Tradings, Holdings and Other International Services in Madeira

The International Business Center (IBC) in Madeira presents an enticing suite of benefits for international service activities, including:

• Reduced tax rates;
• Advanced infrastructure;
• High-quality local support services;
• Competitive operational expenses;
• A secure and high-quality living environment.

Moreover, Madeira is seamlessly integrated into both Portuguese and European Union legal frameworks, enhancing the IBC’s legitimacy, transparency, and stability. This integration also means companies benefit from a Portuguese VAT number, access to international treaties Portugal has ratified to prevent double taxation, and full applicability of all EU directives and regulations.

The IBC’s tax scheme in Madeira is authorized until December 31, 2033, and has been officially endorsed by the European Commission as a legitimate state aid regime. This endorsement is based on Madeira’s designation as an outermost region of the EU and complies with the EU’s “Code of Conduct on Business Taxation” guidelines.

Eligible Activities

The types of activities and companies eligible to establish and operate under the Madeira International Business Centre’s legal framework are determined by Article 36º-A of the Portuguese Tax Incentives Statute.

This includes a wide range of international service activities, for instance, international trade, digital business and telecommunications, management and consulting services, intellectual property ownership, real estate development investments, or the management of holdings via the formation of a SGPS – a Portuguese pure holding company.

SGPS entities can be structured as either an S.A. (Public Limited Company) or a Lda. (Private Limited Company), with their primary purpose being the management of shares in other businesses.

It’s important to highlight that while general service companies are primarily engaged in commercial activities, they are also permitted to manage holdings.

Moreover, despite Portugal’s adherence to Civil Law, the establishment and management of trusts within the Madeira IBC are facilitated by specially designed legislation.

However, pure financial services such as banking, insurance, and brokerage services offered to external parties are excluded from the tax incentives provided.

License Application

A submission, in the Portuguese language, is required to be made to S.D.M., the authorized concessionaire for the IBC of Madeira, in two copies. This submission should be directed to the Regional Government of Madeira and can be made on behalf of a pre-existing company, whether located in Portugal or internationally, or in regard to a company yet to be formed. Licensing for branches of already established companies is also permissible.

The documentation for the license must include all necessary details about the business activities planned, specifically:

• The company’s name and its physical address;
• The nature of the activities to be carried out along with the relevant NACE code (the European system for categorizing economic activities);
• The projected investment amount;
• The anticipated number of jobs to be created.

Upon a successful application, the license is officially issued to the company following the provision of proof regarding the company’s incorporation and its official registration. All supporting documents for the licensing process must be translated into Portuguese and appropriately legalized.

Applicable Fees

Companies granted a license to operate within the Madeira IBC are obligated to pay license and annual fees as determined by Order no. 222/99, issued on December 28th by the Regional Government of Madeira.

Companies focused on services will incur a one-time application fee of €1,000 and an annual maintenance fee of €1,800.

For SGPS (pure holding companies), there is also a €1,000 application fee. The annual fees for these companies start at €1,800 for the first year. From the second year onwards, the fee includes €1,800 plus 0.5% of the profit from the preceding year, with the initial €1 million in profits exempt from this calculation. The variable portion of this fee is capped at a maximum of €30,000 annually.

Company Formation

Within the framework of Portuguese law, investors commonly opt for two main types of legal entities: the share company (S.A.) and the private limited company (Lda.). Additionally, two other structures, the branch and the S.G.P.S. (Portuguese pure holding company), are frequently used for business operations in Portugal and, by extension, within Madeira’s IBC legal framework.

A private limited company (Lda.) can be established by a single shareholder. Lda requires at least one manager, who is legally empowered to manage the company.

A share company (S.A.) can also be founded by a single shareholder, but requires a minimum capital of €50,000. The governance of such companies is overseen by a board of directors, the size of which is determined by the company’s bylaws. For companies with share capital under €200,000, a single director suffices.

Branches are distinguished by the absence of a minimum capital requirement.

SGPS entities must adopt the form of either an S.A. or Lda., with their single object the management of shares held in other companies. It may render services and, in certain cases, lend credit to the companies in which it holds shares.

Shareholders of companies within the IBC of Madeira can be individuals or corporate entities, domestic or international. Under Portuguese law, shareholders may also serve as managers or directors, or they may appoint someone else to manage the company.

Companies are required to have their principal office in Madeira, whereas branches must have a legal representative.

The formation of companies in Madeira’s IBC is facilitated through the Private Deeds Registry Office, which offers a complete waiver of fees and notary costs. Prior to formation, approval for the company name and a provisional identification card must be obtained from the National Company Registrar (RNPC). The formalization of the public deed is scheduled by the notary office.