Your Global Tax Strategy & Brazil

If you are a high net worth individual or are working to become one, you likely already take steps to legally minimize your worldwide tax exposure. A big part of this is often done through acquiring additional citizenships and permanent residency visas from various countries – not only as a general quality of life improvement but also as a way of making yourself more resilient in an increasingly turbulent macroeconomic environment. From Brexit, to Trump, to COVID authoritarianism, to a return to potential nuclear war that could realistically threaten tens of millions of lives in the Northern Hemisphere, to the decline of American Empire and the rise of another, it is clear that we live in uncertain times. The geopolitical landscape is changing rapidly, and it is becoming more important than ever to ensure one’s ease-of-travel (including permission to live elsewhere if needed) and to securely store one’s wealth.

Here I try to address how and why Brazil might justifiably fit into a global strategy for high net worth individuals thinking along these lines – even though Brazil’s government is famously bureaucratic and corrupt. I won’t repeat too much all the advantages I already outlined in detail on the main page. (If you haven’t read it, I recommend going back and reading it!) I will instead fit Brazil into Harry Schultz’s “Flag Theory.”

Harry Schultz’s “Flag Theory”, applied to Brazil

The basic idea behind Flag Theory is that in order to maximize one’s sovereignty, you want to:

1. Hold passports/citizenships from countries that don’t tax your global income (outside these countries’ own borders),

2. Maintain status as a tax resident (by spending enough time living) in a country that doesn’t tax income from outside its borders (Brazil does, but I’ll get to that!) or at least taxes them at a low rate,

3. Own companies that are registered in countries with no (or low) corporate taxes.

This doesn’t mean tax “evasion” in any negative sense of the word. It merely means learning the ropes enough to legally reduce your tax exposure, and it means a willingness to vote with your feet and dollars for a long-term strategy for you and your family.

Brazil’s taxation type is residence-based – meaning that it does indeed tax your global income (usually) if you live in the country long enough to become a tax resident (usually meaning residing in Brazil for 183 days within a calendar year). So how do we consolidate the fact that Brazil does tax global income with Flag Theory if point #2 above says that we try to live in countries that don’t tax global income? A few things:

• If most of your income is (or will be) sourced from outside Brazil, then over the long-term, you may consider Brazil a fantastic place to spend a few months per year but not spend all year every year. In the medium-term, consider staying in Brazil just long enough to acquire its valuable passport, then once you acquire it, you can take steps to avoid continued status as a local tax resident (usually by spending fewer than 183 days in Brazil).
  

  • Relevant side note: There is one path to citizenship that is relatively quick and will minimize the number of years that you will spend as a tax resident (assuming you are willing to move your tax residence to another country once your Brazilian citizenship has been approved): “birth tourism”. Having a baby in Brazil gives the parents quick Permanent Residency (approved usually within a couple of months), then the right to apply for citizenship after just one year.
    

• Note that Brazil no longer offers a citizenship-by-investment (CBI), but it does offer a Permanent Residency (PR) by investment, and you have the opportunity to apply for citizenship 4 years thereafter (or after just 1 year if you have a child in Brazil). Real estate is the most popular avenue for investment, and the minimum investment for PR is R$1 million (less than US$200K at November 2022’s exchange rate). In some parts of Brazil, the minimum real estate investment is even lower. So, basically, if you are willing to purchase (what is considered by the standards of the developed world) a low-priced house in an exotic country with an incredibly rich culture and enormous land mass, you get Permanent Residence there. (Not a bad deal).

In sum, despite Brazil taxing global income, if you plan carefully, you can legally avoid its worldwide tax scheme over the long-term by subjecting yourself to it over the medium-term - just long enough to obtain its valuable passport. Once you are successful in obtaining the passport, you can still spend quality time in the country every year but avoid being considered a tax resident by the government by never spending more than 183 days within a calendar year. Using this strategy, you can work Brazil into either a Perpetual Traveler lifestyle (constantly on the move) or even a strategy in which you spend each year in the same 2-3 countries, with a home in each one, always following the good weather, for example.

Brazil is worth it. Make it work for you!

If you are ready to explore how Brazil can fit your long-term goals, please fill out our form on the main page. We will reply shortly.