Publication date: 2022/05/27
The Autonomous Region of Madeira (RAM) is part of Portugal located in the Atlantic Ocean, 600 miles from Lisbon. Since 2007, Portugal has taken steps to build the nation’s appeal to international businesses and high net-worth individuals. Non-habitual Residents and Golden Visa programs have become an attractive feature for new business, relocation of companies and highly qualified professionals.
The Madeira International Business Centre (MIBC), or Madeira Free Trade Zone as it is commonly referred to, offers a series of benefits for new companies formed in Madeira, predominantly tax benefits approved by the European Union and guaranteed until at least 2027.
The MIBC offers the following tax advantages:
- A reduced corporate income tax rate of 5% is applicable to active income (such as income resulting from trading activities or provision of services, etc.).
- Under Portugal’s Participation Exemption Method, Madeira companies are exempt from withholding tax on the distribution of dividends, if certain conditions are met.
- The participation exemption regime is also applicable to:
- capital gains received by the MIBC entity (a minimum of 10% ownership, held for 12 months, is required), and
- the sale of its subsidiaries, and
- the payment of capital gains to the shareholders, by the sale of the MIBC company.
- Exemption from withholding tax on interest, service fees and royalties paid to non-residents.
- Exemption from stamp duty, property tax, property transfer tax, and regional and municipal surcharges (subject to an 80% limitation per tax, transaction, or period).
- Application of the double taxation treaties signed by Portugal.
- Application of the investment protection treaties signed by Portugal.
It is important to note that Madeira operates under a credible regime supported by the 28 EU Member states and is therefore not classed as a tax haven. As a result, Madeira is not included on any international financial blacklists.
- Madeira companies are automatically granted a VAT number, allowing them direct access to the EU intra-Community market.
- All EU Directives are applicable to Madeira, guaranteeing a well-regulated and modern legal system that protects investors´ interests.
- A highly skilled workforce is available on the Portuguese mainland as well as Madeira Island.
- Portugal is recognized as a politically and socially stable country in the European Union.
- Portugal, and Madeira, offer companies low operating costs compared to other European jurisdictions.
- Madeira, as a region, offers individuals security, quality of life, a temperate climate and outstanding natural beauty.
Companies that wish to join the Madeira Free Trade Zone are required to meet several conditions set by the EU.
- Within six months of formation, the company must hire a minimum of six workers, or within two years, invest €75,000 in the acquisition of tangible/intangible fixed assets.
- The company must have at least one Portuguese individual on its payroll on an ongoing basis, contributing to income tax and social security. This employee can be the company director or a board member of the MIBC company.
A corporate tax rate of 5% is applied to the company’s taxable income.
| Jobs created | Minimum Investment | Max. Taxable Income Reduced Tax Rate Applies to |
| 1-2 | €75000 | €2.73 million |
| 3-5 | €75000 | €3.55 million |
| 6-30 | N/A | €21.87 million |
| 31-50 | N/A | €35.54 million |
| 51-100 | N/A | €54.68 million |
| 100+ | N/A | €205.5 million |
Companies licensed to operate in the MIBC are, however, capped on their total benefits at one of the following amounts.
- 15.1% of the annual turnover; OR
- 20.1% of the annual Gross Value Added; OR
- 30.1% of the annual labour costs.
Madeira Company specialises in company formation and MIBC registration. Our experienced team will assist you with the preparation and submission of all necessary documents, requesting Portuguese personal tax numbers (NIF), VAT and registration with RCBE. For more information, contact a member of our team today.
