The Madeira’s Corporate Tax Rate is a key factor attracting international businesses to the region. Companies operating within the International Business Centre of Madeira (IBC) benefit from one of the most competitive tax regimes in Europe. Understanding the savings, incentives, and compliance requirements is essential for any business considering this jurisdiction.
What Is the Madeira Corporate Tax Rate?
The standard corporate tax rate for companies licensed in the IBC is just 5%. This reduced rate applies until the end of 2027, making Madeira a highly attractive location for international operations. However, the general corporate tax rate in Portugal is 20%, which applies to income derived from activities with resident entities outside the IBC regime. Therefore, the 5% rate represents a significant saving for eligible companies.
Alternatively, companies that do not wish to benefit from the IBC corporate tax rate and/or operate in the Portuguese market can register in Madeira and still benefit from the island’s standard corporate tax rate of 14%, another 30 p.p. saving when compared to the mainland’s 20% corporate tax rate.
Tax Incentives and Additional Benefits
Besides the low Madeira corporate tax rate, companies can access further incentives. These include exemptions from withholding tax on dividends, interest, royalties, and capital gains, provided certain conditions are met. There is also an 80% exemption on stamp duty, municipal property tax, and property transfer tax, as well as regional and municipal surtaxes. These incentives are designed to enhance the region’s competitiveness and attract foreign investment.
Requirements for Benefiting from the 5% Corporate Tax Rate
To qualify for the reduced Madeira corporate tax rate, companies must meet specific requirements. They must create at least one job within the first six months of operation and invest a minimum of €75,000 in the first two years. If a company creates six or more jobs, the investment requirement is waived. The tax benefits are also subject to annual ceilings, which increase with the number of jobs created. If a company exceeds its ceiling, the standard corporate tax rate of 14% applies to the excess.
Compliance and Reporting Obligations
Compliance is crucial for maintaining eligibility for the Madeira corporate tax rate. Companies must keep proper books of accounts in Portuguese and in euros. They are required to submit annual tax returns, periodic VAT declarations, and other statutory filings. Auditing requirements depend on company size and turnover, with stricter rules for larger entities. Failure to comply with these obligations can result in the loss of tax benefits and potential penalties.
Social Security and Personal Income Tax
Foreign crew members on commercial vessels registered in Madeira are not required to contribute to the Portuguese social security system if they have alternative coverage. Portuguese nationals or residents must contribute at a reduced rate of 2.7%. Additionally, crew wages are exempt from personal income tax, further enhancing the attractiveness of the Madeira corporate tax rate for shipping companies.
VAT and Other Considerations
Yachts and commercial vessels engaged in charter activities benefit from VAT exemptions on importation, acquisition, and certain operations. This adds another layer of savings for companies operating in the maritime sector under the Madeira corporate tax rate regime.
Conclusion
Madeira’s corporate tax rate offers substantial savings and incentives for international businesses. However, strict compliance with regulatory and reporting requirements is essential. By understanding the full scope of benefits and obligations, companies can maximize their advantages and ensure long-term success in Madeira.
For tailored advice, consult a legal or tax professional experienced in the Madeira corporate tax rate regime.
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
