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: Home : Tax Benefits
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 2013, granting significantly reduced corporate tax rates until the end of 2020 as well as no withholding taxes. Companies licensed to operate within the legal framework of the IBC of Madeira will benefit from the following reduced corporate tax rates:
In the case of services activities, the reduced rates are 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, 20% from 2008 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. Portuguese Pure Holding Companies (SGPS)Portuguese Pure Holding companies (SGPS) qualify for the full participation exemption on E.U. sourced dividends, provided they comply with the requirements set by the E.U. Directive EC/90/435 and by Article 46º of the Portuguese Tax code, namely a minimum holding period of one year.
Capital gains are not included in the taxable income of the SGPS, provided that the shares are held for a minimum period of 1 year (or 3 years in certain circumstances) and represent a minimum shareholding of 10%.
Non–E.U. sourced dividends will be subject to 3% to 5% taxation. Shipping companies, vessels and yachtsShipping 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 companiesIn addition to the reduced tax rates of 3% to 5% on profits 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:
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 ShareholdersBoth private and corporate shareholders will be exempt from withholding taxes on the worldwide distribution of dividends provided that they are not resident in Portuguese territory (with the exception of shipping and manufacturing companies, whose shareholders will qualify for this exemption even if resident in Portugal).
This exemption also applies to income resulting from interest and other forms of loans, bonds, and capital advances to IBC companies. 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 exemptionsCapital duty and other local taxes
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