Portugal continues to attract Americans seeking lifestyle, stability, and long-term value in Europe. Yet many overlook the fiscal advantages available to those who structure their affairs correctly. Madeira, Portugal’s autonomous Atlantic region, offers an exceptionally competitive environment combining EU legal certainty with one of Europe’s lowest corporate tax rates.
Below, MCS outlines 8 tax opportunities for US expats living in Portugal, with a focus on Madeira as the ideal base for personal and corporate efficiency.
1. Benefit from Portugal’s Double Taxation Treaty with the United States
The Portugal-US Double Taxation Agreement (DTT) ensures that income is not taxed twice. It allocates taxing rights between both countries and provides methods to eliminate double taxation through credits or exemptions.
For US expats, the DTT coordinates Portuguese and American tax systems, defining where income from employment, pensions, or dividends is taxed. Correct treaty application is essential for avoiding excess US tax and ensuring compliance with both jurisdictions. MCS assists clients in interpreting the treaty correctly and aligning it with IRS obligations.
2. Explore the International Business Centre of Madeira (MIBC)
The International Business Centre of Madeira (MIBC) offers one of the most competitive corporate tax frameworks within the European Union. Companies licensed under the MIBC pay a 5% corporate income tax rate on qualifying income, provided they maintain real substance in Madeira.
Additional benefits include:
- Exemption from withholding tax on dividends, interest, and royalties paid to non-residents.
- Participation exemption on dividends and capital gains from eligible subsidiaries.
- Up to 80% reductions in municipal property tax (IMI), property transfer tax (IMT), and stamp duty.
- Full access to Portugal’s double tax treaties network.
- For US investors relocating business functions to Europe, Madeira provides legitimate, EU-approved efficiency and a professional ecosystem that meets both Portuguese and OECD standards.
3. Access Reduced Personal Income Tax in Madeira
Portugal’s personal income tax (IRS) system is progressive, but Madeira applies lower regional rates than the mainland. This difference benefits expatriates receiving pension, salary, or investment income while residing in Madeira.
Although the Non-Habitual Resident (NHR) regime closed to new applicants in 2023, existing beneficiaries continue to enjoy the benefits of their ten-year status. For the latest arrivals, Madeira’s lower effective tax rates, combined with treaty relief, still provide significant long-term savings.US expats should evaluate residency timing carefully to optimise tax exposure between the two systems.
4. Optimise Capital Gains and Dividend Income
Portugal offers generous participation exemptions for capital gains and dividends earned through qualifying corporate structures. Under the participation exemption regime, dividends received by Portuguese companies are exempt from tax if:
- The company holds at least 10% of the subsidiary for 12 months, and
- The subsidiary is not located in a blacklisted jurisdiction.
- Similarly, capital gains realised on the sale of such shares are exempt under equivalent conditions. For US citizens investing through Madeira, this framework enables efficient repatriation of profits while ensuring full compliance with EU and treaty regulations.
5. Benefit from Tax Credits and Treaty Relief on Foreign Income
Even when income is taxable in both jurisdictions, Portugal offers unilateral tax credits to prevent international double taxation. These credits enable expats to deduct foreign taxes paid, including US federal or state taxes, against their Portuguese liability, where applicable.
Combined with treaty mechanisms and US foreign tax credits, this coordination helps prevent double taxation while ensuring complete transparency. Effective planning requires aligning reporting periods and income classifications between the two countries, an area where professional assistance is crucial.
6. Structure Your Activity Through a Portuguese Company
Many US expats operate remotely or manage international ventures. Incorporating a company in Madeira allows it to benefit from Portugal’s favourable corporate tax rates, access to the EU market, and a simplified administrative environment.
A Madeira company under the MIBC can engage in consulting, trading, or digital services while maintaining compliance with EU substance requirements. This structure also enables efficient remuneration strategies through dividends and management income, supported by the participation exemption and treaty network.MCS assists with incorporation, tax representation, and ongoing compliance to ensure that corporate and personal tax strategies remain aligned and effective.
7. Explore Estate and Succession Tax Advantages
Portugal imposes no inheritance or gift tax on transfers between direct family members (parents, children, or spouses). Only stamp duty applies to non-family transfers, typically at a rate of 10%.
This makes Madeira an attractive location for family succession planning, allowing US expats to hold European assets under clear, predictable rules. When combined with US estate planning, this framework offers continuity and protection across both jurisdictions.
8. Plan Residency and Substance Strategically
Tax residency in Portugal is established after spending 183 days in the country or maintaining a habitual residence there. For US citizens, coordinating residency dates helps determine when Portuguese taxation begins and how to apply treaty relief effectively.
Corporate investors must also ensure that their investments in Madeira have economic substance, are managed effectively, involve local employees, and involve tangible operations. These factors confirm eligibility for the 5% MIBC rate and sustain compliance with EU and OECD standards.MCS provides ongoing support to ensure that operational, legal, and accounting elements align with both local regulations and international best practices.
Conclusion
Portugal, and Madeira in particular, offers a robust and transparent framework for optimising global income, investments, and business structures. For Americans seeking to combine lifestyle advantages with fiscal efficiency, these 8 tax opportunities for US expats living in Portugal demonstrate why the region remains a leading European destination for long-term relocation and international business.
Madeira Corporate Services (MCS) has over 30 years of experience supporting investors, companies, and expatriates. Our multidisciplinary team ensures compliance, efficiency, and full integration with Portuguese and EU regulations.
The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more
