Succession Planning for Brazilian Families Holding BVI Companies
Executive Summary
Brazilian business owners and investors often use British Virgin Islands (BVI) companies for asset protection, flexibility, and tax efficiency. However, when a shareholder dies, the shares are treated as BVI-situs property, triggering a local probate process unless specific planning is implemented. This memorandum outlines practical strategies to avoid BVI probate, including automatic share transmission provisions and trust structures, while addressing the potential Brazilian tax implications under Law No. 14.754/2023 and recent court decisions such as RE 851.108. Proper structuring can ensure a seamless transition of ownership, minimize taxes, and protect family wealth across generations.
1. Importance of Probate Planning in the BVI
Under the BVI Business Companies Act, shares of a BVI company are deemed to be located in the BVI. Upon a shareholder’s death, the shares become part of the deceased’s BVI estate and cannot be transferred until the executor obtains a grant of probate or letters of administration from the BVI High Court. Even if the deceased left a valid will in another jurisdiction, the executor must secure a separate BVI grant. The process generally takes six months or more and involves legal fees that can reach tens of thousands of dollars. For Brazilian families, this procedure also raises forced-heirship concerns under Brazilian law, potentially triggering conflicts of law and cross-border probate complications. Avoiding probate requires pre-arranged mechanisms to ensure the automatic transfer of ownership upon death. Two main approaches are available, each with variations: (1) corporate succession mechanisms—incorporating automatic transmission or redemption provisions into the company’s memorandum and articles of association (“M&AA”) through customized share classes; and (2) trust-based solutions—settling the shares into a trust so that legal title is already vested in the trustee at the time of death.
2. Share-Class Succession Mechanisms under BVI Law
The BVI Companies Act (the “Act”) grants broad flexibility to create multiple share classes with distinct rights and restrictions (Sections 9 and 28–37). A common structure designates Class A shares (held by the senior generation) with full voting and economic rights, and Class B shares (held by heirs) with dormant rights that activate upon the death of the Class A holder. This arrangement allows succession without reissuing shares or initiating probate. While efficient and low-cost, it is most effective when there are few shareholders and clearly identified heirs. Once multiple shareholders and family branches are involved, the provisions can become complicated. Changing beneficiaries later usually requires amending the M&AA or redeeming and reissuing shares, which may require the consent of other shareholders. Furthermore, because the mechanics rely entirely on the Companies Act, there is some legislative risk – future amendments could affect the validity of the succession provisions.
3. Brazilian Tax Implications
From a Brazilian perspective, any BVI succession plan must account for both income tax and state-level inheritance tax (ITCMD). Although the BVI imposes no inheritance or capital gains taxes, Brazil taxes capital gains and currency variations on disposals or cancellations of foreign investments. Article 7 of Law No. 14.754/2023 provides that capital gains are recognized when an investment in a foreign entity is disposed of or cancelled, including by way of capital return. Some Brazilian tax practitioners argue that automatic redemption upon death may be viewed as a cancellation of investment, triggering Brazilian income tax (15–22.5%). Others contend that no taxable event occurs since there is no inflow of wealth. As of 2025, there is no binding precedent from the Secretaria da Receita Federal (SRF) on this issue, so careful structuring remains critical. Brazilian law also imposes ITCMD of up to 8%. However, in RE 851.108 (2021), the Supreme Federal Court (STF) ruled that states may not tax inheritances or gifts of assets located abroad without a complementary federal law. As of September 2025, the STF’s First Panel reaffirmed that position by rejecting São Paulo’s attempt to impose ITCMD on foreign donations. This creates a temporary “tax gap”: foreign inheritances are not subject to ITCMD until Congress enacts new legislation.
4. Alternative and Complementary Strategies
a. Lifetime Donations of Shares — Donating shares during the shareholder’s lifetime may avoid future capital gains taxation triggered by death. The donor may owe ITCMD at up to 8%, though the STF’s decision temporarily prevents its enforcement on foreign assets until a complementary law is enacted. In October 2024, the Chamber of Deputies approved PLP 108/2024, which addresses taxation of assets abroad, though it awaits Senate approval and sanctioning. For example, São Paulo currently applies a 4% ITCMD rate but is considering a progressive system under PL 7/2024 (2–8%), while Rio de Janeiro already applies progressive rates between 4% and 8%. Another pending STF case, RE 1522312 recognized as having general repercussions in April 2025, will decide whether donors owe income tax on capital gains realized when gifting assets as an advance on inheritance.
b. Multi-Generational Share Classes (Share Cascade Method) — This involves creating several dormant share classes (A, B, C, etc.), where only Class A shares are automatically redeemed on death. Subsequent classes activate only when the preceding class is voluntarily sold or gifted, deferring Brazilian income tax because death does not constitute a taxable disposal. The M&AA should clearly define activation triggers and redemption values (e.g., redemption at cost to avoid capital gains). This strategy complies with Section 9 of the BVI Companies Act and provides long-term flexibility while maintaining control within the family. Note: Implementation requires careful coordination with local corporate law requirements and tax regulations. The specific mechanics and redemption triggers are customized based on jurisdiction and family objectives.
c. Trust Structures — Trusts remain the most flexible and reliable mechanism for avoiding probate and ensuring multi-generational control. Brazilian law recognizes foreign trusts, and properly structured trusts can defer taxation under Articles 10–13 of Law 14.754/2023. Common trust types include:
i. BVI VISTA Trust. A VISTA trust allows you to place your BVI company shares in trust while retaining full operational control. You continue managing the business exactly as before, while the trustee simply holds the shares according to your instructions. This structure provides seamless succession planning for active family businesses at lower administrative costs than traditional trusts. A family-controlled private trust company can serve as trustee to further reduce expenses.
ii. BVI Discretionary Trust. This structure transfers your shares to a trustee who distributes benefits among your chosen beneficiaries (children, descendants) at their discretion. The trust avoids probate, continues across multiple generations, and adapts to changing family circumstances. Ideal for blended families, international beneficiaries, or situations requiring strong asset protection. A protector can oversee major trustee decisions while you provide guidance through a letter of wishes.
iii. Voting Trust. Multiple shareholders transfer voting rights to a trustee while keeping all economic benefits (dividends, distributions). The trustee votes as a unified block according to your agreement, preventing ownership fragmentation while preserving family control. Unlike other BVI trusts, this can be governed by Florida law and administered by family members, reducing costs. Shares remain in trust upon death, avoiding probate while maintaining unified decision-making
5. Choosing the Right Succession Strategy
The optimal structure depends on the family’s size, objectives, and desired balance between control and flexibility. M&AA succession is best for simple ownership structures; the Share Cascade Method is potentially more optimal from a Brazilian tax perspective and better suited for more complex family and ownership structures; the VISTA Trust suits active business owners; the Discretionary Trust fits complex family situations; and the Voting Trust preserves unified control, cost-efficient, and offers flexibility in jurisdiction selection. These methods can also be combined for added flexibility.
6. Conclusion
Effective BVI succession planning for Brazilian families requires harmonizing corporate law, tax efficiency, and long-term governance. Embedding automatic transfer provisions in a company’s M&AA can be effective for simpler cases, while trust structures offer greater flexibility and protection. The evolving Brazilian tax landscape—including STF decisions on ITCMD and the interpretation of Law 14.754/2023—necessitates continuous monitoring. Amendments to the BVI Companies Act effective January 2, 2025, further underscore the importance of compliance and transparency. With proper cross-border coordination, Brazilian families can ensure their BVI companies transfer efficiently to the next generation while preserving control, minimizing taxes, and protecting wealth.