Madeira special tax regime: an European instrument not to be missed by MNC’s, entrepreneurs and their advisors.
Madeira IBC offers relevant tax benefits, in a white listed environment fully integrated in the European Union (and Portuguese) legal system, that can be further combined with other general and special Portuguese tax incentives.
Madeira is a Portuguese island located in the middle of the Atlantic Ocean, close to Europe’s southwest coast and Africa’s northwest coast.
Madeira International Business Centre (MIBC) offers a white listed, totally transparent, not ring fenced and fully European Union (EU) compliant special taxation regime. The regime is very simple, pragmatic and effective. Furthermore, investors can also apply for general incentives (tax benefits, subsidies and grants), including the so called non habitual resident and golden visa regimes (such combination of regimes is a true option and thus not required and often not even advisable).
As the regime is transparent and not ring-fenced, Portuguese tax residents (individuals and corporations) can also benefit from the MIBC regime and Portuguese and EU regulations do apply.
Under MIBC tax framework corporations (and their investors) can benefit from a number of relevant EU approved tax benefits, including:
5% corporate income tax rates on almost all international activities (for royalties a 2,5% tax rate can be possible), subject to thresholds of reasonable substance requirements and job creation;
Withholding tax exemptions;
Stamp Duty, Property Tax and Property Transfer Tax exemptions.
Not being a ring fenced regime, the main advantages of the Portuguese laws and regulations do apply, including:
Participation exemption for paid and received dividends and capital gains;
Optional territorial regime for permanent establishments abroad;
Tax incentives for job creation, investment, retention and reinvestment of profits, equity (notional interest deduction) and R&D (e.g. patent box, special tax depreciation for certain intangibles without limited useful life), venture capital, etc;
No wealth tax;
Virtually no inheritance and gift tax;
Double tax treaties and Social security and Investment protection agreements, together with very special links to the remaining Portuguese Speaking Countries (CPLP) and very convenient flights, turns Portugal an ideal investment hub, notably for the South Atlantic area.
Substance requirements
Creation of 1 to 5 jobs in the first six months of activity, together with a minimum total CAPEX of EUR 75 000 during the first two years of activity.
Alternatively, creation of a minimum of 6 jobs during the first six months of activity.
Additionally, the following thresholds and job creation requirements apply (thus taxable income in excess is subject to the the standard tax rate and not the the reduced 5% nominal tax rate):
2.7 millions euro / 1-2 jobs;
3.5 millions euro / 3-5 jobs;
21.8 millions euro / 11-50 jobs;
35,5 millions euro / 36-30 jobs;
54 millions euro /51-100 jobs;
205 millions euro / More than 100 jobs;
Capped at one of the 3 following limits:
a) 20,1% of gross value added;
b) 30,1% of annually incurred labor costs;
c) 15,1% of the annual turnover.
Do you know the Madeira Business Center incentives are also available to non habitual residents?
April 2020 update
For generic information purposes only
Specific advise must be obtained before any decision is taken