Tag Archives: company incorporation

Economic Substance

Opening a Company in Portugal

There are several ways one can open a company in Portugal, as the Portuguese Government aims at reducing bureaucracy for investors and as such it has implemented some quicker ways for investors to open a company.

In this blog post we will discussing the “traditional” procedure of opening a company Portugal, a procedure that is followed by most investors who at the time of incorporation cannot be present in country to perform all the required diligences or who prefer to have assurance of a legal team in dealing with the Portuguese bureaucracy.

Opening a company in Portugal (or Madeira) starts with the filing for the name approval certificate. The filing shall be done by one of the future company’s shareholders or by its legal representative and must clearly identify the company’s denomination, detailed corporate object (i.e. economic activities to be carried out by the company), and Portuguese address of the company’s registered office.

Application for the name approval certificate is usually completed online with the Institute of Registries and Notaries and once issued it is valid for a 3-month period as from its issuance date or renewal date.

For the name approval procedure, we recommend the shareholders suggest at least 6 different company names, in case the initial 3 are refused by the National Register of Legal Entities. A formal requirement, in case of name refusal, can be filed for with Institute of Registries and Notaries, however such procedure is time consuming and may include providing duly certified and translated documentation proving that shareholders have a solid claim for the name they have applied for.

Once obtained the company’s name approval certificate, shareholders wishing to open a company within the Madeira International Business Centre (MIBC) must submit a formal application (in Portuguese language) to Sociedade de Desenvolvimento da Madeira, the official concessionaire of the MIBC, in two copies, addressed to the member of the Regional Government of Madeira responsible for the MIBC in the name of an existing company, in Portugal or abroad, or of a company to be incorporated. All relevant information concerning the activity to be performed by the company must be included in the licence application, namely: company name and address; activity to be undertaken and corresponding NACE codes (European nomenclature of the economic activity);  total value of the investment; foreseen number of full-time tax resident job posts to be created.

Once the document(s) mentioned above are produced, the opening of the company is formalized by means of the execution of the incorporation private act which will contain detailed information on the share capital, its shareholders, its directors, the binding rules, and the articles of association of the company. The grantors’ signatures (shareholder(s) or legal representative(s)) must be legally recognized, in the presence of a notary or a lawyer with express declaration of intent to open the company.

All shareholders and members of the corporate bodies must hold a Portuguese Taxpayer Identification Number (known as NIF) and those who are not EU-Residents must also appoint a tax representative in Portugal.

The opening of a company (and the appointment of the members of the corporate bodies) will then be subject to public accessible registration. Once opening of the company is concluded, an access code to the on-line commercial registry certificate of the company is generated by the Commercial Registry Office.

The opening of the company then becomes effective for operational activity and tax purposes (including VAT) by registering the company with the Portuguese Tax and Customs Authority (AT), done by filling specific forms with the Portuguese Tax and Customs Authority which must be signed by Certified Accountant (which all companies are obliged to have under bookkeeping rules and regulations) together with the company’s legal representatives. The deadline for such procedure is 15 days after registration with the Commercial Registry Office.

Registration of the company with the Portuguese Social Security must take place within 10 business days after filing the registration with the AT and by providing the following documents: commercial registry certificate; evidence of the commencement of activity for tax purposes; document appointing corporate bodies (incorporation document or relevant minutes of the competent corporate body’s resolution); and taxpayer number of members of corporate bodies.

Directors may be exempt from social security contributions in Portugal provided they present proof of social security contributions made in country of residence with which Portugal has entered a Social Security cooperation agreement.

Our multidisciplinary team of lawyers, economists and accountants has more than 20 years of experience and is able to provide you an integrated approach to your investment and relocation to Madeira Island by operating as one-stop-shop.

The founding of Madeira Corporate Services (MCS) dates back to 1995. MCS started as a private and corporate service provider in the Madeira International Business Center and rapidly became one of the leading management firms. As a result of its position in the market, the quality of the services it has been providing for over a decade and full compliance with business ethics, MCS was awarded the Merit Certificate by SDM – Sociedade de Desenvolvimento da Madeira.

auctor Lília Caldeira & Miguel Pinto-Correia

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Company formation in Portugal

Not many investors think of company formation in Portugal, and those who consider Portugal might to know why Madeira is the place to be.

“Portugal’s history is made of discoveries, entrepreneurship, creativity and permanent innovation. Portugal is a modern, sophisticated, and future-oriented country. Capable of combining tradition and innovation in what we do in a surprising way. A welcoming country, filled with sunshine, breathtaking landscapes, and a unique gastronomy. Open and multicultural, the country can gather the best of its experience and knowledge to originate solutions that push forward global businesses. Portugal, a country that will surprise you.”

One thing that surprises all investors in Portugal is its corporate tax system, more specifically the one available under the Madeira International Business Centre (MIBC).

A favourable tax landscape

Developed in the 1980s, the MIBC was conceived by the Portuguese Government to attract international investment, namely international services providers in the areas of international trading, e-business and telecommunications, management services, consulting services, as well as the ownership of intellectual property, the development of real estate investments or the holding of participations.

 Type of entity incorporated

MIBC

Autonomous Region of Madeira

Portuguese Mainland

Resident entities and permanent establishments of non-resident entities

5%

20%

21%

Resident entities characterized as a small or medium enterprises, on the first € 25 000 of taxable profit

13%

17%

Add the competitive corporate taxation regime to the tax benefits available to expats and former Portuguese emigrants wishing to relocate to Portugal, the Non-Habitual Resident (NHR) tax regime. And one will find a comprehensive and desirable tax regime to expand one’s international business to Portugal. In fact, under the NHR tax regime those qualifying can 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.

Company formation / incorporation

Generally speaking, in order for one to incorporate a company in Portugal, the following steps need to be followed:

  1. Verify the business name and make a reservation with the Portuguese Commercial Register.
  2. Appoint a legal representative for the company in Portugal.
  3. Draft the Articles of Association with information about the owners, business activities, etc.
  4. Open a bank account for depositing the share capital.
  5. Apply for licenses and permits in accordance with the company’s activities.
  6. Register for tax purposes and social contributions in Portugal.

Those looking into incorporating a company within the MIBC need to apply for a MIBC license. The license’s application (to be submitted in Portuguese language) must be filed to Sociedade de Desenvolvimento da Madeira, the official concessionaire of the MIBC, in two copies, addressed to the Cabinet of the Vice-President of the Regional Government of Madeira in the name of an existing company, in Portugal or abroad, or of a company to be incorporated. Branches of existing companies may also be licensed.

All relevant information concerning the activity to be performed by the company must be included in the license application, namely:

  1. Company name and address.
  2. Activity to be undertaken and respective NACE code (European nomenclature of the Economic Activity).
  3. Total value of the investment.
  4. Indication of the number of jobs to be created.

In the case of a successful application, the license is deemed to be granted in favour of the company once the applicant furnishes proof of the formation and registration of such company. All documents in support of the license application must be duly translated into Portuguese and legalized.

Types of companies

Most investors opt for a private limited company (sociedade por quotas – LDA) where liability is limited by the contribution to the capital. LDA type of companies must established by at least two founders with a minimum share capital of EUR 2, although it is recommended that it should be at least of EUR 1000. All the shareholders must bring a contribution to the capital and their liability is limited to that contribution. Management of the company is assured by a director appointed by the general meeting of the shareholders.

Sole investors, lacking a business partner, can opt to incorporate a sole shareholder company (sociedade unipessoal por quoatas – Uni. LDA). Under this type of company, the minimum share capital is EUR 1, although it is recommended that it should be at least of EUR 1000. Uni. LDA’s liability is limited by the contribution to the capital.

On the other hand, if investors opt to incorporate a public company (sociedade anónima – SA) which requires a minimum share capital of EUR 50 000. SA companies and at least 5 shareholders. Like LDAs their liability is limited to their contribution to the capital. The management of this type of companies is assured by a board of directors which is monitored by a supervisory board, both appointed by the general meeting of the shareholders. In addition, SA companies are required, by law, to appoint a certified public accountant.

Other types of companies can be incorporated under the Portuguese Commercial Code, such as limited partnerships and general partnerships, nevertheless these are seldomly chosen by investors and their partners.

auctor Miguel Pinto-Correia

MCS and its team has more than 20 years of experience in assisting corporate and private clients wishing to invest in Portugal or within the Madeira International Business Center. For more information on our services please do no not hesitate to contact us.

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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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Rising after Covid-19

Rising after Covid-19, a “new era” with some economic uncertainty, requires a wise decision to invest in certain frameworks that could alleviate the tax burden, and therefore your personal and/or corporate operational costs.

Madeira has the right tools to help you and your international business to have a head start after the coronavirus outbreak. These tools take the shape of extremely competitive tax benefits targeting personal income and corporate income.

High-mobility workers, entrepreneurs, and digital nomads alike, whose job does not depend on being in an office or a specific geographical location over a long period of time will find solace in the Non-Habitual Tax Resident (NHR) regime.

Created in the late 2000s the NHR regime comprises of a 10-year tax holiday on all foreign-sourced income for those effectively transferring their tax residency, i.e. spending more than 183 non-consecutive days a year in Madeira; or having a house that can be deemed as a permanent abode during the same time frame.

Under such a taxation exemption scheme, NHR status holders are able to benefit from a 0% tax on foreign salaries/free-lancer income; 0% tax on foreign interests/royalties/dividends; a flat tax of 20% on local salaries/free-lancer income for high-added value jobs; and even a flat tax of 10% on pensions (should it be the case). NHR status is granted to everyone, regardless of their nationality, and assuming that one was not tax resident in Madeira in the 5 years prior to the  application.

The above personal income tax benefits combined with a high-standard quality of life in Madeira has been attracting expats.

Digital nomads will be please to know about the high internet speed connections available on the island thanks to its geographical location (the island’s international connectivity is distributed by: 3 PoPs (London, Amsterdam and Paris), peering connections with hundreds of major international ISPs and IP transits to Europe and the USA). While others might be pleasantly surprised by the its culture, nature, history, gastronomy, and stress-free city buzz.

From a corporate income standpoint, the same high-mobility entrepreneurs and digital nomads can, together or separately from the NHR scheme, benefit from the lowest corporate income tax rate in Europe, just 5%, by incorporating a company within the Madeira International Business Centre (MIBC).

The MIBC, is a type of a EU approved state aid available to all duly licensed company operating in Madeira and whose main source of profit are non-resident entities or other MIBC companies.

All of the above mentioned benefits can be coordinated through and with the Golden Visa scheme, a residency by investment scheme created by the Portuguese Government in order to attract non-EU/EEA citizens and their respective families to Madeira.

Should you be interested in any of these programs MCS’s multi-disciplinary team has more than 20 years of experience in assisting expats and international companies wishing to relocate or operate in Madeira. Do not hesitate to contact us for more information.

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Economic Substance

Economic Substance Requirements in Madeira

Economic substance describes the economic (operational) reality of a corporate structure which has been put in place because of international tax optimization reasons.

In an ever more globalized economy, and especially taking into account the European Union context, it is not the the freedom of the establishment, guaranteed under EU law and Treaties, that is being questioned nowadays by Tax Authorities. What is being put into question is whether such structures do reflect the economic/operational reality of day-to-day business.

Taking into account the above-mentioned and, in line with international and European best practices and orientations, the Madeira International Business Center (MIBC or IBCM) was the leading jurisdiction to set up enhanced economic substance requirements for the international services, trading and shipping companies operating within its scope.

In fact, the International Business Center of Madeira, always a subject of Portuguese and European law, paved the way for the European Union Code of Conduct Group assessment of non-EU jurisdictions.

Companies benefiting from the 5% tax, made available to those operating within the Madeira International Business Center, must begin their activities in a period of six months in the case of international services and one year in the case of industrial activities or shippingg, counting from the date of licensing and they must observe one of the following enhanced economic substance requirements:

  • Create 1 to 5 jobs, within the first 6 months of activity, and make a minimum investment of €75,000 in the acquisition of tangible or intangible fixed assets within the 2 first years of activity;
  • Create 6 or more jobs, withing the first 6 months of economic activity.

Furthermore, the jobs to be created need to be on a full-time basis and to be performed by a residents, for tax purposes, in the Autonomous Region of Madeira, regardless of their nationality. Company directors can obviously count as jobs posts, but need to fulfill the requirements above-mentioned.

In relation to the “investment”, this economic substance requirement foreseen within the rules applicable to the MIBC must involve control of a resource and generate future economic benefits for the company (financial investments/portfolios are excluded from the investment definition). In the case of  real estate and IT servers the investment must occur within the Autonomous Region of Madeira.

The above economic substance requirements needed to obtain the lowest corporate income tax rate in the EU, through the MIBC, make it comply with the OECD and EU guidelines economic substance. This is because:

  • It demonstrates that the core income generating activities have been undertaken in the jurisdiction (i.e.: coordinating group activities; managing stock and taking orders; providing consulting/administrative services; R&D activities; agreeing funding terms; monitoring and revising any agreements, managing risks; taking relevant management decisions, etc…)
  • It assures adequate expenditure in the MIBC proportionate to the level of activity and have adequate physical presence in the MIBC (e.g. office space, facilities and employees).
  • It can be use to show that the company is directed and managed in the jurisdiction with regards to the relevant activity (e.g. having board meetings with an adequate frequency, quorum of directors physically present at such meetings, the directors having the necessary knowledge and expertise to discharge their duties as directors, meeting minutes kept in the jurisdiction, etc.).

It goes without saying that investors looking into relocation or incorporation within the Madeira International Business Center are also capable of providing the economic motivation for the operation based on several factors, among which we highlight the following: profit motive, improvement of business position (market share); growth, risk reduction, better control over the operations, leverage and even in some cases the beneficial owner is also relocating to Madeira to live.

Taking into consideration the above, the Madeira International Business Center is one of the leading jurisdictions, within the European Union, to provide the best of both worlds: low corporate taxation and the characteristics needed to assure that internationally recognized substance requirements are met.

Substance levels for a company in the MIBC (or in Portugal) must always be set on a case by case basis. Our team at MCS, with more than 20 years of experience in the sector, is able to assist you in setting up and managing a company within the MIBC or Portugal. For more information click here.

 

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Funchal

Investing in Madeira Matters

Investing in Madeira matters, not only for the (international) growth of your business/company, but also because through it you can be part of a group of international investors re-shaping the archipelago’s economy.

The creation of the International Business Center of Madeira (also known as the Free Trade Zone of Madeira), resulted from a set of circumstances:

  • The ancestral aspirations of the Madeirans founded on the existence of a free port of consumption existing in the Canary Islands.
  • The movement that, under the auspices of the Commercial and Industrial Association of Funchal (ACIF), led, given the situation of the Madeira’s economy in the 70’s. XX; and
  • The reflection of the free zone model most appropriate and in line with the geographical, geological, morphological, economic and social characteristics of Madeira.

Thanks to the combined efforts of all the stakeholders involved in the process, the Autonomous Region of Madeira was able to fully implement the International Business Center of Madeira in 1986. Since that date international investors have taken the tax benefits granted by the Regional Government to not only grow economically but also to promote the archipelago’s development.

Today international investors operating within the advantageous tax regime of the International Business Center, with a corporate tax rate of 5% (the lowest in Europe), contribute actively to the diversification of the island’s tourism dominated economy.

Here is why investing in Madeira matters, from a corporate perspective:

  • 5% Corporate Income Tax Rate;
  • 0% Withholding on payment of dividends/profit distribution to non-resident shareholders;
  • 0% Withholding tax on the payment of interests, royalties and services;
  • 0% Taxation on capital gains payments to shareholders;
  • 80% exemption on stamp duty;
  • Access to a qualified labour force;
  • Access to European and international markets;
  • Excellent IT and Communications Infrastructures.

Here’s why investing in Madeira matters, from an economic perspective, apart from the economic substance requirements foreseen to benefit from the above tax benefits:

  • Your company will be among those in the International Business Center contributing for 21% of the archipelago’s GDP;
  • Your company will be among those in the International Business Center contributing for 43% of the total corporate income tax revenue of the archipelago;
  • Your company will be among those in the International Business Center contributing 14,1% of the total tax revenue of the archipelago.

All in all, your investment in Madeira matters not only for your business, which is granted the ideal conditions for international growth and competitiveness, but it also matters because your investment also helps to change the lives of the population of an Outermost Region of the European Union, through the small tax revenue you will be charged for.

Our team at MCS, with more than 20 years of experience in the sector, is able to assist you in setting up and managing a company within the MIBC or Portugal. For more information click here.

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Madeira Island, Portugal

A safe haven during and after Covid-19

The COVID-19 pandemic is taking a toll on businesses across the world. Governments are pouring in money, setting up credit lines and other forms of state aid to support businesses.

Start-Ups, especially those breaking-even or already profitable are also facing cuts on their investment while facing the same responsibilities, compliance and deadlines as full grown-up companies. Because despite the support offered by governments, the taxes and taxes systems have not been adapted to the demand of the current and following-up crisis.

The businesses that will thrive are those who have introduced the option of online shopping or those who can even remotely provide and deliver their services. There is no question that the trends that small and medium international services providers are setting will surely influence the way many businesses will seek to operate once the COVID-19 pandemic is over.

How the post-pandemic economy will recover, and whether Europe will come up with a Marshall Plan is all still a mystery. In a world of uncertainties, companies need, more than ever, to have access to a stable ecosystem where they can recover and relaunch their operations and where operational costs are minimal.

That is why Portugal, and more specifically, its Autonomous Region of Madeira, offers one of the most important types of support to a company’s economic growth to recovery: a stable low taxation tax regime.

Since the 1980s that the Autonomous Region of Madeira has provided a stable business friendly ecosystem that allows small and medium international enterprises to expand their international business.

Madeira Island, is located 1h 30min by plane from Lisbon, offers a 5% corporate rate on all income derived from profit with non-Portuguese companies, full exemption from withholding tax on dividend remittances from the Madeira, among other tax benefits.

The MIBC – Madeira International Business Centre is a state aid scheme granted under the Portuguese Tax Benefits Statute and duly approved by the European Commission.

Since the MIBC is governed by Portuguese and European Law, it offers the required legal certainty to its investors. All companies duly licensed to operate within the MIBC comply with all legal requirements to operate in Portugal, and therefore in the EU.

In addition, in Madeira there is an easy access to a skilled workforce, speedy internet infrastructure and access to mainland Europe.

Furthermore, all e-commerce directives have been duly transposed into Portuguese law, including those relating to electronic billing, digital signatures and data protection.

Such facts make it clear that, in addition to being a completely transparent tax incentive, the MIBC also allows a for an effective tax saving that can be used in the internationalization of the licensed company.

Apart from the above, employees of startup companies and other technological companies might also be entitled to a 20% flat rate on their salary for a period of 10-years and a 0% tax rate on the foreign income they earn. These incentives not only allow you to easily bring your team to live in one of the world’s most beautiful islands, but also to attract the best of the best worldwide.

We know that bureaucracy and costs can slow down your vision and hinder your will to relocate to another jurisdiction, but we at MCS believe that Madeira Island, Portugal, holds the key to its growth.

Our team at MCS, with more than 20 years of experience in the sector, is able to assist you in setting up and managing a company within the MIBC or Portugal. For more information click here.

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Incorporating a Company in Portugal

To start a business activity in Portugal you will need to incorporate a company and, usually, license its activity.

Madeira Corporate Services, can help you set up a company, make changes or amendments to the memorandum of association or statutes, dissolve companies, provide you accounting services plus provide you with information on the licensing of commercial activities within the International Business Center of Madeira.

Company Incorporation

The choice of the legal entity type of the company will determine its operating model from the outset and has implications for both the shareholder/quota-holder and the future development of the company and the business itself. The most common types of legal entities are the following:

  • Single-person limited company (Sociedade Unipessoal por Quotas – Uni. Lda.)
  • Limited liability company (Sociadade por Quotas – Lda.)
  • Joint stock company (Sociedade Anónima – S.A.)

Note: In choosing any of the above-mentioned types, you must take into account all the assets you wish to allocate to the company, the type liability for the company’s debts (personal property or assets of the company) and additionally, whether you wish to pursue the economic activity alone or with other business partners. Before committing to a specific type of company, our legal and accounting teams are able to advise on the most suitable entity type based on your needs and plans for your business.

Amendments to the memorandum or articles of association

The amendment to the articles of association may be the introduction, removal or modification of some of the clauses of the memorandum of association and must be the result of a resolution by all the shareholders, made according to the by-laws set forth for each type of company. Pursuant to Portuguese law, all changes can be made by the Minutes of the General Meeting. Therefore, a public deed for such amendments is optional.

Of course, our legal team is able to assist you in drafting such minutes that are required for different amendments.

Types of Amendments:

  • Capital Increase
  • Capital Reduction
  • Transfer of shares
  • Change of the company’s name, the corporate purpose or headquarters (to another district)

Dissolving and winding up companies

The dissolution of a company by resolution of the shareholders may be carried out according to one of the following ways:

  • Immediate extinction (no assets or liabilities)
  • Dissolution and liquidation (free assets or liabilities)
  • Dissolution and liquidation by partition (with assets and without liabilities)
  • Dissolution with liquidation (with assets or with assets and liabilities)
  • Dissolution with liquidation by global transmission (with liabilities)

International Business Center of Madeira License

In order to benefit from the unique tax incentives, namely Europe’s lowest corporate tax rate of 5%, available in the Autonomous Region of Madeira, through its International Business Center of Madeira, a special application (in Portuguese language) must be submitted.

This application is submitted to the official concessionaire of the International Business Center, in two copies, addressed to the Cabinet of the Vice-President of the Regional Government of Madeira in the name of an existing company, in Portugal or abroad, or of a company to be incorporated. Branches of existing companies may also be licensed.

All relevant information concerning the activity to be performed by the company must be included in the licence application, namely:

  • Company name and address;
  • Activity to be undertaken and respective NACE code (European nomenclature of the economic activity);
  • Total value of the investment;
  • Indication of the number of jobs to be created.

In the case of a successful application, the license is deemed to be granted in favor of the company once the applicant furnishes proof of the formation and registration of such company. All documents in support of the license application must be duly translated into Portuguese and legalized.

Our team at MCS, with more than 20 years of experience in the sector, is able to assist you in setting up and managing a company within the MIBC or Portugal. For more information click here.

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MIBC: ready for business

Portugal has one of the most important tax policy tools in Europe, the Madeira Free Trade Zone, internationally known as the International Business Center of Madeira (MIBC) and it is ready for business.

Intended for the internationalization of Portuguese and foreign companies, this State aid, foreseen in the Statute of Tax Benefits and duly approved by the European Commission, is based on the fact that the Autonomous Region of Madeira is considered an outermost region (ORs) of the European Union, lacking as such of incentives to promote tradable services to the sector in the Region.

Companies licensed under the IBC-M benefit from one of the lowest Corporate Income Tax (CIT) rates in the EU, i.e. 5% on all activities carried out with non-resident entities, making Madeira a 100% Portuguese destination for national and foreign investors, with due validation by the Portuguese and European authorities.

This internationalization platform from the Atlantic, places Madeira, and consequently Portugal, in an important geostrategic position between Europe, America and Africa.

In addition to the 5% CIT, the MIBC provides a set of tax incentives that also cover non-resident shareholders, such as: exemption from withholding tax on the payment of dividends, in the proportion resulting from the profits that at the level of society, have been taxed at the reduced rate of CIT or which, if not, are derived from income obtained outside Portuguese territory; exemption from withholding tax on the payment of interest, royalties and services.

Merchandise trading, e-business, technology, telecommunications, call-centers, consultancy and marketing services, intellectual property management, development of real estate projects, shipping companies or shareholding management, can all benefit from the tax regime in force of the Madeira Free Trade Zone (currently known as the IV Regime), which allows investors a tax saving that translates into greater financial availability to reinvest in their employees and in their business activity, thus leveraging the regional and national economy.

The tax benefits provided for in the institutional scope of the Free Zone of Madeira are based on mandatory requirements of economic substance, namely: the creation of a certain number of jobs, to be filled by tax residents in the Autonomous Region of Madeira (regardless of their nationality), and the number of which will vary according to the estimated taxable profit for each year; and investment of at least 75 000 euros (in tangible or intangible fixed assets) if less than 6 jobs are created.

The regulation and transparency on which the entire regime in the Madeira Free Zone is based, and which implies subjecting all companies licensed therein to the very same obligations as other Portuguese companies (“General Taxation Regime”) for tax, regulatory and statistical reporting , confer a high degree of confidence and rigor.

Exactly for the reasons explained above, in 2018 about 28% of the companies operating in the Free Zone result in Portuguese capital investment and 77% of the companies result from European investment, thus showing the enormous economic potential of the tax regime.

In most recent years the main investors in the MIBC are high-mobility expats whose business is centered around consultancy services and tech-companies looking for high-speed internet connections and cheap qualified labor forces.

Our team at MCS, with more than 20 years of experience in the sector, is able to assist in your relocation to Madeira. For more information click here, for information our services click here.

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one woman and one man working together

A Global Hub for Business: Madeira

At a time that it is increasingly important for companies to have internationalization tools at their disposal, the Autonomous Region of Madeira enables companies to significantly reduce their internationalization costs.

Given the above, the set of tax benefits available within the Madeira International Business Center (MIBC) make it possible for international companies to reduce their internationalization/context costs.

Thus, companies wishing to internationalize and that have their core business in international trade activities, e-business and telecommunications, consultancy and marketing services, as well as the management of intellectual property, the development of real estate projects or management of investments can license themselves in the MIBC / ZFM and get the following benefits:

Available Tax Benefits within the MIBC

  • 5% Corporate Tax Rate, provided some legal requirements are met;
  • Access to the Portuguese system of participation exemption ;
  • No withholding tax on:
    • Payment of dividends, to non-resident entities
    • Payment of services, to non-resident entities;
    • Payment of interest, to non-resident entities;
    • Payment of royalties, to non-resident entities;
  • Exemption from 80% in stamp duty on documents, contracts and other acts carried out requiring public register since performed with non-resident entities in Portugal or licensed in the MIBC;
  • Companies licensed in the MIBC also benefit from 80% of municipal property tax and property transfer tax exemption due to the acquisition of immovable property for the installation, as well as other fees and local taxes;
  • Access to the network of double taxation treaties signed by Portugal.

It is important to note that the MIBC / ZFM is covered by all tax and social security Portuguese laws and is licensed under European Union law. Such legislative provisions allow the MIBC / ZFM to fully comply with national and international standards.

The benefits above mentioned can be combined with the highly attractive Portuguese Golden Residence Permit Programme (also known as Golden Visa) and the Non-Habitual Resident (NHR) Tax Regime, which grants a 10 year tax exemption on new residents.

Having said, it is clear that all companies can alleviate the costs associated with the internationalization of its activities in an efficient way by using Madeira as its HQ.

Our team at MCS, with more than 20 years of experience in the sector, is able to assist in the incorporation of your company within the MIBC or Portugal. For more information click here, for information our services click here.

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