Investing and Living in Portugal

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, the Algarve and Madeira are also getting their share. The southern Portuguese most richest regions have an agreement with Saint Peter (all-year-round good weather) and therefore are attracting not freshly retired residents from Central and Northern Europe every year, but also digital nomads looking for good weather and inspiration.

A Land of Tax Opportunities
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, dividends, interest, capital gains and rental incomes. As for pensions, these are taxed at a flat rate of 10%. 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.

Reduced Tax Costs for International Businesses

Apart from the NHR Regime applicable to anyone relocating to Portuguese territory and complying with the regime’s conditions, digital nomads, freelancers, international consultants and international services providers 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% or Madeira’s 20%), 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.
  • Access the participation exemption regime.
Why Madeira, of all other places in Portugal?

Weather: Geographically located off the coast of Africa, Madeira is certainly European.  The currency is the euro, the culture is European and politically speaking Madeira is 100% Portuguese.  And yet the climate is sub-tropical with temperatures rarely dropping below 20 degrees centigrade even in the winter, and a high level of rainfall in the mountainous interior ensures the island is very green for the majority of the year.

Reduced operational costs: Madeira offers low operational costs when in comparison with other European countries. In fact, the cost of human resources and the price of several goods and services are very competitive when directly compared with other European locations, allowing companies to face considerably lower costs when establishing operations in Madeira.

Connectivity: Business wise, Madeira has a highly qualified workforce and most of the people speak and understand the English. Add that to the fact the its Cristiano Ronaldo Airport connects you to most of European capitals (Paris, Amsterdam, Vienna, Zurich, London, Berlin…) and it is easy to understand why the tech start up scene is developing.

In terms of international communications connectivity, Madeira is connected to a Submarine Cable Station connecting Europe to Africa and the Americas, hosted in the “Madeira Datacenter”, operating several international optical submarine cables, allowing interconnectivity with national and international SDH networks and providing, as such, significant advantages in terms of quality, cost, bandwidth and scalability.

Safety: Madeira is Portugal’s safest region, with a criminality rate of just 26 criminal cases per thousand inhabitants.

auctor Miguel Pinto-Correia

MCS has more than 20 years of experience in assisting private and corporate clients making their move to Portugal. Find out how we can help and do not hesitate to contact us.

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Bringing your car to Madeira

EU Nationals

An EU national moving to Madeira, must register his/her car if one is the holder of the registration certificate, the owner of the vehicle, or a user of a vehicle one does not own (e.g. a family member). One can use your vehicle here while it is still registered in your previous home country. An EU national has 20 working days to register your car in Madeira, following the car import into Portuguese territory. One can register his/her car at any customs office by showing the Vehicle Tax (Imposto Sobre Veículos – ISV) and by submitting the vehicle customs declaration (DAV) with the Portuguese Tax and Customs Authority.

Please note that if one changes his/her country of residence to Portugal, one has 12 months from the date you transfer residence to Portugal to request an exemption from the payment of vehicle tax.

If one buys a car abroad, transit registration plates issued in another EU country will be recognized in Portuguese territory for the purposes of driving one’s car back to his/her place of residence (temporary importation).

One can only use his/her car in Madeira for the maximum period of 90 days, after the entrance in Portuguese territory, under the condition that it is driven only by the owner of the vehicle.

Vehicles owned by a private individual, who has transferred his/her residence to Portugal, may be exempt from vehicle tax (ISV) if they meet the following criteria:

  • individuals over 18, resident in the country from where are transferring the residence for a minimum period of 6 months, consecutive or otherwise
  • that has paid the vehicle tax in the country of your former residence and did not benefit from any type of reimbursement scheme when left that country
  • owner the vehicle in the country of your former residence for at least 6 months prior to transferring to Portugal, starting from the date on which the vehicle registration document was issued, or from the date on which the leasing contract was signed, as relevant.

An EU national registering and using his/herr car in Madeira, must pay:

  • Resgistration Tax (ISV); and
  • Road Tax (IUC).

The following categories of vehicles are exempt from vehicle tax but must be registered in Madeira:

  • vehicles whose owner has transferred his/her residence from another EU country, or from a third country to Portuguese territory
  • vehicles brought by diplomats who are returning to Portugal

The following categories of vehicles are exempt from road tax:

  • motor vehicles and motorcycles owned by foreign states, diplomatic and consular missions, international organizations, and specialised European agencies and their officials
  • motor vehicles and motorcycles which are older than 20 years or are public museum pieces, and are occasionally used for no more than 500 kilometres a year
  • non-motorised vehicles, exclusively electric or powered by non-combustible renewable energies, special non-carrying goods vehicles, ambulances and vehicles dedicated to the transport of patients under applicable regulations, hearses and agricultural tractors
Step by step
  1. When importing a car into Portuguese territory one must obtain the following documents: registration certificate and the European Certificate of Conformity (COC);
  2. Upon arriving to Portuguese territory the vehicle needs to be submitted to vehicle inspection;
  3. Obtain approval from Madeira’s Regional Directorate for Economy and Land Vehicles concerning the legality of the vehicle’s documents;
  4. Submit all the vehicle’s documents to the Portuguese Tax and Customs Authority and pay the respective tax;
  5. Once tax is paid the car owner will then receive the new license plate numbers, which he/she will then have to obtain (from an authorized producer) and fix the new license plates to the car;
  6.  Deliver to Madeira’s Regional Directorate for Economy and Land Vehicles the documents produced by the Portuguese Tax and Customs Authority and obtain the Single Vehicle Document (DUA);
  7. Once the DUA is obtained one must register the vehicle with the National Car Registry;
  8. Once the vehicle is registered, pay the road tax.

translator Miguel Pinto-Correia | fons Ekonomista

Our team at MCS has more than 20 years of experience in assisting investors and expats alike relocating their business and life to Madeira, Portugal. Should you need assistance, in dealing with the bureaucracy, namely from a tax standpoint we are here to help you.

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NHR Portugal – The Ultimate Expat Tax Benefit

Without a doubt, the ultimate expat tax benefit is the Non-Habitual Tax Resident Tax Regime  (NHR) granted by Portugal (Madeira Island included) to those wishing to relocate (or return) to the country, regardless of their nationality.

If you have not been deemed tax resident in Portugal in the previous 5 years and you decided to acquire tax residency in Portugal, then you are able to apply for the NHR status under which you will benefit from:

  • A unique personal income tax treatment over a 10-year period, which included the possibility of enjoying a 10-year tax exemption on almost all foreign source income;
  • 20% flat rate, instead of the normal tax rates that can go up to 48%, for certain Portuguese source incomes (from high-added value activities, as determined by Ministerial Order, as well as income from self-employment).
  • Not needing to have a minimum staying period, although one must be careful with tax residency implications in other jurisdictions
  • Becoming part of a white-listed tax jurisdiction within the European Union
  • A tax exemption for gifts or inheritance to “direct line” family members (descendants and ascendants)
  • No wealth tax
  • Free remittance of funds to Portugal

In order to qualify for all the above mentioned tax benefits one must have the right to legally reside (i.e. from an immigration perspective) in Portugal. As such at the moment of the application one must either be Portuguese, a European Union citizen, and European Economic Area Citizen or a holder of a visa (for example: the Golden Visa or the Passive Income Visa) that entitles one to reside in the Portuguese territory.

Notwithstanding the above, EU/EEA citizens are required to obtain a EU/EEA Residency Certificate from the City/Town Hall with jurisdiction over their tax residency address in order to comply with EU/EEA citizens immigrations requirements. The documents needed to be presented in order to obtain such certificates vary from municipality to municipality, although under law such documents are the following:

  • A valid Identity Card / Passport;
  • A written Affidavit declaring that you have a Professional activity as a worker or as self-employed in Portugal; or An Affidavit, declaring that you have sufficient funds for you and for your family, and that you are covered by health insurance when the same applies to Portuguese citizens in your country of origin.

Once right of residency is established, from a tax stand point all the NHR applicant needs to do is to hold an abode, either purchased or rented, in Portugal ready at December 31st of that year with the intent to hold habitual residence.

Income Taxation under the NHR – Foreign Sourced Income
  • Taxation exemption on employment income is granted if the income is subject to taxation in the source country, in accordance with the applicable Double Taxation Agreement, or are considered not to be derived from a Portuguese source.
  • Pensions are subject to a flat tax rate of 10%. In case they are subject to tax in the source country, in accordance with the applicable Double Taxation Agreement, a tax credit applies.
  • Freelancer income / Independent Contractor derived from high value-added service activities, with a scientific, artistic or technical character, are also exempt if these can be taxed in the country of source, with which Portugal has Double Taxation Agreement or, in the absence of such agreement, when the income is not to be considered obtained in Portuguese territory.
  • Taxation exemption on other types of foreign sourced income (interests, dividends, capital gains, income from immovable property (rents), royalties, intellectual property income and business income) if: these can be taxed in the country of origin under a Double Taxation Agreement concluded between Portugal and the respective State or; if these types income may be taxed in the State of origin in accordance with the OECD model of tax convention (excluding tax havens) in cases where there is no Double Taxation Agreement.

List of jurisdictions deemed as tax havens (this includes some jurisdiction with whom Portugal has signed a Double Taxation Agreement): American Samoa, Liechtenstein, Andorra, Maldives, Anguilla, Marshall Islands, Antigua and Barbuda, Mauritius, Aruba, Monaco, Ascension Island, Monserrat, Bahamas, Nauru, Bahrain, former 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, Puerto Rico, Christmas Islands, Qatar, Cocos (Keeling), Queshm Island , Iran, Cook Islands, Saint Helena, Costa Rica, Saint Kitts and Nevis, Djibouti, Saint Lucia, Dominica, St. Peter and Miquelon, Falkland Islands, Samoa, Fiji, San Marino, French Polynesia, Seychelles, Gambia, Solomon Islands, Gibraltar, Saint Vincent and the Grenadines Granada, Sultanate of Oman, Guam, Svalbard, Guyana, Eswatini, Honduras, Toquelau, 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, United States Virgin Islands, Labuan, Vanuatu, Lebanon, Yemen, Liberia.

Income Taxation under the NHR – Portuguese Sourced Income
  • Employment income and business or professional income derived from high added value activities are taxed at a flat rate of 20%.
  • Remaining employment and business or professional income (not considered of high added value) and other types of income, shall be aggregated and taxed according to the taxation general rules.
High-Added Value Activities
  • General Manager and Executive Manager of Companie
  • Directors of Administrative and Commercial Services
  • Production and Specialty Services Directors
  • Hotel, restaurant, trade and other service directors
  • Experts in the physical sciences, mathematics, engineering and related techniques
  • Doctors
  • Dentists and stomatologists
  • University and Higher Education Teacher
  • Information and Communication Technology (ICT) Experts
  • Authors, journalists and linguists
  • Creative and performing arts artists
  • Intermediate science and engineering technicians and professions
  • Information and Communication Technology Technicians
  • Market-oriented farmers and skilled agricultural and livestock workers
  • Skilled, market-oriented forest, fishing and hunting workers
  • Skilled workers in industry, construction and craftsmen, including in particular skilled workers in metallurgy, metalworking, food processing, woodworking, clothing, crafts, printing, precision instrument manufacturing, jewellers, craftsmen, electrical workers and in electronics.
  • Plant and machine operators and assembly workers, namely stationary and machine operators

Please note that the above list is updated through Ministerial Order issued by the Minister of Finance.

Engaging a Tax Consultant

Notwithstanding the above it is important to obtain specialized advice from a reputable tax consultant to help navigate not only through the Portuguese bureaucracy, but also to help fully comply with the regime’s requirements and tax reporting obligations arising with such status.

Did you know that Portugal, and therefore Madeira, blacklists and penalizes, through taxation, income deriving from more than 80 different jurisdictions including all British Overseas Territories and British Crown Dependencies? Did you know that the Portuguese fiscal year matches the calendar year? Did you know that not all types of pensions maybe exempt from taxation? Did you know that even though you are an NHR you are still obliged to file tax returns in Portugal?

The above-mentioned small details can become a headache if your income structure and relocation dates are not analysed and adjusted, if needed, on a timely manner in order to comply with the NHR scheme rules.

Applying for NHR status

The first step regarding NHR application is to obtain a Portuguese Taxpayer Identification Numbers (NIF) as non-resident in Portuguese territory. In order to do this, applicants need to provide proof of residency abroad through a government issued document. Non-EU-Citizens must also appoint a tax representative when applying for a NIF.

Only once you have obtained residency can you apply for a NIF as resident in Portuguese territory. Change of residency status with the Portuguese Tax and Customs Authority can only be done by presenting proof of said residency, i.e. by presenting a residency permit card issued by the Portuguese Borders and Aliens Service (SEF) or a EU/EEA-Citizen Residency Certificate issued by the City or Town Hall with jurisdiction over the applicant’s residential address. Furthermore, proof of real estate purchased or rental agreement (short-term tourist rentals are not accepted) may also be requested.

Upon change of residency status, from non-resident to resident, for tax purposes you will be able to apply for the NHR status until March 31st of the following year. Please note that if you have appointed a tax representative you now ought to dismiss such representative.

In order to apply for NHR status one must firstly apply for a password to access the Portuguese Tax and Customs Authority website, through which the application is to be submitted by your tax consultant. Any random audits carried to the said application are notified on the tax authority’s website and ought to be replied there too.

auctor Miguel Pinto-Correia

MCS and its team has more than 20 years of experience in assisting corporate and private clients wishing to relocate to Madeira. For more information on our services please do no not hesitate to contact us.

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Madeira’s International Shipping Register

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.

fons SDM – Sociedade de Desenvolvimento da Madeira

Our team at MCS has more than 20 years of experience in assisting ship owners, chartering companies and yachting companies in registering their vessels and yachts in the Madeira International Shipping Register and in incorporating and managing the respective companies within the Madeira International Business Center. For more information do not hesitate to contact us.

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Regressar a Portugal

Depois de anos a fio a trabalhar no estrangeira, regressar a Portugal possui vantagens fiscais e o caminho para as obter é através do regime dos Residentes Não Habituais (RNH) aprovado pelo Decreto-Lei n.º 249/2009. O regime dos RNHs o qual visa atrair para Portugal, não só profissionais altamente qualificados, mas também beneficiários de pensões estrangeiras, de entre os quais os antigos emigrantes.

Apesar deste regime ter especial importância para os emigrantes que pretendam voltar a Portugal, o mesmo parece continuar muito desconhecido junto da nossa comunidade emigrante. Em 2016 existiam cerca de 10.684 RNHs em Portugal, contudo a sua a sua esmagadora maioria estrangeira.

Ao abrigo do regime dos RNH, os emigrantes (ou qualquer outra pessoa) que se qualificarem como beneficiários do mesmo desfrutam durante um período consecutivo de 10 anos de isenção de IRS sobre os seus rendimentos passivos (rendas, rendimentos de capitais, e rendimentos derivados de mais-valias) desde que obtidos no estrangeiro.

Este regime permite que os rendimentos acima referidos estejam isentos (já as pensões são tributadas a uma taxa fixa de 10%) de tributação em Portugal desde que possam ser tributados no país da fonte conforme o acordo internacional para eliminar a dupla tributação em vigor, e não sejam considerados como obtidos em Portugal de acordo com a legislação interna.

Nos casos em que não exista acordo internacional para eliminar a dupla tributação, os rendimentos devem ser efectivamente tributados no outro país, território ou região, desde que os rendimentos não sejam considerados como obtidos em território português.

Porém, é importante referir que a isenção prevista na Lei não abrange rendimentos passivos obtidos em territórios considerados como paraísos fiscais pelo Ministério das Finanças, como Andorra, Bahamas, Ilhas Virgem Britânicas (BVI), Liechtenstein, entre outros.

Tendo em conta as condições acima descritas, um emigrante, desde que cumpra todos os requisitos que lhe são legalmente exigidos, pode contar com 10 anos sem pagar IRS sobre as pensões obtidas no país para o qual tenha emigrado no passado. O mesmo se aplica aos investimentos realizados, quer no país para o qual emigrou, quer noutro país onde tenha realizado investimentos.

O regime dos RNH é também favorável aos emigrantes que pretendam continuar a desenvolver a sua actividade profissional aquando do seu regresso a Portugal. O regime garante, também por um período de 10 anos, uma taxa de IRS de 20% sobre as actividades de elevado valor acrescentado, com carácter científico, artístico ou técnico, e independentemente do valor do salário auferido.

Destas actividades de elevado valor acrescentado destacam-se os administradores, os gestores, os consultores, os auditores, os artistas, os designers e os médicos. A lista prevista na Lei abrange maioritariamente actividades que exijam um elevado grau de formação e especialização as quais podem também ter relevância para os expatriados que trabalham no sector hoteleiro madeirense e desempenham funções de chefia ou cargos intermédios.

Ao abrigo do regime dos RNH qualquer cidadão nacional ou estrangeiro residente, para efeitos fiscais, em território português, pode beneficiar do regime desde que não tenha sido considerado residente em território português em qualquer dos cinco anos anteriores ao ano relativamente ao qual pretenda que tenha início a tributação como residente não habitual.

Ainda que um emigrante que volte para Portugal possa rapidamente obter o seu registo junto da Autoridade Tributária como RNH, é altamente recomendável que o mesmo procure aconselhamento fiscal dada a sua, por vezes, complexa, ou extensa, estrutura patrimonial.

Sem uma análise cuidada do seu património e aconselhamento técnico adequado o emigrante arrisca-se a não beneficiar do regime e, consequentemente, a ser tributado à luz do regime geral de tributação das pessoas singulares residentes no país com taxas que podem atingir os 48%.

Há vantagens fiscais que os nossos emigrantes desconhecem quando regressam que podem ser uma merecida recompensa pelos os longos anos em que labutavam no estrangeiro para terem uma reforma sem preocupações na sua terra e junto dos seus familiares.

A equipa da MCS conta mais de 20 anos de experiência, assistindo todos aqueles que querem regressar a Portugal ou à Região Autónoma da Madeira. Para mais informações não hesite em nos contactar.

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A Zona Franca da Madeira

Portugal dispõe de uma das ferramentas de política fiscal mais importantes na Europa, a Zona Franca da Madeira, internacionalmente conhecida como Centro Internacional de Negócios da Madeira (CINM).

Destinada à internacionalização das empresas portuguesas e estrangeiras, esta ajuda de Estado, prevista no Estatuto dos Benefícios Fiscais e devidamente aprovada pela Comissão Europeia, assenta no facto da Região Autónoma da Madeira ser considerada uma região ultraperiférica (RUP) da União Europeia, carecendo como tal de estímulos de fomento ao sector os serviços transacionáveis na Região.

As empresas licenciadas no âmbito do CINM beneficiam de uma das mais baixas taxas de IRC da UE, i.e. 5% sobre todas atividades levadas a cabo com entidades não residentes, fazendo da Madeira um destino 100% português para investidores nacionais e estrangeiros, com a devida validação por parte das autoridades portuguesas e europeias.

Esta plataforma de internacionalização a partir do Atlântico, a qual conta como uma “pool” de mão de obra qualificada, coloca a Madeira, e consequentemente Portugal, numa posição geoestratégica de relevo entre a Europa, a América e África.

Para além do IRC de 5%, o CINM prevê um conjunto de incentivos fiscais que abrangem também os acionistas não residentes, como por exemplo: isenção de retenção na fonte no pagamento de dividendos, na proporção resultante dos lucros que ao nível da sociedade, tenham sido tributados à taxa reduzida de IRC ou que, não o sendo, derivem de rendimentos obtidos fora do território português; isenção de retenção na fonte no pagamento de juros, royalties e serviços.

Empresas de trading de mercadorias, e-business, tecnológicas, telecomunicações, call-centers, serviços de consultadoria e marketing, gestão de propriedade intelectual, desenvolvimento de projetos imobiliários, transportadoras marítimas ou de gestão de participações sociais, podem todas beneficiar do regime fiscal em vigor da Zona Franca da Madeira (atualmente conhecido como IV Regime), o qual permite aos investidores uma poupança fiscal que se traduz numa maior disponibilidade financeira para reinvestirem nos seus colaboradores e na sua atividade empresarial, alavancando assim a economia regional e nacional.

Os benefícios fiscais previstos no âmbito institucional da Zona Franca da Madeira assentam em requisitos obrigatórios de substância económica, a saber: a criação de um certo número de postos de trabalho, a serem preenchidos por residentes fiscais na Região Autónoma da Madeira (independentemente da sua nacionalidade), e cujo número variará em função do lucro tributável estimado para cada ano; e a realização de investimento no valor mínimo de 75 mil euros (em ativos fixos tangíveis ou intangíveis) se menos de 6 postos de trabalho forem criados.

A regulação e transparência em que assenta todo o regime da Zona Franca da Madeira, e que importa a sujeição de todas as empresas nela licenciadas às mesmíssimas obrigações que as demais empresas portuguesas (“Regime Geral de Tributação”) de reporte fiscal, regulatório e estatístico, conferem um elevado grau de confiança e de rigor.

Exatamente pelas razões acima expostas, em 2018 cerca de 28% das empresas a operar na Zona Franca resultam investimento de capital português e 77% das empresas resultam de investimento Europeu, evidenciando assim o enorme potencial económica de regime fiscal.

auctor Miguel Pinto-Correia & Lília Caldeira

MCS and its team has more than 20 years of experience in assisting corporate and private clients wishing to relocate to Madeira. For more information on our services please do no not hesitate to contact us.

 

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Portugal’s E-Residency

In an effort to promote investment in the country and attracting digital nomads, freelancers, startups and digital entrepreneurs, the Portuguese Government approved Resolution of the Council of Ministers no. 30 / 2020, which sets ou the Action Plan for the Digital Transition (“PATD”) on April 21, 2020. This plan is in line with policies defined by the European Union for the period 2021-2027, aiming at innovation, digitalization, economic transformation of the Single Market.

Under said plan the Government has establish 12 sub-plans to be carried out in accordance with the foreseen digital transition strategies, two of them being of extreme importance for investors and expats alike: the E-Residency Program and the Free Tech Zones.

The E-Residency Program, similar to the one implemented by Estonia in 2014, aims at facilitating access by non-Portuguese to Portuguese services such as company formation, banking, payment processing, and taxation. The program will give the e-resident a smart card which they can use to sign documents and carry out business in the country.

Portugal’s E-Residency Program, foreseen to be launched in early November this year, will allow investors to submit all the needed documentation for application in exchange for residency kit, if said application is approved.

The other important measure foreseen in the PATD is the creation of Free Tech Zones, physical spaces/locations where high-end technologies (such as 5G or self-driving vehicles, for example) can be tested and displayed.

Free Tech Zones will be managed in such a way that specific legislation and regulations will be enacted in order guarantee that enough legal flexibility exists to promote research and development (R&D).

Both these programs are expected to actively promote the development of Portuguese tech companies and research centers through the acceleration of development and testing processes and the creation of Portuguese knowledge and intellectual property.

In this way, these programs will promote Portugal’s positioning in R&D, national resources and participation in international projects, as well as the attraction of innovative projects, foreign investment related to emerging technologies and qualified workers.

The existence and development of such programs can be integrated with Portugal’s attractive taxation system available not only for individuals but also to companies, i.e. the Non-Habitual Tax Resident (NHR) program and the Madeira International Business Center (MIBC).

E-Residents that, at a later stage, wish to relocate to Portugal can benefit from a set of personal income tax exemptions or flat rates, depending on their income source, while those looking into incorporate a company can opt for the MIBC framework, allowing their business to benefit from Europe’s lowest corporate income tax rate, i.e. 5%.

auctor Miguel Pinto-Correia

MCS and its multidisciplinary team, with over 20 years of experience, has been assisting investors and expats wishing to make a move to Portugal. Fore more information about our services do not hesitate to contact us.

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COVID-19 Update – Getting to Madeira

The mandatory quarantine for passengers disembarked in Madeira will end from July 1, and it will be substituted by the obligation to present or perform a test to COVID-19 on arrival.

“For the month of July, it is assumed as a necessary condition to enter the Autonomous Region of Madeira, the presentation of a negative PCR test, performed in the last 72 hours, prior to boarding, or, alternatively, the performance of a PCR test at arrival”. – Miguel Albuquerque, President of the Regional Government of Madeira

The cost of the test on arrival is to be borne by the Regional Government.

As of June, all passengers who present a PCR test along the same lines are exempt from “any prophylactic isolation”, however, they will be subject to monitoring by Madeira’s health authorities through a smart phone app or regular contacts.

“Passengers who have a negative test, can disembark and then must provide voluntary monitoring, via their mobile phone, to the health unit, or are accompanied using traditional methods,” Miguel Albuquerque, President of the Regional Government of Madeira

On the other hand, all passengers who arrive at Madeira airports without PCR testing during the month of June are still required to comply with quarantine in hotel units.

Madeira’s Regional Government strict measures in fighting COVID-19, have made it possible for Madeira to only have, as of May 21, only 90 cases (of which 64 have already recovered) and 0 deaths.

fons: LUSA, via JM-Madeira

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Portuguese Participation Exemption

Participation exemption is, under Portuguese law, a tax exemption applicable to dividends received from a subsidiary and any possible capital gains ensuing from the sale of that participation.

Under the participation exemption regime companies can do business and invest worldwide in a tax efficient manner and even benefit from Portugal’s lowest corporate tax rate under the Madeira International Taxation Regime, should they pursue other economic activities apart of that of a pure holding company.

This post of ours focus on the participation exemption regime from a Portuguese holding company standpoint, nevertheless should the Portuguese company a subsidiary, rather than a parent company, the same regime still applies, under conditions foreseen in EU law and the parents’ company home country.

Under the Portuguese participation exemption regime is applicable to the following types of income/transactions:

  • Profits and reserves distributed to Portuguese companies by their subsidiaries shall not contribute to their taxable profit. Provided that these derive from:
    • The taxpayer directly, or directly and indirectly, holds at least 10% of the share capital or voting rights in the subsidiary.
    • The shares are held for a consecutive period of at least one year or maintained for that period.
    • The taxpayer is not covered by the tax transparency regime.
    • The subsidiary is subject to and not exempt from corporate income tax, an income tax mentioned in Article 2 of the Council Directive 2011/96/EU, or a tax similar to corporate income tax with a legal rate that is not lower than 60% of the standard corporate income tax rate.
  • Capital losses or gains occurring due to the transfer of shares in these companies at a cost in any form, and regardless of the percentage of the share transferred, shall not contribute to their taxable profit. Provided that the following requirements are met at the date of transaction:
    • The shares are held for a consecutive period of at least one year.
    • The taxpayer directly, or directly and indirectly, holds at least 10% of the share capital or voting rights in the entity from which the shares are transferred.
    • The taxpayer is not covered by the tax transparency regime (i.e. imputation of profits to individual or corporate shareholders, regardless of effective distribution).
    • The entity from which shares are transferred is not resident in a tax haven.
    • The assets of the entity from which shares are transferred are not directly or indirectly comprised of more than 50% of real estate located in Portugal and acquired on or after 1 January 2014 (except real estate allocated to an agricultural, industrial, or commercial activity that does not consist of buying and selling real estate).
  • Profits, reserves, capital gains and loses realized by a Portuguese permanent establishment may also benefit from the participation exemption regime provided that said Portuguese permanent establishment is of:
    • An European Union resident entity, which complies with the requirements foreseen in Article 2 of the Council Directive 2011/96/EU.
    • A European Economic Area resident entity, subject to tax cooperation obligations similar to the ones established within the European Union, provided that the entity complies with requirements that are comparable to those foreseen in Article 2 of the Council Directive 2011/96/EU.
    • An entity resident in a state with which Portugal has concluded a double tax treaty (except if resident in a tax haven) that foresees exchange of information and is subject to and not exempt in its state of residence from an income tax similar to the Portuguese Corporate Income Tax, which legal rate is not lower than 60% of the standard Portuguese corporate income rate.

As previously mentioned, profits, reserves, and capital gains or loses deriving from such jurisdictions cannot benefit from the Portuguese participation exemption regime.

Last, but certainly not least, tax credit for economic and legal double taxation are available to companies, in the cases foreseen in the law, when said company does not qualify for the participation exemption regime.

NOTE – list of current tax havens: 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, Porto 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.

This article is intends to be an introduction to the Portuguese participation regime, specific professional advice should be hire in order to analyse its application to one’s specific circumstances.

MCS and its team have more than 20 years of experience in assisting international investors and expats in Portugal and in the Autonomous Regions of Madeira. For more information on our services please do not hesitate to contact us.

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Madeira to have unique “COVID19” safe certification

According to the Regional Government, Madeira is the first tourism region to have a destination certification process underway by an internationally recognized multinational.

“Madeira was the first region in Portugal to have a manual of good referencing practices for the sector, participated by the sector, and it is the first tourism region that we know, until now, with an ongoing certification process”, said Eduardo Jesus, Secretary for Tourism, in an interview with the Portuguese news agency, Lusa.

The Secretary for Tourism pointed out that the epidemiological situation of this autonomous region in the context of the COVID-19 pandemic, with 90 cases, 60% of which were recovered, and the absence of deaths caused by the new coronavirus, make Madeira “a very unique and quite differentiated ”, placing this destination“ on a completely different level from the markets with which it regularly works”.

A Handbook of Good Practices, which was prepared with “contributions and ideas from stakeholders“, being a document“ that does is not closed, it has a daily version, is available on the ‘website ‘from the Regional Directorate for Tourism’ and is in permanent update.

This handbook “served as a basis for thinking ahead, given the enthusiasm of the sector and the quality that has been achieved in the document”, showing that “it could be a good basis for certifying Madeira” as a “COVID19 travel safe destination”, he stressed.

The Secretary of Tourism announced that the Regional Government invited the multinational Société Générale de Surveillance (SGS), for being “one of the most credible entities with regard to these certification processes”, referring that, through this project, Madeira is “on the crest” the wave in the four corners of the world quickly ”.

“What we are doing is differentiating Madeira through its credibility, as “ no one will leave the house to enter an adventure of danger to health ”. The government official mentioned that this investment also involves the Madeira Promotion Association, with members being exempt from any costs of this certification this year.

“We want to have the first certifications in July”, he pointed out, explaining that this process “is distinct” from the seal (Covid Safe Tourism) which has “a more immediate logic”, a “short reach”, just filling out a survey, while “Certification requires the implementation of practices”, depending on the verification of the proper implementation “.

Eduardo Jesus emphasized that certification “is a different commitment and one does not invalidate the other”.

“Here the key is that what you do, you do it well. And to do well is not being able to create a false expectation for the traveller ”, based on three prevention criteria, which“ must always be verified in any circumstance: social distance, use of personal protective equipment and health security ”.

“If we apply these three directories at any point during the trip, we have the process safeguarded. That is, before getting on the plane, on the plane, when leaving the plane, when making the first ground transportation, when going to the accommodation, when circulating inside and outside the accommodation, at all these moments there are three major lines to check orientation ”, he stressed.

The Madeiran government official also maintained that everything that is done must “attend to these three universes: whoever visits, who works and who resides”.

abridged from LUSA – full text in Portuguese available here.

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