Tax Benefits

The current tax regime permits the establishment of new entities within the legal framework of the International Business Centre of Madeira (IBC) until December 31, 2026. It offers a reduced corporate tax rate of 5% on taxable income until December 31, 2033.

For international services activities, this reduced rate applies to profits exclusively derived from operations with non-resident entities or other companies operating within the IBC of Madeira. However, there are no restrictions on conducting business activities with Portuguese companies, which will be subject to the general corporate tax rate in Madeira, currently 14%.

Additionally, companies engaged in production and assembling activities in the Industrial Free Trade Zone of Madeira will benefit from tax reductions, including operations with Portuguese residents.

Shareholding Activities

Companies within Madeira’s IBC are eligible for the Portuguese participation exemption regime, which applies to both dividends and capital gains. To qualify, the following conditions must be met:

• Maintain a minimum shareholding of 10%, held continuously for 12 months;
• The subsidiary must be subject to taxation at a rate of at least 60% of the Portuguese general rate;
• The subsidiary must not be resident in a jurisdiction listed on Portugal’s “black list”.

Shipping Companies, Vessels, and Yachts

Shipping companies will continue to benefit from the reduced taxation regime until December 31, 2033.

Furthermore, non-Portuguese crew members serving on commercial vessels and yachts registered in MAR are not required to contribute to the Portuguese social security system, provided that some form of insurance is ensured, whether public or private. Conversely, Portuguese nationals or residents in Portuguese territory are obligated to be covered by the general Portuguese social security system. In such cases, a total contribution rate of 2.7% applies, with 2.0% borne by the employer and 0.7% by the employee.

All crew members are exempt from personal income tax.

Manufacturing, Assembly, and Warehousing Enterprises

In addition to the reduced corporate tax rate of 5% until December 31, 2033, manufacturing companies operating within the Industrial Free Trade Zone may qualify for a 50% reduction in taxable income if they meet two of the following criteria:

• Facilitating the modernization of the economy through technological innovations, novel products, and processes;
• Promoting diversification in the regional economy by introducing new value-added activities;
• Attracting and retaining highly skilled human resources;
• Making contributions towards environmental improvements;
• Generating 15 job positions over a span of 5 years.

Moreover, these companies will enjoy the benefits of a suspension regime, meaning that import duties will only be imposed on non-European Union companies (comprising raw materials and components) when the final products exit the IFTZ.

Tax Advantages for Shareholders.

Shareholders, whether individual or corporate, who are non-residents of Madeira’s IBC companies, will enjoy full exemption from withholding tax on dividend remittances from the Madeira companies, provided they are not residents of jurisdictions included in Portugal’s “black list”. Similarly, Portuguese corporate shareholders will also be exempt if they hold a participation of at least 10% for 12 consecutive months.

Additionally, the following benefits will apply:

• Exemption on capital gains payments to shareholders not resident in blacklisted jurisdictions.
• No withholding tax on worldwide payments of interest, royalties, and services.

Other Tax Incentives and Exemptions

Capital Duty and Local Taxes

Under the tax regime of the IBC of Madeira, documents, contracts, and other operations conducted by IBC companies will receive an 80% exemption on stamp duty (capital duty), given that other parties involved are not residents in Portuguese territory or are also companies operating within the legal framework of the IBC of Madeira.

Furthermore, companies licensed within the IBC of Madeira will enjoy an 80% exemption from municipal property tax, property transfer tax, regional and municipal surtaxes, as well as any other local taxes.

Double Taxation Agreements.

Companies licensed to operate within the International Business Centre of Madeira can leverage Portugal’s extensive network of international treaties aimed at preventing double taxation.

Requirements for Tax Benefits.

To qualify for tax benefits within the International Business Centre of Madeira, companies must fulfill certain criteria:

• Creation of one to five jobs (residents of Madeira) in the first 6 months of operation and undertake an investment of at least €75.000 in the acquisition of fixed assets in Madeira, tangible or intangible, in the first two years of operation;

Or:

• Creation of six or more jobs (residents of Madeira) in the first 6 months of operation.

The discounted corporate tax rates are subject to a cap on the yearly taxable income, determined by the total number of employees, in the following manner: