By Miguel Silva Reichinger Pinto Correia No Comments
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.
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
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. Continue reading