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Madeira is a very efficient location for companies with operations in the European Union and worldwide that welcomes international investment. With reduced direct and indirect taxation, adequate infrastructures, competitive operational costs, safety and quality of life, Madeira is positioned to provide international investors with a unique package of benefits.
Madeira’s preferential tax regime has been approved by the Portuguese and E.U. authorities as a State aid programme for regional development until 2020. It is therefore a credible, transparent and stable regime. All companies setting up in Madeira are fully Portuguese, automatically given a VAT number and with access to the large network of international treaties to avoid double taxation ratified by Portugal. They also have full access to the European single market and benefit from the application of all E.U. Directives and Regulations.
In the following paragraphs you will find a summarized explanation of the most common activities and their tax treatment, as well as information on the requirements, formalities and business environment in Madeira. You may also download our investment guides or contact us for further information. To find out more about ship and yacht registration, please refer to the shipowners section. About MadeiraMadeira is a Portuguese region located in the Atlantic Ocean, 900 Km southwest of Lisbon and a 3 hours flight from the major European capitals. Apart from the renowned natural beauty, Madeira also offers an excellent quality of life, with a political and social stability, mild climate and diversified offer of leisure activities. In addition, Madeira has a modern economy based in the international services, with highly specialized and efficient professional services providers and qualified workforce, with excellent language skills. The existence of a modern infrastructure, allied to a reduced direct and indirect taxation, also contributes to provide investors with a unique package of benefits. Madeira is a very efficient location for companies with operations in the European single market and worldwide.
Business Environment
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| Companies licensed as from 2007 | |
|---|---|
| Taxation | Income from activities held with non-residents |
| Corporate Income Tax Rate | 5% - until 2020 |
| Capital Gains | 5% - until 2020 |
| Dividends | 0%(1); 5%(2) |
| Withholding Tax | Paid to non-resident shareholders |
| Dividends | 0%(1); 5% 10% or 15%(3); 25%(4) |
| Interest | 0% |
| Royalties | 0% |
| Capital gains | 0% |
| Services | 0% |
| Capital (Stamp) Duty | Full Exemption |
(2) If from non-E.U. source
(3) According to the various DTT’s
(4) General rate on the absence of a DTT
Portuguese Pure Holding Companies (SGPS)
The Parent/ Subsidiary Directive (2011/96/EU) is fully applicable to SGPS, exempting from withholding tax dividends paid by E.U. subsidiaries provided that the SGPS complies with a minimum holding period of one year and a minimum shareholding of 10%. Income from non-EU subsidiaries is subject to the general IBC regime described above.
Holdings Regime
Income
E.U. Affiliates
Non-E.U. Affiliates
Dividends received
0%
5%
Interest from loans rendered to affiliates
25%
5%
Services rendered to affiliates
25%
5%
Capital gains
0%
0%
Withholding Tax
Paid to non-resident shareholders
Dividends
0%(1); 5%, 10% or 15%(2); 25%(3)
Interest
0%
Capital gains
0%
Services
0%
Royalties
0%
(1) According to Council Directive nr. 2011/96/EU, of the 30th of November, when applicable
(2) According to the various DTT’s
(3) General rate on the absence of a DTT
Production and assembling activities
Benefit from a most advantageous tax and customs duties regime in the E.U.
| Production and assembling activities | ||
|---|---|---|
| Taxation | Income from activities held with resident and non-resident entities | |
| Corporate Income Tax Rate | 5% - until 2020 | |
| Capital Gains | 5% - until 2020 | |
| Withholding Tax | Paid to non-resident shareholders | |
| Dividends | 0%(1); 5%, 10% or 15%(2); 25% (3) | |
| Interest | 0% | |
| Capital Gains | 0% | |
| Royalties | 0% | |
| Capital (Stamp) Duty | Full Exemption | |
| Custom Duties | Companies may benefit from the suspensive customs duties regime approved for the IFTZ | |
(1) According to Council Directive nr. 2011/96/EU, of the 30th of November, when applicable
(2) According to the various DTT’s
(3) General rate on the absence of a DTT
Warehousing activities
These activities also benefit from a very advantageous tax and customs duties regime.
| Warehousing activities | ||
|---|---|---|
| Taxation | Income from activities held with non-residents | Income from activities held with residents |
| Corporate Income Tax Rate | 5% - until 2020 | 25% |
| Capital Gains | 5% - until 2020 | 25% |
| Withholding Tax | Paid to non-residents | |
| Dividends | 0% (1); 5%, 10% or 15%(2); 25%(3) | |
| Royalties | 0% | |
| Capital gains |
0% | |
| Interest | 0% | |
| Capital (Stamp) Duty | Full Exemption | |
| Custom Duties | Companies may benefit from the suspensive customs duties regime approved for the IFTZ | |
(1) According to Council Directive nr. 2011/96/EU, of the 30th of November, when applicable
(2) According to the various DTT’s
(3) General rate on the absence of a DTT
Shipping companies
In addition to the facilities and tax advantages available to shipowners who choose to register their vessels in MAR – Madeira International Shipping Register, shipping companies also benefit from a most advantageous tax regime.
| Companies licensed as from 2007 | |
|---|---|
| Taxation | Income from activities held with non-residents |
| Corporate Income Tax Rate | 5% - until 2020 |
| Capital Gains | 5% - until 2020 |
| Dividends | 0%(1); 5%(2) |
| Withholding Tax | Paid to non-resident shareholders |
| Dividends | 0%(1); 5% 10% or 15%(3); 25%(4) |
| Interest | 0% |
| Royalties | 0% |
| Capital gains | 0% |
| Services | 0% |
| Capital (Stamp) Duty | Full Exemption |
(2) If from non-E.U. source
(3) According to the various DTT’s
(4) General rate on the absence of a DTT
Access to Portugal's network of double taxation agreements
Access a list of Portugal's Double Tax Treaties and respective texts here
Requirements
- To create 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;
- To create six or more jobs in the first 6 months of operation.
| Number of Jobs | Minimum Investment | Threshold |
|---|---|---|
| 1 - 2 | € 75.000 | € 2.000.000 |
| 3 to 5 | € 75.000 | € 2.600.000 |
| 6 to 30 | - | € 16.000.000 |
| 31 to 50 | - | € 26.000.000 |
| 51 to 100 | - | € 40.000.000 |
| More than 100 | - | € 150.000.000 |
Formalities
Licence application
An application (in Portuguese language) is submitted to S.D.M. - Sociedade de Desenvolvimento da Madeira, S.A. (concessionaire of Madeira's International Business Centre), in two copies, addressed to the Cabinet of the Regional Secretary for Planning and Finance of the Regional Government of Madeira, in the name of an existing company, in Portugal or abroad, or of a company to be incorporated. Branches of existing companies may also be licensed. The licence application must include all relevant information concerning the activity to be performed by the company.
Applicable fees
| Area | Applicable Fees |
|---|---|
| Up to 2,500 m2, inclusive | 12.5 €/m2 |
| Additional section of 2,501 m2 up to 5,000 m2, inclusive | 11 €/m2 |
| Additional section of 5,001 m2 up to 10,000 m2, inclusive | 9.5 €/m2 |
| Additional section of 10,001 m2 up to 20,000 m2, inclusive | 8 €/m2 |
| Additional section above 20,000 m2 | 7 €/m2 |
Company formation
Companies are formed in the IBC of Madeira through the use of the Private Deeds Registry Office with full exemption from fees and notary costs. Before incorporation, a name approval certificate and a provisional identification card must be requested to the National Company Registrar (RNPC). The public deed will be performed at the date indicated by the notary office. Companies licensed to operate in the IBC of Madeira must keep the head-office in Madeira, whilst companies with branches licensed in the IBC of Madeira are required to maintain legal representation.
Private limited companies (Lda.)
Private limited companies (Lda.) may be incorporated with a single shareholder and a minimum capital of €1 (one Euro) per shareholder. This type of company does not need to appoint directors; the minimum requirement is to appoint a manager who, by law, has the powers to undertake the management of the company.
Share companies (S.A.)
Branches
SGPS companies
Shareholders
Labour and Recruitment
Labour Regulations
The working week includes a maximum of 40 hours with Sunday being the day of rest. Employees are entitled to 22 working days of vacation per year, plus 10 days statutory holidays, and to sick leave and maternity leave. If the employee starts work in the first half of the calendar year, he will be entitled to a minimum vacation period of 10 working days during that year.
Overtime is payable at the rate of 125% for the first hour and 137,5% thereafter. Overtime worked during rest days is payable at the rate of 150%. Salaries are paid on a monthly basis 14 months per year (holidays and Christmas bonuses included).
The law allows short-term contracts, with a minimum period of 6 months, renewable at the employer’s option, up to a limited period of 3 years, after which the employee is either granted a permanent contract or is dismissed.
Local recruitment
Placing an advertisement in local and national newspapers is a very common procedure, as well as resorting to the local employment centre or a recruitment agency. S.D.M. has set up a database containing the CV’s of applicants who seek job opportunities within the companies operating under Madeira's IBC. Companies may also use the appropriate section of this site advertise their recruitment needs.
Madeira’s University, as well as other local technical schools, are a good source of skilled professionals. It is also possible to recruit from a large pool of Madeirans studying in Portuguese universities or working abroad.
S.D.M. may support companies setting up in the IBC in their recruitment process, by providing them with CV's adequate to their vacancies or by putting them in contact with the relevant schools or entities.
Foreign staff
Portugal abides by Article 9º of the Convention for the Application of the Schengen Agreement, namely regarding the regime of the concession of visas. The working visa will allow the entrance in Portuguese territory of foreign citizens (from non-EU or European Economic Area (EEA) countries or Switzerland), for the undertaking of their professional activities for a maximum of three years (allowing for multiple entrances). Visas should be applied for from a Portuguese consulate or embassy in the country of residence. The applicant will have to present a valid working contract in Portugal and will be subject to an interview at the Portuguese Consulate.
All citizens from the EU, EEA and Switzerland are allowed to enter, remain and live in Portugal, up to three months, without formalities other than holding a valid passport or identity card. Relatives accompanying such citizens, irrespective of their nationality, are also allowed to enter, remain and live in Portuguese territory. If the three months period is exceeded, such citizens must proceed with a registration at the SEF- Foreigners and Frontiers Services, to formalize the right to reside in Portugal. Relatives, of EU or non-EU citizenship, are also required to register at the SEF.
Personal Income Tax and Social Security Taxes
Companies are required to withhold personal income tax and social security contributions on the payment of salaries and other forms of remuneration to workers. Personal income tax rates vary according to the level of salary paid. As a reference, the applicable withholding rates in Madeira for 2013 start at 1% (for a monthly income up to 590 euros, single individuals) to 44,5% (for a monthly salary over 225.000 euros, single individuals). Monthly salaries up to 585 euros are not subject to withholding personal income tax.
Social security contributions are of a fixed rate of 11% for the employee and of 23,75% for the employer. The social security rates applicable to Directors are of 21,25% paid by the company and 10% paid by the Director.
The amounts withheld will be paid to the tax authorities until the 20th day of the following month in which the deductions were made.
Minimum and average wages
The latest available data on the average monthly salaries paid in the Autonomous Region of Madeira, dated from 2009, show that the average gross monthly wages paid in the services sector were of approximately 1.996,60 euros for highly qualified workers and of 775,49 euros for non-qualified workers. The minimum monthly wage set for 2013 in Madeira is of 494,70 euros.
Business Environment
Find out more on Why Madeira.
