On December 31st, 2020, the Regional Legislative Decree (8/2020/M) was published, approving the Budget of the Autonomous Region of Madeira for the year 2021.
This Regional Budget introduces some very beneficial changes for the Region´s tax Regime, between other social and administrative measures in the effort of economic recovery due to the economic recession associated with the global pandemic situation. More importantly, among other changes, was the significant reduction of the general corporate income tax (CIT) rate for all Madeira companies from 20% to 14.7%, which is complemented by the already existing support measure applicable to Madeira companies that qualify as SMEs (small or medium-sized companies) where the rate applied to the first €25,000 of tax base is 11.9%.
This change will help promote the economic development of the Autonomous Region of Madeira, which now has the lowest CIT rate in the entire Portuguese territory, and one of the lowest in Europe, serving as a clear factor of attraction for new investors, allowing a genuine diversification of the regional economy, traditionally dependent on tourism, a sector that suffers most from the current pandemic situation.
Thereby, Madeira becomes now a more competitive jurisdiction, even for local companies that are still outside the special tax regime of the International Business Center of Madeira (IBCM), where the corporate income tax rate remains only 5%, upon compliance with the respective local substance requirements.
Please find bellow our excel simulation that compares these 3 different tax regimes in Portugal (General Tax regime in Portugal, General Tax regime in Madeira, and special Tax regime of the IBCM).
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