Tag Archives: incorporating in Portugal

MIBC: licensing period extended

The MIBC

The Madeira International Business Center (MIBC) is a set a set of taxation incentives, granted since the 80s with the objective of attracting inward investment into Madeira, recognized as the most efficient mechanism to modernize, diversify and internationalize the regional economy.

Main Tax Benefits

  • Corporate tax rate of 5%, applicable on the taxable income derived from profits of operations exclusively carried out with non-resident entities or with other companies operating within the ambit of the MIBC.
  • Access to the Portuguese participation exemption regime.
  • Non-resident single and corporate shareholders of Madeira’s IBC companies will benefit from a full exemption from withholding tax on dividend remittances from the Madeira companies, provided that they are not resident in jurisdictions included in Portugal’s “black list”. Moreover, Portuguese corporate shareholders will also be exempt if holding a participation of at least 10% for 12 consecutive months.
  • Exemption on capital gains payments to shareholders not resident in black listed jurisdictions.
  • No withholding tax on the worldwide payment of interest, royalties and services.

Licensing

Companies wishing to benefit from the above tax benefits need to obtain a license from Sociedade de Desenvolvimento da Madeira which if applied for with the Vice-Presidency of the Regional Government of Madeira. Under the current regime licenses could be applied for until December 31st, 2020. However the European Commission has extended the licensing period until 2023.

The Portuguese Government is expected to legislate on the extension period soon.

Extension Period Background

The European Commission has prolonged, on July 2 the validity of certain State aid rules which would otherwise expire at the end of 2020. In this context, and to take the effects of the current crisis into due consideration, the Commission, after consulting Member States, has decided to make certain targeted adjustments to the existing rules with a view to mitigate the economic and financial impact of the coronavirus outbreak on companies.

To this end, the Commission has adopted a new Regulation amending the General Block Exemption Regulation (GBER) and the de minimis Regulation, and a Communication amending seven sets of State aid guidelines and prolonging those which would otherwise expire on 31 December 2020.

Prolongation of the existing State aid rules

In order to provide predictability and legal certainty, whilst preparing for a possible future update of the State aid rules in the context of the ongoing “fitness check” exercise and of the ongoing evaluation and future review of certain sets of State aid rules set out in the recent European Green Deal and European Industrial Strategy Communications, the Commission has decided to prolong the validity of the following State aid rules, which are due to expire by the end of 2020:

Prolongation by three years (until 2023):

–    General Block Exemption Regulation (GBER) – under which the Madeira International Business Center (MIBC) is regulated.

–    De minimis Regulation

–    Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty

After 2020

The Portuguese Government, together with the Madeira Regional Government, is expected to soon start negotiating the 5th MIBC Regime to be applicable to private and corporate investors wishing to relocate or incorporate their businesses with the MIBC framework.

MCS and its multidisciplinary team have more than 20 years of experience in assisting international private and corporate investors with incorporation, accounting and management of MIBC licensed companies. 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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Madeira International Business Center

Investing in Madeira remains an attractive solution for those looking to operate in Portugal and abroad.

The International Business Center of Madeira (MIBC, also known as Madeira Free Trade Zone) remains attractive for foreign and Portuguese investors, representing the single Portuguese fiscal incentive created to directly support the internationalization of worldwide companies.

Duly licensed companies benefit from one of the lowest corporate income tax (CIT) rates in the EU, 5%, to which 0% withholding tax on interest, capital gains, services, royalties and dividends is added (provided that certain requirements are met).

The MIBC is a real European incentive for the internationalization of exporting companies or international services providers.

Most service providers can benefit from the MIBC, including those engaged in trading, e-business and telecommunications, consultancy and marketing services, as well as intellectual property management, real estate project development or holding-related services.

Another important feature of the MIBC related benefits is that once the licensing process is done, the tax benefits become immediately effective. Unlike European funds there is no waiting period between the approval of the incentive and its implementation.

The MIBC is a tax benefit 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.

Given the above, 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.

In addition to all the above-mentioned benefits, companies that are duly licensed in the MIBC may cumulatively apply for European funding under the Madeira 14-20 program and other financial instruments available to companies based in the Autonomous Region of Madeira.

Last, but not least, Madeira has all kinds of high quality support services, such as a broad network of information technology companies, consulting firms, financial services and administrative support, thus making operational costs low when compared to other European markets.

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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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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A land of (tax) opportunities

A leading destination for all ages, 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, Madeira is also getting its share. The Portuguese archipelago, one of most richest regions in Portugal, has an agreement with Saint Peter (all-year-round good weather) and therefore is attracting freshly retired residents from Central and Northern Europe every year.

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, pension, dividends, interest, capital gains and rental incomes. 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.

Investing in Portugal, from a tax standpoint, has never been easier!

Reduced Tax Costs for Start-Ups and Investors

Apart from the NHR Regime applicable to any Start-up employee that complies with the regime’s conditions, start-up founders 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%), 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.

Professional tax consultancy is required

Regardless of the tax benefits that someone may benefit from in Portugal, one thing is for sure: applying correctly for them is not a straightforward thing. Despite all the advantages there is a somewhat considerable amount of red tape and formalities that require an experience professional in order to swiftly apply and benefit from the existing tax incentives.Nevertheless, the next time you think Portugal as a paradise, just remember that the country is much more than good weather and good food.

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

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