Category Archives: Investment

Startups in Madeira Island, Portugal

Taxation is one of the main reasons that hinder economic growth of a startup and finding the correct jurisdiction for your rising business can be troublesome. That is why Portugal has come up with a taxation business that is startup-friendly.

Startups looking into expand their international business, have access to a skilled workforce (namely IT engineers), good and speedy internet connections should be looking into locating their business in Madeira Island, Portugal.

Madeira Island, is located 1h 30min by plane from Lisbon, as offers a 5% corporate rate on all income derived from profit with non-Portuguese companies, full exemption from withholding tax on dividend remittances from the Madeira, among other tax benefits.

The MIBC is a tax benefit scheme granted under the Portuguese Tax Benefits Statute and duly approved by the European Commission.

Since the MIBC is governed by Portuguese and European Law, it offers the required legal certainty to its investors. All companies duly licensed to operate within the MIBC comply with all legal requirements to operate in Portugal, and therefore in the EU.

Given the above, all e-commerce directives have been duly transposed into Portuguese law, including those relating to electronic billing, digital signatures and data protection.

Such facts make it clear that, in addition to being a completely transparent tax incentive, the MIBC also allows a for an effective tax saving that can be used in the internationalization of the licensed company.

In addition to all the above-mentioned benefits, companies that are duly licensed in the MIBC may cumulatively apply for European funding under the Madeira 14-20 program and other financial instruments available to companies based in the Autonomous Region of Madeira.

Apart from the above, employees of startup companies and other technological companies might also be entitled to a 20% flat rate on their salary for a period of 10-years and a 0% tax rate on the foreign income they earn. These incentives not only allow you easily bring your team to live in on the world’s most beautiful islands, but also to attract the best of the best worldwide.

We know that bureaucracy and costs can slow down your vision and hinder your will to relocate to another jurisdiction, but we at MCS believe that Madeira Island, Portugal, holds the key to its growth.

Continue reading

Official List of Tax Haven Jurisdictions

The European Union has it own list of non-cooperative jurisdictions, also know as tax havens. This list is a non-binding one, therefore acting as “bullying” diplomatic document against small island economies.

Given the above, Portugal has its list of what it considers to be non-cooperative jurisdictions, for tax purposes. Generally speaking, income made available by these jurisdictions to Portuguese resident taxpayers are subject to a flat tax rate of 35%.

List of Non-Cooperative Jurisdictions, as determined by the Portuguese Ministry of Finance

American Samoa, Liechtenstein, Andorra , Maldives, Anguilla, Marshall Islands, Antigua and Barbuda, Mauritius, Aruba, Monaco, Ascension Island, Monserrat, Bahamas, Nauru, Bahrain, Netherlands Antilles, Barbados, Northern Mariana Islands, Belize, Niue Island, Bermuda, Norfolk Island, Bolivia, Other Pacific Islands, British Virgin Islands, Palau, Brunei, Panama, Cayman Islands, Pitcairn Island, Channel Islands and Isle of Man, Puerto Rico, Christmas Island, Qatar, Cocos (Keeling), Queshm Island, Iran, Cook Islands, Saint Helena, Costa Rica, Saint Kitts and Nevis, Djibouti, Saint Lucia, Dominica, Saint Pierre and Miquelon, Falkland Islands, Samoa, Fiji, San Marino, French Polynesia, Seychelles, Gambia, Solomon Islands, Gibraltar, St Vicente and the Grenadines, Grenada, Sultanate of Oman, Guam, Svalbard, Guyana, Eswatini, Honduras, Tokelau, SAR Hong Kong (China) Trinidad and Tobago, Jamaica, Tristan da Cunha, Jordan, Turks and Caicos Islands, Kingdom of Tonga, Tuvalu, Kiribati, United Arab Emirates, Kuwait, Virgin Islands of the United States, Labuan, Vanuatu, Lebanon, Yemen, Liberia.

Continue reading

Madeira International Business Center

Investing in Madeira remains an attractive solution for those looking to operate in Portugal and abroad.

The International Business Center of Madeira (MIBC, also known as Madeira Free Trade Zone) remains attractive for foreign and Portuguese investors, representing the single Portuguese fiscal incentive created to directly support the internationalization of worldwide companies.

Duly licensed companies benefit from one of the lowest corporate income tax (CIT) rates in the EU, 5%, to which 0% withholding tax on interest, capital gains, services, royalties and dividends is added (provided that certain requirements are met).

The MIBC is a real European incentive for the internationalization of exporting companies or international services providers.

Most service providers can benefit from the MIBC, including those engaged in trading, e-business and telecommunications, consultancy and marketing services, as well as intellectual property management, real estate project development or holding-related services.

Another important feature of the MIBC related benefits is that once the licensing process is done, the tax benefits become immediately effective. Unlike European funds there is no waiting period between the approval of the incentive and its implementation.

The MIBC is a tax benefit scheme granted under the Portuguese Tax Benefits Statute and duly approved by the European Commission.

Since the MIBC is governed by Portuguese and European Law, it offers the required legal certainty to its investors. All companies duly licensed to operate within the MIBC comply with all legal requirements to operate in Portugal, and therefore in the EU.

Given the above, all e-commerce directives have been duly transposed into Portuguese law, including those relating to electronic billing, digital signatures and data protection.

Such facts make it clear that, in addition to being a completely transparent tax incentive, the MIBC also allows a for an effective tax saving that can be used in the internationalization of the licensed company.

In addition to all the above-mentioned benefits, companies that are duly licensed in the MIBC may cumulatively apply for European funding under the Madeira 14-20 program and other financial instruments available to companies based in the Autonomous Region of Madeira.

Last, but not least, Madeira has all kinds of high quality support services, such as a broad network of information technology companies, consulting firms, financial services and administrative support, thus making operational costs low when compared to other European markets.

Continue reading

EU Citizens – Residency Requirements

EU citizens who remain in Madeira (or in any Portuguese territory) for longer than 3 months have to formalize their right of residence by registering.After 3 months in Madeira (or in any Portuguese territory), EU citizens have 30 days to register, after which they receive a registration certificate.They must apply at their local town hall (Câmara Municipal) and provide the following documents:Workers

  • a valid identity document
  • a declaration on oath that they are employed or self-employed in Madeira (or in any Portuguese territory)

or

  • a declaration on oath that they have sufficient financial resources for themselves and their family members, and a health insurance policy, if the country of which they are citizens has the same requirement for Portuguese citizens.

Pensioners

  • a valid identity document
  • a declaration on oath that they have sufficient financial resources for themselves and their family members, and a health insurance policy, if the country of which they are citizens has the same requirement for Portuguese citizens.

Students

  • a valid identity document
  • a declaration on oath that they are registered with an officially accredited public or private educational establishment
  • a declaration or other means of proof that they have sufficient financial resources and a health insurance policy, if the country of which they are citizens has the same requirement for Portuguese citizens.

Failure to register is an offence punishable by a fine of between EUR 400 and 1500.Registering or remaining registered without meeting the necessary conditions is an offence punishable by a fine of between EUR 500 and 2500.In the event of an abuse of the law, fraud, or false marriage or partnership of convenience, residence rights will be refused and withdrawn.For further information please and assistance in complying with immigration requirements in Madeira, please do not hesitate to contact us management@mcs.pt and request a fee quote.

Continue reading

Golden Visa: Why Madeira?

The Statistics: Investment Turnover

Official statistics collected from the Portuguese National Statistic Institute and the Directorate of Statistics of the Madeira Regional Government showed that, already in 2018, the median value of rents for new leases of family accommodation in Madeira was EUR 5.15 / m2, which is higher than the value registered for Portugal (EUR 4.39 / m2). These numbers positioned Madeira as the second region among the seven regions with the highest median of rental income, behind the Lisbon Metropolitan Area (EUR 6.06 / m2) and ahead of the Algarve (EUR 5.00 / m2), which came in the third position.

According to the same authorities, the median housing prices in Madeira remained among Portugal Top 3 regions. In 2018 the Algarve (EUR 1,500 / m2), the Lisbon Metropolitan Area (EUR 1,318 / m2) and the Autonomous Region of Madeira (EUR 1,203 / m2) were all above the national average of EUR 984 /m2.

The above mentioned values are sustained by the fact that the Autonomous Region of Madeira is the solely year-round tourism destination in Portugal due not only to its permanent spring-like weather climate, but also because of its tourism history that dates back to the 19th century when it was a coveted destination among European royalty and nobility.

In Funchal’s civil parishes of Sé and São Martinho apartment rents can yield a monthly rental income (long-term rental) between EUR 1,800 to EUR 2,000 for a EUR 270,000 investment in 196 m2 apartment. Should you opt for short-term rentals, in the likeness of AirBnB, the same well located apartment can yield between EUR 500 and EUR 1,000 per week.

Outside the municipality of Funchal, the long term rental income decreases per square meter decreases, namely in the municipalities of Santa Cruz (4.46 € / m2), Câmara de Lobos (3.81 € / m2) and Machico (3.68 € / m2).

However, just like the Madeiran capital, the city of Santa Cruz, especially in the civil parish of Caniço, can yield good short-term rental income (EUR 1,200/week) due to the fact that this area of Madeira is popular with the Germanic market. The trick here is to invest in a villa with a good view over the Atlantic Ocean. In the Caniço civil parish, villas start at EUR 250,000 and depending on the view you have over the ocean they can go up half a million or more euros, specially in the highly coveted Garajau area.

Apart from the existing houses and apartments already available for sale, some stakeholders in the Madeiran real estate market are offering once in a lifetime investment opportunities that can turn into great short-term rental income sources: bespoke modern villas and traditional Madeiran manorial houses known locally as Madeiran quintas.

While those offering bespoke villas usually require an initial investment of at least EUR 295,000 for a fully personalized villa built from scratch and along the famous banana line, in the municipalities of Ponta do Sol and Ribeira Brava, a Madeiran quinta will never be sold below EUR 1 Million threshold.

The advantage of a bespoke villa project is that with a single investment you get the opportunity to built a house the way you like and, depending on the plot you get, you can built two additional luxury bungalows for short-term renting and with an expected yield of  EUR 1.000/week.

Most of the quintas available for sale in the Madeiran real estate market are superbly preserved and combine history and tradition with modern amenities. Even though few of them are allocated to rental, the yield regarding such investment option is never below EUR 1000/week, due to the peaceful and romantic scenery that inspires rest and happiness among travelers and owners.

The Golden Visa

Given the statistics above, those looking to obtain residency, and later citizenship, by real estate investment as a way to obtain the Portuguese Golden Visa should look into Madeira as the place to invest.

Under the Golden Visa scheme, qualifying real estate investments are the following:

  • Real estate in Portugal with a value of 500 000 Euros or more (this value can be reduced to 400 000 Euros if the property is located in areas of low population density); or
  • Construction of at least 30 years or real estate acquired in an area of urban rehabilitation and rehabilitation of real estate acquired in the total amount equal to or greater than 350 000 Euros (acquisition + works) – (this value may be Reduced to 280 000 Euros if the property is located in areas of low population density).

Disclaimer: the above statistics are for informative purposes only and refer to the information available for the year 2018. All investors are advised to fully understand all risks associated with any kind of investment they choose to do. Hypothetical, simulated or statistical performance is not indicative of future results.

Continue reading

A Global Hub for Business: Madeira

At a time that it is increasingly important for companies to have internationalization tools at their disposal, the Autonomous Region of Madeira enables companies to significantly reduce their internationalization costs.

Given the above, the set of tax benefits available within the Madeira International Business Center (MIBC) make it possible for international companies to reduce their internationalization/context costs.

Thus, companies wishing to internationalize and that have their core business in international trade activities, e-business and telecommunications, consultancy and marketing services, as well as the management of intellectual property, the development of real estate projects or management of investments can license themselves in the MIBC / ZFM and get the following benefits:

Available Tax Benefits within the MIBC

  • 5% Corporate Tax Rate, provided some legal requirements are met;
  • Access to the Portuguese system of participation exemption ;
  • No withholding tax on:
  • Payment of dividends, to non-resident entities
  • Payment of services, to non-resident entities;
  • Payment of interest, to non-resident entities;
  • Payment of royalties, to non-resident entities;
  • Exemption from 80% in stamp duty on documents, contracts and other acts carried out requiring public register since performed with non-resident entities in Portugal or licensed in the MIBC;
  • Companies licensed in the MIBC also benefit from 80% of municipal property tax and property transfer tax exemption due to the acquisition of immovable property for the installation, as well as other fees and local taxes;
  • Access to the network of double taxation treaties signed by Portugal.

It is important to note that the MIBC / ZFM is covered by all tax and social security Portuguese laws and is licensed under European Union law. Such legislative provisions allow the MIBC / ZFM to fully comply with national and international standards.

The benefits above mentioned can be combined with the highly attractive Portuguese Golden Residence Permit Programme (also known as Golden Visa) and the Non-Habitual Resident (NHR) Tax Regime, which grants a 10 year tax exemption on new residents.

Having said, it is clear that all companies can alleviate the costs associated with the internationalization of its activities in an efficient way by using Madeira as its HQ.

Continue reading
portugal-golden-visa-madeira-corporate-services-6

Madeira’s your Brexit opportunity

Low Taxes

Today more than 10% of Madeira’s International Business Centre (MIBC) are of British origin, operating in one of Europe’s most tax efficient and tax compliant jurisdictions.
Approved the tax benefits were approved by the European Commission and allow the licensing and installation of new companies, which benefit from a reduced corporate tax rate of 5% and exemption from withholding of payment of dividends, among other fiscal benefits.
The change of the VAT regime in the transactions and other tax regulations caused by the Brexit make Madeira one of the best places for companies who want to relocate to the EU.
MIBC currently has 2,000 companies operating in three economic sectors, International Services, the Industrial Free Trade Zone and the International Ship Registry of Madeira (MAR).
When compared with Malta or Cyprus, which also offer reduced corporate tax rate regimes, Madeira’s main advantage is that its regime has been approved by the EU, while other territories will have to harmonize their legislation by 2020.

Expat Paradise

The Portuguese special personal income tax regime, the NHR scheme (Non-Habitual Resident), is specifically designed for individuals wishing to transfer their residency to Portugal and currently presents and excellent opportunity to all the British wishing to relocate before or after Brexit is conclude.
Provided that all requirements are fulfilled the main characteristics of the regime are:
  • Foreign sourced income such as dividends, interest, capital gains (duly structured), rental income, occupational pensions, together with self-employment income and professional income can be exempt from personal income tax;
  •  Portuguese sourced employment and self-employment income are liable to a special flat rate of 20%.
If you have not been a resident, for tax purposes, in the previous five years prior to taking up residence in Portugal you are able to benefit from the potential advantages of the NHR Regime, which can be combined with the Portuguese Golden Visa.
Continue reading
mcs-madeira-ship-registration-madeira-corporate-services-1

A land of (tax) opportunities

A leading destination for all ages, Portugal is asserting itself as a major start-up destination in Europe, and with that hundreds of techies are willing to relocate to Europe’s oldest country. But it is not just the Web Summit’s new capital, Lisbon, who’s attracting new residents, Madeira is also getting its share. The Portuguese archipelago, one of most richest regions in Portugal, has an agreement with Saint Peter (all-year-round good weather) and therefore is attracting freshly retired residents from Central and Northern Europe every year.

Smart Tax Incentives for New Residents

The Portuguese Government is not relying on the country’s “good looks” to attract investment, in fact, it has resorted to an interesting tax policy aimed at luring and securing foreign investment in the long term. The tax policy? Portugal’s Non-Habitual Resident (NHR) Regime.The NHR Regime is a special tax residency status, applicable to all those who fall under the following conditions, regardless of nationality or age:

  • Be a tax resident under Portuguese domestic legislation; and
  • Not have been taxed as a Portuguese resident in the five years prior to taking up residence in Portugal.

Provided you check the previous requirements, you can benefit from a total tax exemption on foreign source employment, professional, pension, dividends, interest, capital gains and rental incomes. All you need to do is to make sure that those incomes are either taxed at source, in accordance with the applicable tax treaty or that are not deemed as derived from Portugal nor from a tax haven (in the case of dividends, interests, capital gains and rents).In case you work in Portugal and earn either employment or professional income from a Portuguese source, then those incomes will only be liable to a 20% flat tax rate, provided the job performed is deemed as a high-added value profession by law.

Investing in Portugal, from a tax standpoint, has never been easier!

Reduced Tax Costs for Start-Ups and Investors

Apart from the NHR Regime applicable to any Start-up employee that complies with the regime’s conditions, start-up founders can reduce their tax-related operational costs through the International Business Center of Madeira. This preferential and highly efficient tax regime grants significant advantages to companies structured in Madeira Island, of which I highlight the following:

  • 5% corporate tax (against mainland’s 21%), in all international operations;
  • Total exemption from withholding tax on dividend remittances from the Madeira companies, for non-resident shareholders;
  • Exemption on capital gains payments, for non-resident shareholders.

Professional tax consultancy is required

Regardless of the tax benefits that someone may benefit from in Portugal, one thing is for sure: applying correctly for them is not a straightforward thing. Despite all the advantages there is a somewhat considerable amount of red tape and formalities that require an experience professional in order to swiftly apply and benefit from the existing tax incentives.Nevertheless, the next time you think Portugal as a paradise, just remember that the country is much more than good weather and good food.

Continue reading

Madeira Onshore Tax System

Madeira, being a political autonomous territory of Portugal, has been granted, since the 80s, a low tax system (Madeira’s International Business Center, or MIBC) in order to promote its island economy. And, contrary to popular belief not all low tax systems are synonymous of offshore or tax havens.

In fact, since Portugal’s accession to the EU, the MIBC system has been subject to several revisions and approvals from the European Commission, as such regime is considered State Aid in accordance to EU Law and jurisprudence and is thus subject to the Regional Aid Guidelines issued by the European Commission itself.

As such ,the MIBC fiscal regime is fully integrated and regulated under EU and Portuguese law, and such regulation means that:

  • There is full implementation of EU law regarding business activities admitted to the MIBC;
  • Full application of norms arising from the Treaties signed by Portugal or by international organizations to which Portugal is member, especially OECD, FATF7, ILO and IMO apply to the regime;
  • All business activities within MIBC are subject to the same rules and proceedings regarding customs, tax and financial activities in terms of control, inspection and supervision. Consequently the regime has “onshore” characteristics, since terms and conditions are identical to those of Madeira and the Portuguese mainland;
  • Additional measures exist regarding the improvement of the rules applied to the MIBC;
  • Complete access to double taxation agreements signed by Portugal; and
  • Relationship with resident entities without fiscal benefits is allowed.
    In fact Portuguese investors can take full advantage of MIBC if they aim to internationalize their activities or develop activities. Investor activities’ income, whether the investor is foreign or national, will be taxed at normal rate if income derives from activities with residents in Portuguese territory and reduced tax rate (5%) will be applied if income derives from activities with non-residents.

Because of the reasons mentioned above, the MIBC fiscal regime cannot be considered, legally, technically and conceptually, an offshore tax system, but rather an onshore tax system.

Continue reading