Tax Benefits

Madeira's IBC companies qualify for the Portuguese participation exemption regime, applicable to both dividends and capital gains, for which the following conditions must be fulfiled:

- A minimum shareholding of 10% held for 12 consecutive 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 included in Portugal's "black list". 

 

Shipping companies will have full access to the reduced taxation regime until the 31st of December, 2028. 

In addition, non-Portuguese crew members aboard commercial vessels and yachts registered in MAR are not obliged to contribute to the Portuguese social security regime provided some form of insurance is guaranteed, public or private. On the other hand, Portuguese nationals or residents in Portuguese territory shall be mandatorily covered by the general Portuguese social security regime. In this case, a total contribution rate of 2,7% will be applicable, of which 2,0% shall be borne by the employing entity and 0,7% by the employee. 

All crew members will be exempt from personal income tax.

 

In addition to the reduced tax rate of 5% until the 31st of December, 2028, manufacturing companies in the Industrial Free Trade Zone may also benefit from a 50% reduction on the taxable income, when fulfilling two of the following criteria:

• • Contribution to the modernisation of the economy through technical innovation, new products and procedures;
  • Diversification of the regional economy by introducing new activities of added value;
  • Fixation of qualified human resources;
  • Contribution to the improvement of the environment;
  • Creation of 15 jobs for a period of 5 years.

These companies will also benefit from a suspension regime, under whose provisions import duties will be charged on the non-E.U. incorporated raw materials and components only when the final products leave the IFTZ.

 

Non-resident single and corporate shareholders of Madeira's IBC companies will benefit from a full exemption from withholding tax on dividend remittances from the Madeira companies, provided that they are not resident in jurisdictions included in Portugal's "black list". Moreover, Portuguese corporate shareholders will also be exempt if holding a participation of at least 10% for 12 consecutive months.

In addition, the following benefits will be applicable:

• Exemption on capital gains payments to shareholders not resident in black listed jurisdictions;

• No withholding tax on the worldwide payment of interest, royalties and services.

Capital duty and other local taxes

Documents, contracts and other operations carried out by IBC companies will benefit from an 80% exemption on stamp (capital) duty, provided that other parties involved are not resident in Portuguese territory or are also companies operating within the legal framework of the IBC of Madeira.

Companies licensed in the IBC of Madeira will also benefit from an exemption of 80% applicable to municipal property tax and property transfer tax, regional and municipal surtax as well as any other local taxes.

All companies licensed to operate in the International Business Centre of Madeira may also benefit from the large network of international treaties to avoid double taxation ratified by Portugal.

 

To qualify for the tax reductions, companies incorporated in Madeira's IBC have to comply with one of the following pre-established requirements:

• Creation of one to five jobs in the first 6 months of operation and undertake a minimum investment of €75.000 in the acquisition of fixed assets, tangible or intangible, in the first two years of operation;
• Creation of six or more jobs in the first 6 months of operation.

On the other hand, the reduced corporate tax rates are applicable up to a ceiling placed upon the annual taxable income, which varies according to the number of employees, as follows:

 

Number of Jobs	Minimum Investment	Ceiling
1 - 2	€75,000	€2,730,000
3 to 5	€75,000	€3,550,000
6 to 30	-	€21,870,000
31 to 50	-	€35,540,000
51 to 100	-	€54,680,000
More than 100	-	€205,500,000

Additionally, companies will be subject to one of the following maximum annual limits applicable to the tax benefits of the present regime:

1. 20,1% of the annual Gross Value Added, or
2. 30,1% of the annual incurred labour costs, or
3. 15,1% of the annual turnover.