Tag Archives: Taxation

Madeira’s Ship Registry is World’s TOP 15

Portugal and its national merchant navy have recently been the subject of very positive analyzes by both the Organization for Economic Cooperation and Development (OECD) and the United Nations (UN). The reason: the International Ship Registry of Madeira (MAR)

In the case of the OECD, the country has been highlighted by the steady growth of its fleet since 2013, due to the work done under the MAR. The compliments to the Portuguese flag came from an OECD study in which Portugal is named one of the few flag states in Europe that have had constant success in growing their fleet over the last few years.

As for the United Nations, the most recent data confirm Portugal’s entry in the top 15 of the world records due to MAR.

In regards to the EU, it is confirmed that the International Register of Madeira Ships is the 3rd behind Malta and Cyprus, as the United Kingdom and Greece bring together several registers.

In recent years, in various international forums and agencies, the quality and growth of the Portuguese-flagged merchant navy has been widely recognized, based on analyzes that have the denominator of the International Register of Madeira Ships, and which unquestionably place the country among the most respected and competitive in the world in this sector.

This was the case for the International Chamber of Shipping (ICS) reports on the performance of ship registrations, placing Portugal at the level of the best in the world, and for other reports issued by international bodies and entities such as the Memorandum Committee (MOU) of Paris and the American Coast Guard Qualship Index.

It should be noted that the exponential growth of the MAR has provided Portugal with a quality fleet, having contributed decisively to the country and, consequently, also to Europe, having more weight in the large international maritime forums, namely in the International Maritime Organization (IMO), where the major issues related to the sea and maritime transport are discussed and decided.

The most recent data show that the Madeira International Ship Registry continues to show a positive upward trend. Since the end of 2018, over a period of six months, MAR has seen an increase of 27 more commercial vessels. With a total of 653 vessels registered on 30 June, MAR maintains its top position among European international registrations, both in number of vessels and in tonnage.

Source: SDM

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Trusts in Madeira

Trusts in Madeira are regulated through omission. Decree Law 352/88 & Decree Law 149/94 deal with the registration and management of offshore trusts whereas Decree Law 264/90 concerns authorization by government of trust corporations and branches.

Portuguese residents cannot use Madeiran offshore trusts. The law forbids a trust to hold immovable property situated in Portugal and to have either a settlor or a beneficiary who is a Portuguese resident.

All trust property must be based outside Portugal and all trust income must be derived from non-Portuguese sources if the favorable taxation regime governing entities licensed to operate under the Free Trade Zone Legislation of Madeira is to apply.

Where trust income arises in Portugal, it is taxable in the hands of the trustees as if the trustees were both legally and beneficially entitled to the income. The reasoning behind this principle is that Portuguese law does not recognize the concept of a trust and so does not recognize the distinction between legal and beneficial ownership for the purposes of taxation.

By way of exception income arising through investments made through companies licensed to operate under the Free Trade Zone Legislation of Madeira is not considered to have arisen within Portugal for tax purposes.

For a Madeira trust to be valid it must satisfy the following criteria:

  • The trust must pass the three tests of certainty of intention, certainty of objects and certainty and identification of the beneficiaries;
  • The settlor, the trustees, the beneficiaries and the assets settled by the trust must all be identified in the trust deed;
  • The trust period must be specified.
  • A power to accumulate income must be specified in the deed;
  • The trust deed must stipulate a foreign proper law governing the validity, interpretation and administration of the settlement;
  • The trust deed must set out the trustees powers of investment, the rights and obligations of trustees and the relationships between trustees and beneficiaries including any personal liability arising.

Re-domiciliation

Trusts that are created in or transferred to Madeira may emigrate without prior authorization by exchanging the law governing the trust with the law of the foreign jurisdiction to which the trust is going to migrate.

Change of Proper Law

The settlor must expressly designate the law (other than Portuguese) that will regulate the Trust at the time of incorporation. Furthermore the trust deed can reserve the right to change the proper law governing the validity, interpretation & administration of the trust at any future point in time.

Creation of a Madeira Trust

A Madeira offshore trust is brought into existence by the execution of a notarial trust deed in front of a public notary. Provisions protecting

Confidentiality

Pursuant to European Directive 2015/849, all beneficial owners of the trust must be reported to the control-accessed Central Registry of Beneficial Owners. Under this EU Directive the trust’s beneficial owners are: the settlor(s), the trustee(s), the curator (if applicable), the beneficiaries of the trust and any other individual that controls (in)directly the trust.

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Assuring an Efficient Move to Madeira

If you have moved to Madeira Island or are planning to relocate, you already know that it is a beautiful place to live and with a lot of choices to what you can do.

Nevertheless such move does require careful planning, since the island can offer many tax advantages too. The following considerations can help you avoid costly mistakes and therefore will allow you to make the most of tax-efficient opportunities in Madeira.

Tax Residency

Taking up residency in Madeira (or Portugal for that matter), means that you are liable to taxation on your worldwide income, including capital gains, and reporting of non-Portuguese bank accounts to the Portuguese Tax and Customs Authority.

Portuguese tax residency kicks in if you spend more than 183 days in Portugal, or if your have real estate property, either rented or purchase, that can be occupied by you at any time in those same 183 days.

Careful attention must be paid to these rules, especially if you are considering real estate property purchase since before purchase you will need to be correctly registered with the Portuguese Tax and Customs Authority in order to avoid any costly mistakes.

Non-Habitual Resident Status

New residents, those who did not qualify in the 5 years previously to their arrival as residents for tax purposes in Portugal, can enjoy a a 10-year tax holiday period through acquiring non-habitual resident (NHR) status.

If you aim to take up employment in Portugal, a 20% income flat tax rate may apply to those professions deemed as ‘high value-added’. Fore more information on the NHR status please click here.

Investors and Entrepreneurs

Those wishing not to immediately retire can either relocate their international services company or incorporate a new one within the Madeira International Business Centre (MIBC).The MIBC is a unique set of tax benefits targeted to international services companies, international consultants and those within IT sector can be summed up as:

  • A reduced corporate income tax rate of 5% applicable to profits derived from operations exclusively carried out with non-resident entities or with other companies operating within the ambit of the MIBC;
  • Non-resident single and corporate shareholders of MIBC companies will benefit from a full exemption from withholding tax on dividend remittances from the Madeira companies.
  • Full access to the participation exemption regime;
  • Exemption on capital gains payments to shareholders not resident in black listed jurisdictions;
  • No withholding tax on the worldwide payment of interest, royalties and services.

Restructuring your Income

One cannot assume what was tax-efficient back in their previous jurisdiction is the same in Portugal. UK ISAs, for example, are taxable for Portuguese residents (even those with NHR status).

A full analysis of your income structure must be carried in order to make sure you are suitably diversified and everything is set up in the best way for your new circumstances.

MCS as a locally-based adviser who understands the Portuguese tax regime is best placed to recommend tax-efficient solutions regarding your relocation.

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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.

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