In today’s globalized maritime industry, selecting the right international ship register has become critical for vessel owners and operators. Madeira, a Portuguese archipelago, has emerged as a compelling choice for those seeking to optimize their maritime operations. Its international ship register offers a unique blend of advantages that can significantly impact a company’s bottom line and operational flexibility.
This article delves into the five key advantages of registering ships internationally in Madeira. From its competitive tax regime to its cost-effective registration process, Madeira’s international ship register provides many benefits. The discussion will cover Madeira’s strong international standing, flexible registration options, and advantageous crew regulations. By exploring these factors, maritime professionals can gain valuable insights to make informed decisions about vessel registration strategies.
International Ship Register: 5 Key Advantages
Competitive Tax Regime
Low Corporate Tax Rate
The International Business Centre of Madeira offers a highly attractive tax regime for corporations. One of the most significant advantages is the reduced corporate income tax (CIT) rate of 5%. This competitive rate applies to new entities incorporated within the MIBC framework until December 31, 2024.
The tax incentive is tied to job creation, with the applicable taxable income determined by the number of jobs created. This structure encourages companies to contribute to local employment while benefiting from favourable tax conditions.
Dividend Distribution Benefits
Shareholders of companies licensed to operate in the MIBC enjoy substantial tax benefits. Non-resident shareholders are exempt from Personal Income Tax (PIT) or Corporate Income Tax (CIT) on profits distributed to them. This exemption applies to:
- Profits made available, including the amortization of shares without capital reduction
- Interest and other forms of remuneration for loans, grants, or advances of capital
These benefits enhance Madeira’s attractiveness to international investors and company owners.
International Tax Treaty Access
Companies registered in Madeira’s International Ship Register (MAR) gain access to Portugal’s extensive network of double taxation treaties (DTTs). This access provides a significant competitive advantage over other international markets. Key benefits include:
- Automatic VAT registration
- Exemption from withholding taxes on dividends, interest, royalties, and service fees paid to non-residents
- Exemption from capital duty, notary, and registration fees
Furthermore, Madeira’s companies can benefit from the Portuguese participation exemption regime for dividends and capital gains, subject to certain conditions. This regime applies when:
- A minimum shareholding of 10% is held for 12 consecutive months
- The subsidiary is subject to taxation at a rate of at least 60% of the Portuguese general rate
- The subsidiary is not resident in a jurisdiction included in Portugal’s “blacklist.”
These tax advantages, Madeira’s strategic location, and modern infrastructure make it an attractive option for international ship registration and maritime business operations.
Strong International Standing of Madeira’s International Ship Register
EU Register Credibility
The International Shipping Register of Madeira (MAR) has established itself as a credible and secure EU Registry. It offers full access to EU cabotage, providing significant advantages for vessels registered under its flag. MAR was created within the Madeira International Business Center (MIBC) to serve as a reliable alternative to other international registers while maintaining high technical discipline and safety standards characteristic of conventional shipping registers.
One key factor contributing to MAR’s credibility is its commitment to international conventions. All vessels registered under MAR fly the Portuguese flag, and all international conventions ratified by Portugal apply to and comply with MAR. This adherence to international standards has enhanced MAR’s reputation in the global maritime community.
Whitelisting on Paris and Tokyo MOU
MAR’s commitment to quality and safety has resulted in its inclusion on the Paris MOU White List. The Paris MOU White List is a prestigious recognition that indicates a flag state’s compliance with international maritime conventions. It is based on the total number of inspections and detentions over a 3-year rolling period for flags with at least 30 inspections.
The White List is published annually, effective from July 1 to June 30 of the following year. Being on this list signifies that vessels flying the Portuguese flag through MAR are considered low-risk and are subject to fewer inspections in ports, leading to reduced delays and costs for shipowners.
Recognition by United States Qualship 21
MAR has also gained recognition from the United States Coast Guard’s Qualship 21 program. This program verifies whether foreign-flagged vessels operating in U.S. waters comply with applicable international conventions, U.S. laws, and U.S. regulations, particularly regarding quality and safety standards.
Flag administrations must meet specific eligibility criteria outlined in the Coast Guard’s Work Instruction (CVC-WI-002) to qualify for the Qualship 21 program. MAR’s inclusion in this program reinforces its credibility and prestige internationally. It demonstrates that MAR can compete with the biggest shipping registers in Europe and beyond.
This recognition significantly impacts the Portuguese merchant fleet, as most vessels are registered in MAR. It contributes to the success of MAR’s strategy to establish itself as a quality and credible flag, further enhancing its appeal to international shipowners and operators.
Flexible Registration Options of Madeira’s International Ship Register
The International Shipping Register of Madeira (MAR) offers a range of flexible registration options that cater to the diverse needs of shipowners and operators. These options provide significant advantages in terms of operational flexibility and financial arrangements.
Bareboat Charter Registration
MAR allows for temporary registration of vessels under bareboat charter arrangements. This option is available for both “in” and “out” scenarios, with a maximum duration of 5 years, which can be renewed. This flexibility enables vessels to operate under different flags during specific periods, accommodating various operational requirements. Importantly, the temporary registration can be cancelled by mutual agreement before its termination, offering additional flexibility to shipowners.
No Head Office Requirement
One key advantage of registering with MAR is the absence of nationality requirements for shipowners. Individuals or corporate entities, regardless of their nationality, can register their vessels with MAR. Furthermore, shipowners are not obligated to have their headquarters in Madeira. Instead, they can appoint a local legal representative with adequate powers to fulfil the registry’s requirements. This arrangement significantly reduces administrative burdens and costs for international shipowners.
Choice of Legal System for Mortgages
MAR provides a flexible mortgage system that enhances its appeal to international shipowners and financiers. The registry allows the mortgagor and mortgagee to choose the legal system of a specific country to govern the mortgage terms. This flexibility enables shipowners to optimize their financial arrangements according to their preferences and requirements. The ability to select a familiar or advantageous legal system for mortgages can lead to more favourable financing terms and increased confidence for both parties involved in the transaction.
In addition to these flexible options, MAR welcomes various entities involved in maritime transport, including companies, branch offices, and other legal or judicial representations. These entities can apply for vessel registration with MAR regardless of whether they have a registered office in Madeira. This inclusive approach expands the range of businesses benefiting from MAR’s registration services.
Advantageous Crew Regulations
Flexible Nationality Requirements
The International Shipping Register of Madeira (MAR) offers significant flexibility in crew composition. Only 30% of the safe manning of the vessel needs to be “European,” which includes nationals from EU countries, non-EU European countries like Russia and Ukraine, and citizens of Portuguese-speaking countries. This requirement allows for a diverse crew while maintaining safety standards. In some cases, this requirement may even be waived if properly justified, providing even greater flexibility for shipowners.
For vessels owned by Spanish entities, a similar authorization extends to official Spanish-speaking countries, further broadening the pool of eligible crew members. This flexible approach to crew nationality requirements enables shipowners to optimize their workforce while adhering to international standards.
Tax Exemptions for Crew
One of the most attractive features of registering with MAR is the tax exemption for crew members. Any income received by the crew of ships registered in MAR is exempt from any taxation in Portugal. This tax-free status applies to all crew members, regardless of nationality, making it an extremely appealing option for maritime professionals.
This tax exemption significantly impacts the overall compensation package for crew members, potentially leading to higher net incomes and increased job satisfaction. This can translate into a competitive advantage for shipowners when recruiting and retaining skilled maritime personnel.
Simplified Social Security Regime
MAR offers a flexible social security regime for crew members and their employers. Non-Portuguese crew members and their employers are not obligated to contribute to the Portuguese social security system, provided an alternative public or private system covers them. This arrangement allows for greater flexibility in managing crew benefits and can lead to cost savings for both employees and employers.
Portuguese crew members are subject to a reduced contribution rate to the national social security system. Additionally, crew members and their respective employers of ships registered in MAR have the option to adopt a voluntary insurance or social security system. This flexibility enables them to choose the most suitable social security arrangement based on their needs and circumstances.
The combination of tax exemptions and a flexible social security regime creates a highly advantageous environment for both crew members and shipowners, contributing to the overall attractiveness of registering vessels with MAR.
Cost-Effective Registration
Competitive Fee Structure
The International Shipping Register of Madeira (MAR) offers a competitive fee structure for vessel registration. Upon registration, vessels are subject to a fixed fee of 1,800 euros plus a variable fee calculated according to the net tonnage. The annual fee comprises a fixed fee of 1,400 euros plus a variable fee based on a sliding scale. For example:
- Up to 250 NT: 200 Euros
- From 250 NT up to 2,500 NT: 0.80 euros per NT
- From 2,500 NT up to 20,000 NT: 0.40 euros per NT
- Above 20,000 NT: 0.25 euros per NT
It’s worth noting that registration fees for passenger vessels, tugboats, and other auxiliary embarkations are increased by 15% and annual fees by 30%.
Absence of Annual Tonnage Taxes
One significant advantage of registering with MAR is the absence of annual tonnage taxes. This policy reduces shipowners’ operational costs, making MAR an attractive option for international ship registration.
Reduced Administrative Costs
MAR offers several features that lead to reduced administrative costs for shipping companies:
- Automatic VAT registration: Companies licensed to operate within MAR benefit from automatic VAT registration, streamlining the tax compliance process.
- No share capital requirements: If a company is formed within the Madeira International Business Center (MIBC) to provide maritime transportation, there are no share capital requirements.
- Exemptions from various fees: Shipping companies enjoy exemptions from capital duty, notary, and registration fees.
Furthermore, MAR provides a highly advantageous tax regime. Shipping companies licensed to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also have access to the Portuguese double taxation treaty network, which can lead to significant tax savings.
Additional tax benefits include exemption from withholding taxes on distributing dividends, interest, royalties, and service fees paid to non-residents. Under certain conditions, shipping companies may also be exempt from capital gains tax when subsidiaries are sold.
These cost-effective measures, combined with the competitive fee structure and absence of annual tonnage taxes, make MAR an economically attractive option for international ship registration.
International Ship Register: Conclusion
The advantages of registering ships in Madeira significantly impact the maritime industry, offering financial benefits, operational flexibility, and international credibility. The competitive tax regime, strong international standing, and flexible registration options create an attractive environment for shipowners and operators. In addition, the advantageous crew regulations and cost-effective registration process further enhance Madeira’s appeal as a leading destination for international ship registration.
To wrap up, Madeira’s International Shipping Register is a strategic choice for optimising vessel operations in today’s global market. Its unique combination of benefits helps reduce operational costs and provides access to a wide range of international markets and conventions. This makes Madeira a compelling option for shipowners aiming to stay competitive and efficient in the ever-changing world of maritime commerce.
FAQs
1. What are the reasons for ships to be registered in foreign countries?
Ships often register under a foreign flag—known as a flag of convenience—to bypass various standards, regulations, and controls that may be more stringent in their own countries. This practice is prevalent, as highlighted in reports by the United Nations Conference on Trade and Development (UNCTAD).
2. Why is the country of ship registration important?
The registration of a ship in a specific country establishes its nationality and is crucial for regulatory purposes. This link between a ship and a state grants the state the authority to protect the ship under international law.
3. Which country is known for registering the highest number of ships?
Panama holds the record for the largest maritime register, followed by Liberia. Interestingly, landlocked countries like Luxembourg and Mongolia also have significant ship registries.
4. Which vessels are required to be registered?
According to international law, every ship must be registered in a country as its flag state. The laws of the flag state govern the ship.
Remember, this article provides a general overview of Madeira’s international ship register. For more detailed information or to obtain it, we recommend seeking the expertise of our team at MCS, who are here to support you.
Rosana Rodrigues is a co-founder and partner of TFRA Law Firm. Her work mainly involves advising foreign investors in Portugal, particularly in areas of Corporate and Tax law. She has also worked extensively in Shipping law… Read more
