Tag Archives: Madeira International Business Center

MCS participates in Madeira’s Recovery Plan

We welcome the initiative of the Regional Government to consult, within the scope of its economic diplomacy agency (Invest Madeira), those responsible for the overwhelming majority of foreign investment in the Autonomous Region of Madeira, the management companies operating within the scope of the International Business Center of Madeira (CINM), such is the case of Madeira Corporate Services (MCS).

We at MCS have accepted the challenge of the Regional Government to participate in the drafting Madeira’s Recovery Plan. This plan is to be presented by the Madeira’s Regional Government as a response to the Covid-19 pandemic economic shock, aiming at relaunching the Madeiran economy and improving its international competitiveness.

Having received input from our stakeholders, our Director for Strategic Development and economist, Mr. Miguel Pinto-Correia, has been entrusted to prepare a letter with suggestions to be taken into account by the Regional Department of Economy when drafting Madeira’s Recovery Plan.

Mr. Pinto-Correia is focusing MCS’s proposals for Madeira’s Recovery Plan on 3 main pillars: lower corporate and personal taxation for international investors and local business, reduction of bureaucracy and development of the Blue Economy and IT sectors.

MCS and its team are committed to promoting Madeira’s international economic competitiveness, and therefore its clients interests, by working closely with regional, national and European stakeholders.

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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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European Union flag

Tax Avoidance Directive

Portugal has effectively transposed the European Corporate Tax Avoidance Directive which introduces rules to prevent tax avoidance by companies and thus to address the issue of aggressive tax planning in the EU’s single market. Madeira, being an outermost region of the EU is subject said directive.

The directive applies to all taxpayers that are subject to company tax in one or more EU country, including permanent establishments in one or more EU countries of entities resident for tax purposes in a non-EU country.

The directive lays down anti-tax-avoidance rules in 4 specific fields to combat BEPS, while amending Directive (EU) 2017/952 (which only covered hybrid mismatches within the EU):

  • Interest limitation rules: where multinational companies artificially erode their tax base by paying inflated interest payments to affiliated companies in low-tax jurisdictions. The directive aims to dissuade companies from this practice by limiting the amount of interest that a taxpayer has the right to deduct in a tax period. The maximum amount of deductible interest is set at a maximum of 30% of the taxpayer’s earnings before interest, tax, depreciation (a measure of how much of an asset’s value has been used up at a given point in time) and amortisation (spreading payments over multiple periods).
  • Exit taxation rules: where taxpayers try to reduce their tax liability by transferring its tax residence and/or its assets to a low-tax jurisdiction, solely for the purposes for aggressive tax planning. Exit taxation rules aims to prevent the erosion of the tax base in the EU country of origin when high-value assets are transferred with ownership unchanged, outside the tax jurisdiction of that country. The directive gives taxpayers the option of deferring the payment of the amount of tax over 5 years and settling through staggered payments, but only if the transfer takes place within the EU.
  • General anti-abuse rule: this rule aims to cover gaps that may exist in a country’s specific anti-abuse rules against tax avoidance, and allows tax authorities the power to deny taxpayers the benefit of abusive tax arrangements. The general anti-abuse clause of the directive applies to arrangements that are not genuine to the extent that they are not put into place for valid commercial reasons that reflect economic reality.
  • Controlled foreign company (CFC) rules: in order to reduce their overall tax liability, corporate groups are able to shift profits to controlled subsidiaries in low-tax jurisdictions. CFC rules re-attribute the income of a low-taxed controlled foreign subsidiary to its more highly taxed parent company. As a result of this, the parent company is charged to tax on this income in its country of residence.

Rules on hybrid mismatches: where corporate taxpayers take advantage of disparities between national tax systems in order to reduce their overall tax liability, for instance through double deduction (i.e. deduction on both sides of the border) or a deduction of the income on one side of the border without its inclusion on the other side. To neutralise the effects of hybrid mismatch arrangements, the directive lays down rules whereby 1 of the 2 jurisdictions in a mismatch should deny the deduction of a payment leading to such an outcome.

For more information on how the Directive might affect your MIBC company or investments in Portugal, or fore detailed information on the transposition mechanism, please do not hesitate to contact us.

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Netherlands to Change Tax Law

Netherlands to change tax law by introducing withholding tax on dividends.

The change is expected to come into effect in 2024, and to be only applicable to dividends sent to countries that have a corporate tax rate of under 9 percent and are included in the EU’s blacklist of non-cooperative tax jurisdictions.

Still in the draft-making, the proposed tax is foreseen to be implemented in combination with a withholding tax on interest and royalty payments that will be effective in 2021.

According to the Dutch State Secretary for Finance, Hans Vijlbrief, “this additional withholding tax represents another major step in our fight against tax avoidance,” as “financial flows channelled from or through the Netherlands to another country where they are not or not sufficiently taxed, will soon no longer go untaxed.” The State Secretary for Finance also stressed that “it’s now vital to make even better international agreements to prevent other countries being used for tax avoidance purposes”.

This expected change to Netherland’s tax law shows that the Netherlands has ceded to international pressure regarding claims that the country used for tax evasion.

in TaxLink

The Netherlands and the Madeira International Business Center (MIBC)

Although at a first glance one would expect that such measure could ruin international groups of companies where money flows exist between the MIBC (given it 5% corporate tax rate) and the Netherlands it is important to mention the following:

  • The MIBC is not an offshore jurisdiction, but a form of State Aid duly approved and regulated by European Union authorities and Portuguese authorities;
  • Companies operating with the MIBC are subject to state of the art economic substance requirements (without which the 5% corporate income tax rate is not granted);
  • The Netherlands cannot discriminate, under EU-Law, a Member State nor their outermost regions.

Further to the above, once concludes that the foreseen tax changes affecting Netherlands do not affect companies licensed to operate within the Madeira International Business Centre. In fact company formation (or company incorporation) in Portugal, for international services, is much more efficient within the scope of the MIBC.

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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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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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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Madeira International Yacht Registry

Armed Security on Board Made Legal

The Presidency of the Council of Ministers of the Portuguese Republic has approved armed private security on board of Portuguese registered ships, including those registered in the International Shipping Registry of Madeira (MAR), through Decree-Law 159/2019 of October 24th.

Private armed security teams on board of Portuguese registered ships is limited to those ships that navigate through high-risk areas for piracy, as defined by the Portuguese Government.

Private armed security providers and their employees must obtain a license and hold a professional card, respectively, to be issued by the Portuguese Public Security Police (PSP) in accordance with the rules set by Decree-Law 159/2019. Furthermore, the use and carrying of weapons is only permitted to the security team members in the areas classified as high-risk areas for piracy.

Portuguese registered ships can hire private armed security companies that are duly registered in accordance with the laws and regulations of a EU Member-State or a country member of the European Economic Area. These companies must have a sole corporate object, private armed security providers, and a minimum share capital of EUR 250 000.

Companies providing private armed security services to Portuguese registered ships must have a Security Director who is responsible for choosing the Security Team Coordinator, for making and proposing the anti-piracy plan (in accordance with the Law and to be approved by DGRM and upon issuance of binding opinion be PSP the National Maritime Authority), for making and proposing the trip plan and for making and proposing the terrestrial transportation plan regarding the arms and ammunitions.

The Security Team Coordinator is responsible for managing the security team, for evaluating the security on board and following the ship’s captain inspection and for coordinating the team’s intervention without jeopardizing the ship’s captain maximum authority on board.

In accordance with the law private armed security on board cannot use a military or a military inspired uniform. When reaching high-risk areas for piracy and overall vestment stating “On Board Security” must be used.

Allowed weapons for security on board include: semi-automatic long firearms with automatic configuration for military use; semi-automatic pistols with calibers 6.5mm Browning; pepper sprays; and electric weapons which shape cannot be mistaken for another class of weapon.

Further to the above, the ship must contain: anti-fire closets to store, separately, arms and ammunitions; CCTV (with audio) system; and voice communications systems.

These new measures greatly benefit the Portuguese merchant navy registered in the International Shipping Registry of Madeira (MAR) and reinforce its position as one of the most competitive shipping registries in Europe.

For more information on this matter please do not hesitate to contact us.

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mar

MAR introduces Electronic Certificates

The International Shipping Register of Madeira (MAR) is now issuing ships’ electronic certificates and documents.

In line with national policies concerning digitalization within public services and administration, the Portuguese maritime administration has also taken the task to develop and implement systems and procedures to issue electronic certificates and documents to ships and seafarers.

These procedures and systems take in due consideration the IMO Guidelines for the use of electronic certificates (FAL.5/Circ.39), thus, means for authorities and other parties to promptly verify the validity of the electronic statutory certificates and documents issued by Portuguese authorities were also implemented. In the scope of this development Portugal has communicated the decision to IMO, which circulated the information to all member States through the Circular Letter No. 3822 dated 06/03/2018.

Seafarers’ electronic documentation, namely documents of recognition of certificates of competence in accordance with STCW/I/10 (endorsements and proof of application), have already been implemented with success by the relevant organization within the Portuguese maritime administration (DGRM).

Document’s Authentication

Electronic certificates and documents issued by MAR will be signed electronically in compliance with relevant Portuguese legislation by means of a qualified digital certificate, which serves as method of authentication of the authorized issuer and of the integrity of the contents of the documents.

The digital certificate used to sign the documents electronically is issued by a certifying entity accredited in accordance with national and EU relevant regulations. The documents are issued in PDF format and the signature and the respective status of validity can be checked within the software used to open the file.

Following the IMO guidelines for the facilitation of the use and acceptance of electronic certificates, MAR issued documents also include information and elements, which are harmonized in all electronic documents issued by the authorities within the Portuguese maritime administration, to provide for the verification of their validity at a national dedicated website.

The electronic documents verification dedicated website can be found at the following address: www.portugueseflagcontrol.pt. For the verification purpose, the electronic documents include an “unique tracking number” (UTN), as per IMO guidelines AL.5/Circ.39, and a QR code.The documents issued electronically by MAR are:

  • Registry certificates:
    • Ownership Registration Certificate;
    • Provisional Ownership Registration Certificate;
    • Bareboat Charter Registration Certificate.
  • Liability certificates:
    • Certificate of Insurance or Other Financial Security in respect of Civil Liability for Oil Pollution Damage (CLC);
    • Certificate of Insurance or Other Financial Security in respect of Civil Liability for Bunker Oil Pollution Damage (BCLC);
    • Certificate of Insurance or Other Financial Security in respect of Liability for the Death of and Personal Injury to Passengers (PLR);
    • Certificate of Insurance or Other Financial Security in respect of Civil Liability for Removal of Wrecks (WRC).
  • Minimum Safe Manning Document;
  • Declaration of Maritime Labour Compliance – Part I;
  • Continuous Synopsis Record (CSR).

In the near future MAR intends to also issue other electronic documents, such as statements and declarations. The same method of authentication will be used – electronic signature by means of a qualified digital certificate – equivalent, from the legal point of view, to the annual signature in a paper document.

Fore more information on this matter please contact us at www.mcs.pt or send us an e-mail to management@mcs.pt.

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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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