Question 1: Why should I have a Family Holding Company? (Click to open)
Answer: Because:
It protects your assets;
It bears smaller tax charges;
It allows institutors to earn the company’s profits as beneficiaries (usufrutuarios);
Institutors keep on as managers and administrators of the company;
Shares or quotas of the company may be donated to sons and daughters;
The “usufruto” ceases only upon the death of institutors in favor of their offspring (sons and/or daughters);
Shares or quotas may be donated to sons and daughters under restrictions.
Sons and daughters so admitted gain the rights thereunder solely upon the death of their parents;
Clauses may be introduced to protect the donated shares or quotas making them not possible to disposition, to communication and not subject to any lien;
Sale and assignment of shares or quotas given under “usufruto” limitation may not be made;
The non-communicable clause protects sons and daughters against the odds of a bad marriage and debts.
The non-communication clause is extensive to whomever is married to the son or to the daughter of the donor of the shares or quotas;
The non-communication clause applies to any marriage regime;
It is also applicable in case of a stable union of living together;
The no-lien clause avoids their transfer to third parties;
When the “usufruto” comes to an end no probate proceedings are required.
Question 2: Who is eligible to form a Family Holding Company?
Answers:
a) Any bachelor or divorced person;
b) Persons married under a separation or under a partial communion of assets regime;
c) Husband or wife married under the universal assets regime by granting each other their consent;
d) Minors represented or assisted by their parents.
Question 3: How much equity is required to open up a Family Holding Company?
Answers:
a) One may start it with a minimum equity capital of R$1.000,00;
b) This initial equity capital may be increased at any time;
c) The subscribed shares or quotas may be paid up in Brazilian currency or with other assets;
d) Such assets may include real estate properties of the partners, among other items of commercial value.
Question 4: Is the assigment and transfer of real estate properties of the shareholder or quotaholder to the company subjet to the capital gains tax?
Answer: No! One should only adopt the same value as shown in his or hers Income Tax Return for the real estate property thereunder.
Question 5: Is there any need of a public deed to be filed with the Real Estate Registry Office?
Answer: No! A copy of the Articles of Association as amended and filed with the Company’s Registry Office is sufficient therefor.
Question 6: Is this assignment and transfer of real estate property subject to the municipal “inter vivos” transmission tax (ITBI)?
Answer: A 3% tax rate may be imposed upon the difference between the value of the property as shown on one’s Income Tax Return and the greater value of the property as assessed by the local municipality. However, this tax shall not be imposed when the value of the property should equal that one assessed by the municipality.
Question 7: Is the State “causa mortis” and donation tax (ITCMD) assessed on the donation of the shares or quotas to the sons and/or daughters of the donors? In the affirmative, which are its tax bases and tax rates?
Answer: The ITCMD (at a rate of 4% in the State of São Paulo) is assessed upon the donation value in two different and separate moments:
(a) Upon donation (first moment) the tax basis shall be the asset value of the shares or quotas, and the amount to be paid shall be of 2/3 of its total thereunder;
(b) The remaining 1/3 shall be paid up upon the transmission (when the “usufruto” comes to an end upon the death of the donor – usufrutuário);
(c) This payment may be made in its integrality and in advance upon the donation as a measure of precaution against any future increase of the tax rate and/or its tax basis.
Question 8: Which is the total federal tax levy upon the gross receipts of a Family Holding Company?
Answer: The total levy (IRPJ, CSLL, PIS and COFINS taxes) upon the gross receipts of a Family Holding Company is 11,33%, while the one in the case of the Personal Income Tax Rate may reach 27,5% thereon. Having a Family Holding Company is more beneficial to their partners even where the additional 10% rate on the Company Income Tax (IRPJ) is applicable.
Question 9: May a Family Holding Company administer its own real estate properties?
Answer: Yes!
Question 10: May a Family Holding Company carry on the purchase for it self and the sale of its real estate properties to third parties?
Answer: Yes! It may also lease their own properties and receive the rental payments therefrom.
Question 11: May a Family Holding Company be a shareholder or quotaholder in other companies such as a corporation or a limited liability company?
Answer: Yes!
Question 12: May it invest abroad in other companies and in the exchange market?
Answer: Yes! It may so do abroad and also in Brazil.
Question 13: Is a Family Holding Company required to have employees in its payroll?
Answer: No! It may be managed and administered by its partners.
Question 14: Is it possible for the partners to make cash advancements to the Family Holding Company? And to keep such funds in individual accounts with the Company?
Answer: Yes!
Question 15: May these fund provisions be usedby the Family Holding Company to pay up personal accounts of its individual partners?
Answer: Yes, if within their credit limits in any such accounts, as the excess payments may the seen and treated as distribution of profits (if any) or as a reduction of the equity capital. However, if any of such partners shall die, the funds so advanced to the Family Holding Company will have to be submitted to a probate proceeding.
Question 16: May the Family Holding Company buy real estate properties under construction?
Answer: Yes!
Question 17: May it be a Rural Holding Company?
Answer: Yes! As in any other field of economical activity, but not in the case of financial institutions.
Question 18: May a Family Holding Company distribute periodical profits to its shareholders or quotaholders before the end of each fiscal year?
Answer: Yes.
Question 19: May I convert my industrial/commercial company into a Family Holding Company?
Answer: Yes. It is possible to do so. If the company continues with its industrial and/or commercial activities, it will be a mixed holding company.
Question 20: May I institute an “usufruto” and donate to my children shares or quotas which I may hold in other companies with third parties within the scope of my succession planning structure?Toggle Title
Answer: As a matter of principle, yes! However, It will depend on what the By-laws of the company establishes regarding the admittance of new partners to the company upon the death of a partner.
Question 21: Is a probate proceeding required upon the death of the “usufrutuario” (former donor and beneficiary)?
Answer: No probate proceeding shall be required when all assets belonging to the “usufrutuario” are concentrated in his/her Family Holding Company.
Question 22: Will a probate proceeding be required if alongside with my condition as “usufrutuario” in the Family Hollding Company I should keep funds in a bank account and financial investments or have other income in my own name?
Answer: Yes. But only for such assets and values.
Question 23: Shall my family have to incur in expenses with lawyers’ fees upon my death being I a “usufrutuário” in my Family Holding Company?
Answer: No! Because a probate proceeding shall not be required thereunder. Your children (as partners by donation of your shares or quotas in the Family Holding Company) shall automatically acquire the full rights thereto as a consequence of the extintion of the “usufruto”.
Question 24: Since no probate proceeding is required upon the death of the “usufrutuario” how much may my family save under my Family Holding Company?
Answer: As the general costs to set up a Family Holding Company are minimal, the total savings for not having to institute a probate proceeding may reach a 90% level as compared to the total costs of a probate proceeding.
Question 25: Why should I avoid a probate proceeding?
Answer: At least for these reeasons: a) the high costs thereof for the heirs, who shall have to advance the ITCMD tax levies, other taxes and court costs as well as lawyers’ fees; b) the years of delay of a judicial probate proceeding, and c) the possible conflict of interests between or among the heirs.
Question 26: Alongside with the institution of an “usufruto” upon the donation of shares or quotas to one’s sons and/or daughters, is the formalization of an agreement possible with them as to how to proceed with the management and the administration of the Family Holding Company upon the death of the “usufrutuario”?
Answer: Yes! Such an agreement (which we may name “Partners’ Agreement” is abolutely advisable. Once it is filed with the Family Holding Company, it becomes mandatory to all of its partners and their successors. It may establish who among the heirs as partners thereof shall be incumbent upon the management and administration of the company, individualy or jointly with other partner as beneficieries of the shares or quotas which belonged to the “usufrutuario”.
Question 27: What is the tax rate upon the sale of real estate properties classified as “ativo circulante” (properties in stock) in the Family Holding Company as compared with the total tax levies where the sale is made by an individual owner of the property as such?
Answer: In such cases, the total federal taxes are levied at the rate of 6,73% upon the sale price of the property, while the sale thereof made by an individual owner is subject to the progressive tax table for capital gains tax from 15% to 22.5%.