By mcs editor
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.
By mcs editor
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.
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.
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.