of survivorship, it will be possible to obtain a substantial tax reduction. In the State of São Paulo, it is around 4% of the equity value.”

However, it is essential to be aware of tax obligations under the Income Tax Return for Individuals. It is mandatory to proceed with the annual declaration stating the value of the shares in the condominium (Joint Tenancy) and the amount contributed to the capital stock of the offshore company.

-----

E&G has experience in fiduciary services and offshore company incorporation. We are currently opening businesses in 21 countries, including the US and the world's main tax havens. Contact us and schedule a coffee with one of our experts.

This material is for informational purposes only and is not intended to constitute legal advice. E&G Financial Group LLC is not a law firm and our employees are not acting as your attorney.