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Tax Benefits
 

Tax Benefits

Madeira's IBC Tax Benefits

The present tax regime allows the incorporation of new entities within the legal framework of the International Business Centre of Madeira (IBC) until the end of June of 2014, granting a reduced corporate tax rate of 5%, applicable on the taxable income, until the end of 2020. 
 
In the case of services activities, the reduced rate is applicable to profits derived from operations exclusively carried out with non-resident entities or with other companies operating within the ambit of the IBC of Madeira. There are no restrictions, nevertheless, on the development of business activities with Portuguese companies which will be taxed at the normal corporate tax rate in Madeira, 23% from 2014 onwards.

Production and assembling activities carried out by companies in the Industrial Free Trade Zone of Madeira, on the other hand, will benefit from the tax reductions also in operations with Portuguese residents.

For more information you may consult and download the Tax Benefits Statute.
 

Shareholding Activities

Companies licensed within the legal framework of the IBC of Madeira fully qualify for the application of the Portuguese participation exemption regime.

As such, worldwide dividends and capital gains deriving from qualified shareholding activities are not included in the taxable income of the companies, provided that the shares are held for a minimum period of 2 years and represent a minimum shareholding of 5%, amongst other conditions.
 

Shipping companies, vessels and yachts

Shipping companies will have full access to the reduced taxation regime until the end of 2020.
 
In addition, 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) and are exempt from personal income tax.
 

Production, assembling and warehousing companies

In addition to the reduced tax rate of 5% until 2020, 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 modernization 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.
 

Tax benefits for Shareholders

Dividends paid to corporate shareholders of companies licensed to operate within Madeira’s International Business Centre, who are resident in E.U.or E.E.A.countries or in countries with which Portugal has a DTA with a tax information exchange clause, benefit from exemption from withholding tax in Madeira.

Otherwise, the payment of dividends will be subject to the rates according to the various DTA’s (5%, 10% or 15%) or to the general rate of 25% on the absence of a DTA or to a rate of 28% when paid to individual shareholders.
 
In addition, shareholders of IBC companies will be exempt from capital gains tax due on the sale of shares or on any share capital increases.
 

Other tax benefits and exemptions

Capital duty and other local taxes
 

Documents, contracts and other operations requiring public registration carried out by IBC companies will be exempt from 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 established in the IBC of Madeira are also exempt from:
 
  • Property transfer tax, donations and inheritance tax due on the acquisition of immovable property for their premises;
  • Capital gains tax due on the sale of estate property and other fixed assets or values, kept as reserves or under utilization;
  • Local taxes and levies. 
 

Double Taxation Agreements

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.

 
 

Tax benefits requirements

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 jobs created, 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


 
 
 

Highlights


The present tax regime allows the incorporation of new entities in the IBC of Madeira until the end of June 2014, granting significantly reduced corporate tax rates until the end of 2020.
 
 

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