The national government, through its legislation, acts on the types of business in the country. This is exactly the case of what we call here CNAE equity holding company, as you will see throughout the publication.
CNAE, in fact, means National Classification of Economic Activities and that's where we see how holding companies (such as CNAE equity holding company) are regulated. This serves various purposes, such as government control and oversight.
What is a CNAE holding company?
First of all, I need to explain what a holding in its most general terms. As you may already know, it is the institution of a legal entity that aims to control and manage companies, being one or more.
Holding companies, such as CNAE equity holding company, are usually linked to medium and large companies. They are common worldwide and do not have a deadline to end, usually staying for a long period.
Evidently, there are different types of holding companies, since the partners or shareholders can have different characteristics and motivations. The patrimonial type is one of those many, and it is about it that we will talk more here.
Now, in the Brazilian case, as the CNAE equity holding company does it apply in this context? What is it made of and how is it characterized?
First, let's talk about the CNAE hierarchy. It is divided as follows:
- Section K: Financial, insurance and related service activities
- Division 64: financial services activities
- Group 64.6: activities of holding companies
- Class 62.62-0: holdings of non-financial institutions
- Subclass 6462-0/000: holdings of non-financial institutions
It is within this bureaucratic and legal framework that the CNAE equity holding company. That's why another name for it is simply “holding of non-financial institutions”, although it is more specific.
Another name, incidentally, given to a CNAE equity holding company is that of “administrator of own assets”. This already highlights some of the main characteristics of what it is, as you will see in the next section.
How a CNAE holding company works
Continuing, then, in the section above, I spoke about a more bureaucratic aspect and how the CNAE equity holding company is included in the legislation. I also introduced some names with which she is usually called, mainly administrator of own assets.
This legal entity is, in short, created so that its assets are paid in to the share capital. These assets must be immovable and, as stated in the National Classification of Economic Activities, to be included in this category, they cannot be financial.
The main purpose of a CNAE equity holding company is to facilitate the management of your assets. If you or your family own a variety of assets, such as real estate, then this is especially you we are talking about.
In short, then, the main features are as follows:
- It is exclusively or mostly focused on non-financial assets, unlike other types of holding company
- It serves to administer and improve the management of its assets, including being known as "administrator of own assets"
- Suitable for people who own several properties, for example, or movable property
- They can be limited liability companies (LTDA), joint-stock company (S/A) or EIRELI – in the latter, part of the succession advantage that holding companies have is excluded
Understand taxation on an equity holding company
So far, we have characterized in detail how the CNAE equity holding company and what are its main features. Now, how does your taxation system work?
After all, perhaps you have already heard about it, since it is one of the great positive highlights of holding companies. In fact, by the way, this is usually the case, although in very specific situations it is better to keep it in the physical person.
Let's say, in a first example, that you are someone who rents a lot of assets, as well as your family members. In that case, if you do so as an individual, this will be taxed along with other taxable income, in a progressive income tax table that has a ceiling of 27.5%.
However, think now that you've decided to put all of this in a holding company, along with your relatives. So the income tax rate ends up being much lower, around 11.33% if you opt for presumed profit.
Mainly for those who have a high income from rental properties, this is therefore a very considerable advantage. Your profits will be much higher.
Let us now come to a second example. Let's say you're thinking of selling one of your properties for some reason. If you do it in the form of an individual, you have the taxation of income tax of 15% on capital gain.
However, again, through the legal entity, the economy it is evident, which can make the profit jump. In this case, taxation drops to something around 6.70% on the total value of the sale.
So, you have to do a simple calculation to find out if the holding is worth it. How much is your capital gain? And how does that relate to the total sale price? That's why I said that in specific cases CNAE equity holding company not worth it.
The big advantage of a holding company
Well, it was important that you really understood what a CNAE equity holding company. I also wanted to demonstrate more specifically the role of taxation in all of this, which is what motivates a lot of people to move forward.
What will be, however, the great positive point of opening a holding company? This is something which is already implied in the text, but which I believe needs to be stressed further.
Think of them as tools to improve your management and boost your profits. As a brush is important for painting, they are relevant for better managing your assets and lowering costs.
With them, the management of your assets is all centralized in one place, which makes it much easier. This, by the way, also helps to reduce a series of costs, since there is a concentration in only one place.
In general, therefore, equity holding companies are part of Brazilian legislation, are legal and capable of promoting considerable benefits. If you are thinking about the possibility of opening one, but you are still afraid, the best idea is to look for a consultancy and advisory service to help you.
