Under the Madeira International Business Center (MIBC) regime, Company Incorporation in Madeira is an EU-approved solution that may benefit international companies operating across different jurisdictions. Under the MIBC regime, duly licensed companies are entitled to the following corporate taxation benefits:
- 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 total exemption from withholding tax on dividend remittances from the Madeira companies, provided that they are not residents in jurisdictions included in Portugal’s “black list”.
- Portuguese corporate shareholders will also be exempt if holding a participation of at least 10% for 12 consecutive months;
- Full access to the participation exemption regime;
- Exemption on capital gains payments to shareholders not resident in blacklisted jurisdictions;
- No withholding tax on the worldwide payment of interest, royalties and services;
- Documents, contracts and other operations requiring public registration carried out by MIBC companies will benefit from an 80% exemption on the stamp (capital) duty, provided that other parties involved are not residents of Portuguese territory or are also companies operating within the legal framework of the MIBC;
- Companies licensed in the MIBC will also benefit from an exemption of 80% applicable to municipal property tax and property transfer tax, regional and municipal surtax, and other local taxes.
The above benefits, in conjunction with access to Portugal’s network of treaties to avoid double taxation and participation exemption regime, makes the island a perfect place to conduct business.
Given the above, company incorporation in Madeira can be a good match for holding companies, commissionaire companies, trading companies, patent royalties, dividend reduction, tax sparing and CFC blocking.
Whether a pure or mixed holding company, those operating within the institutional framework of the Madeira International Business Centre benefit from the participation exemption regime abovementioned. This means that if substance and participation exemption requirements are met, MIBC companies obtain, among others, the following benefits:
- 0% withholding taxes on dividends of Portuguese, EU/EEA and third-country companies;
- Access to tax credit on EU/EEA and third-country dividends;
- Exempt method for permanent foreign establishments.
Commissionaire and Trading Companies
Companies operating within the MIBC and acting as “middle-man” between producers and retailers, receiving commission from either producer, retailer, or both, will have their commissions received taxed at 5%. The same applies to MIBC companies selling from a producer to a retailer. All MIBC tax benefits are subject to compliance with the economic substance requirements foreseen under the law.
Patent Royalty and Service Companies
MIBC-licensed companies, complying with the economic substance requirement, benefit from a 0% withholding tax on licensing patent royalties and service payments.
Other uses of company incorporation in Madeira
Company incorporation in Madeira may have other uses, provided economic rationale for the operation and economic substance requirements are met by the company itself and the group structure in which the company operates. One of the most successful uses of company incorporation in Madeira is in the shipping sector and in conjunction with the Madeira International Shipping Register.
Our team of professionals, with more than 20 years of experience with Portuguese and Madeiran corporate and tax law, is ready to assist you in expanding your business successfully.
This article is provided for general information purposes only and is not intended to be, nor should it be construed as, legal or professional advice of any kind. Should you have any questions or require our assistance with the above, please do not hesitate to contact us.
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