Tax benefits of company registered in International Business Centre of Madeira
With the current tax administration in place, it offers a great opportunity for new bodies to enter the legal framework of IBC (International Business Centre) of Madeira up to 2020 and to reap the benefits. Doing so, grants entities a reduction of 5% on corporate tax rates which applies to all taxable income of such entities up to 2027.
Furthermore, integration of Madeira in the EU, as well as the Portuguese legal system ensures the IBC complete transparency, stability, and credibility. Therefore, the IBC is able to offer entities a Portuguese VAT number in addition to complete access of international treaties, avoiding dual taxation approved by UE regulations and directives, as well as Portugal.
This tax administration offered by the IBC of Madeira is approved until 2027.
Additionally, it is officially sanctioned by the EU Commission as a lawful regime of State Aid and maintained as the certified status of the furthest district of Madeira. This is in complete agreement to the guidelines set out by the “Code of Conduct on Business Taxation” as stated by the EU.
Shareholding, and Shipping
Shareholding and Benefits
Companies that fall under the IBC of Madeira, qualifies for the Portuguese contribution exclusion management. This relates to capital, as well as dividend gains. Yet, there are conditions that will have to be met.
Conditions to be met are as follow:
- A lowest amount of 10% shareholding must be held for at least a period of 12 successive months.
- The secondary’s residence must not fall under a jurisdiction that is included in the “blacklist” of Portugal.
- The secondary must also be subjected to assessment or taxed at a minimum rate of 60% of general rates of Portugal.
Benefits include the following:
- Immunity on capital gain costs made to shareholders who are not residing within “blacklisted” areas.
- Tax will not be withheld on payments made internationally for royalties, services or interest.
Companies that classify as shipping, are allowed complete access until 2027 to the condensed taxation management.
Portuguese Social Security on Yachts and Commercial Vessels
Any crew members who are not Portuguese and are listed in MAR, will not be obliged to make contributions to the social security administration if they are in possession of another form of public or private insurance that is guaranteed.
Furthermore, any nationals or Portuguese residents that are within Portuguese regions will be covered mandatorily through the universal Portuguese social security administration. In such a case, there will be an overall rate for contributions of 2.7%. This rate will be split between the employer and the employee. The employer will be liable for 2.0% while the employee will only be liable for 0.7%.
Moreover, all member of the crew is to be excused from paying personal income tax.
Warehousing, Assembling and Production Companies
Companies that fall under this industry and is classified as an Industrial Free Trade Zone qualify for the 5% reduced rate of tax up to 2027. Plus, they can benefit from a reduction of taxable income of 50%. However, this is only viable if they meet the criteria.
- For a 5-year period, they must be able to create 15 or more jobs
- Technical revolution contribution used to reform the economy such as procedures or products
- A passion for competent human assets
- Broadening of Regional Economy by presenting original activities that add value
- Involvement in environmental upgrading
Furthermore, companies can benefit from the suspension management offered. Under these provisions, companies can enjoy import duties charged at non-E.U for combined components and raw materials. However, this is only applicable once the final product deports the IFTZ.
Other Exemptions and Tax Benefits
Local and Capital Duty Tax
Operations, contracts and even documentation that require public recording that is carried out by an IBC company can include an 80% exemption benefit on capital or stamp duties. This is only applicable provided that any party included are non-residents of Portuguese regions or other companies that operate under the legal framework.
Businesses licensed with the IBC can furthermore benefit with an 80% exemption related to property tax (municipal), as well as transfer tax of property. Plus, municipal and regional surtax and additional taxes seen as local.
Requirements for Tax benefits
There are a set of pre-requirements for companies united within the IBC of Madeira. A company has to comply or meet one of these to be eligible for tax reduction.
- During the first 6-months of business, a company must be able to create a minimum of 6 or more jobs.
- During the initial two-years of business, a company is obliged to commence in an investment to gain either tangible, intangible or fixed assets to the value of seventy-five thousand Euro (75,000). Plus, they must create between one and five jobs within the initial 6-months.
Alternatively, corporate tax rates that are reduced do have an upper limit that is placed on the taxable annual income. These may vary with the amount of employees as shown below.
Number of Jobs
1 – 2
3 to 5
6 to 30
31 to 50
51 to 100
|More than 100||–||
Furthermore, all businesses are also subject to maximum limits annually related to such tax aids in regards to the current regime.
These are as follow:
- 20,1% of the annual Gross Value Added, or
- 30,1% of the annual incurred labor costs, or
- 15,1% of the annual turnover.