LLCs, Privileged Tax Regime and Cosit Tax Ruling No. 56/2026

Abstract

This article examines the classification of United States limited liability companies (LLCs) as beneficiaries of a privileged tax regime under Article 2, item VII, of Normative Instruction RFB No. 1,037/2010 and Cosit Tax Ruling No. 56/2026. It argues that the Brazilian privileged tax regime rules have a functional nature and are aimed at neutralizing materially relevant tax advantages, rather than merely formal features of foreign legal entities. Based on the analysis of U.S. federal income taxation, the study demonstrates that the tax transparency of an LLC, considered in isolation, does not imply any advantage to the nonresident in terms of taxation in the United States. It concludes that the classification should depend on the combination of transparency, ownership structure and income lacking sufficient taxable connection with the U.S. jurisdiction.