Madeira

ABOUT MADEIRA

In the middle of the Atlantic, but at a short flight of 1:20 hours from Lisbon, and 3 hours flight from the major European capitals, the islands of Madeira and Porto Santo are a haven of natural beauty. The exotic colours of the flowers stand out from among the blue sea and the emerald green vegetation; this is an archipelago where two thirds are a protected area and where the largest Laurisilva forest in the world is located.

The springtime temperature, felt all year round, cries out for open air activities. You can go for a walk along the network of levadas (irrigation channels), visit the city of Funchal and discover the heritage associated with the Discoveries or roam freely around the island. Boat rides are an excellent way of admiring the coastline from a different perspective.

INVESTING IN MADEIRA

Madeira, an autonomous Portuguese Region fully integrated in the European Union, benefiting from a growing economy, offer very good conditions to investors looking for stable and safe place to implement its business.

THE CHARACTERISTICS OF MADEIRA BUSINESS ENVIRONMENT:
  • Stable and safe legislative environment;
  • Social and political stability;
  • Highly qualified local workforce;
  • Local population fluent in foreign languages, due to international communities living within, and tourism;
  • Reduced bureaucracy for corporate procedures;
  • Very competitive operational costs.
  • EU Law is fully applicable to Madeiran companies, namely the EU directives;
  • The big network of Tax Treaties currently signed by Portugal is fully applicable to Madeiran Companies;
  • Companies in Madeira are attributed an automatic EU VAT number, being automatically enabled to trade within the EU market.
Besides all the operational advantages of Madeira companies, they can also benefit from specific tax advantages, such as for example, the Participation Exemption Regime, the unilateral international tax credit, and other features available to all Portuguese companies (better detailed in our “Portugal” page).

However, only Madeira companies can benefit from the International Business Centre of Madeira tax regime (IBCM).

IBCM – CORPORATE TAX REGIME

The corporate tax regime of the IBCM exists since 1980’s, with the objective of attracting foreign investment in order to diversify and modernize the island’s economy. The corporate tax regime currently in force until 2027 has been approved by the Portuguese and E.U. authorities as a State aid programme for regional development, in full observation of the EU and OECD guidelines regarding harmful tax competition and is therefore a credible, transparent and stable regime. Madeira is not and has never been classified as a tax haven.

The IBCM is generally applicable to most business activities, except for banking, insurance, and purely financial and intra-group activities.

The unique tax benefits of the IBCM:
  • Reduced Corporate Income Tax rate of 5%
    (Applicable to all income originated abroad or from another IBCM company);
  • No withholding tax in the distribution of dividends to shareholders
    (except for shareholders resident in a tax haven);
  • Participation Exemption regime is applicable
    (tax exemption on receivable dividends, capital gains, etc);
  • No withholding tax on royalties, interest, and services paid to third parties
    (except for shareholders tax resident in a tax haven);
  • Reduced local taxes and levies
    (80% reduction on stamp duty, Real Estate Transfer Tax (IMT), Municipal Property Tax (IMI) and local and national surcharges. 75% reduction in Autonomous Taxation);

Between other advantages…

For more information on the advantages of the IBCM tax regime, please download the following file:

MADEIRA IBC

IBCM – SUBSTANCE REQUIREMENTS

In order to have these unique tax benefits previously mentioned, the IBCM companies have some minimum requirements regarding local substance to comply with. Namely, they can comply these requirements with one of two options:

  • IBCM companies must hire one employee, resident in Madeira, in the first six months of activity, and then do a minimum investment in tangible or intangible assets of € 75.000 in the first 2 years of activity;

OR, ALTERNATIVELY

  • IBCM companies must hire 6 employees, resident in Madeira, in the first six months of activity.

There is also a maximum limit to the taxable income subject at the reduced CIT rate of 5%, which depends on the number of employees hired:

Number Of Workers

Profit Taxable At The Reduced Rate

1 to 2

2,73M€

3 to 5

3,55M€

6 to 30

21,87M€

31 to 50

35,54M€

51 to 100

54,68M€

more than 100

205,55M€

There are other maximum limits to the tax savings of IBCM companies that are rarely applicable and can be easily verified. We have an in-house developed simulation spreadsheet, to test all tax savings and compliance with all thresholds, please do not hesitate to contact us for a quick simulation without any commitment.

For more detailed information on the IBCM company’s compliance obligations, please download the following file:

Corporate Tax Obligations – IBCM

MAR 

International Shipping Register of Madeira

The International Shipping Register of Madeira (“MAR”) is Portugal’s international shipping register, internationally recognized as a high quality, credible and secure shipping registration centre.
MAR is in full compliance with the technical rigour of the safety requirements of EU registration and as such a competitive alternative to other international registrations.

Most commercial vessels can be registered in Mar, such as cargo ships, passenger ships, cruise ships, Tugboats, and even oil rig platforms. Pleasure Yachts and commercial yachts can also be registered with MAR.

The MAR registry, besides being listed in the Paris MOU white list on Port State Control, offers several operational and fiscal advantages.

Operational advantages
  • Full access to European continental and island cabotage as a result of MAR’s status as a E.U. Register;
  • It is not and has never been considered as a “flag of convenience”;
  • Flexible crew composition requirements;
  • Does not require to be owned by and Portuguese/Madeira company;
  • High quality Register, with full application of all international ILO and IMO Conventions on safety, security and quality of life on board, including MLC 2006;
  • A very flexible and competitive mortgage system applies, allowing the mortgagor and the mortgagee to choose, by written agreement, the legal system of a particular country that shall govern the terms of the mortgage. In the lack of an agreement, the Portuguese mortgage law shall be applicable.
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Fiscal advantages
  • Special social security regime that exempts shipping companies with vessels registered in MAR and their respective non-Portuguese crew from contributing to the Portuguese social security regime if some other form of insurance is guaranteed. The crew may choose the Portuguese voluntary social security regime or any other type of protection scheme;
  • The wages of the crew of commercial vessels and yachts registered in MAR are also exempt from personal income tax, according to the tax regime of the IBC of Madeira;
  • If the vessel is owned by an IBCM company (optional), it can take advantage of its special corporate tax regime.
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For more information on the International Shipping Register of Madeira, please download the files shown in this page:

Ship Register
Yacht Register

Valor Solutions | Madeira Fiducia Managment

Av. Arriaga 73, 9000-060 Funchal - t: +351 291 200 980 - @: geral@valorsolutions.org