Portugal continues to attract international investors seeking a stable, transparent, and strategically located jurisdiction within the European Union. For those looking beyond the mainland, Madeira offers one of Europe’s most competitive corporate and personal tax frameworks. Below, MCS outlines five expert tips to help investors identify the most effective tax opportunities for investors in Portugal.
1. Understand Portugal’s Corporate Tax Framework
Portugal offers a modern and harmonised corporate tax system consistent with EU principles and OECD standards. The standard corporate income tax (CIT) rate on the mainland is 21%, to which municipal and state surcharges may apply. However, companies operating in the Autonomous Region of Madeira may access a reduced rate of 14.7%, or 5% if licensed under the International Business Centre of Madeira (IBC).
This framework, approved by the European Commission, applies to qualifying international activities conducted with real economic substance in Madeira. The regime remains valid and fully compliant with EU law. It provides investors with a predictable and legally secure environment for structuring cross-border operations, holding companies, and service entities.
2. Leverage Participation Exemption and Double Tax Treaties
Portugal’s participation exemption regime allows qualifying dividends and capital gains to be excluded from taxable income. To benefit, the Portuguese company must hold at least 10% of the subsidiary’s share capital or voting rights for at least one year, and the subsidiary must not be resident in a blacklisted jurisdiction.
Additionally, Portugal maintains an extensive network of over 80 double taxation treaties, which reduce or eliminate withholding taxes on dividends, interest, and royalties. This combination enables investors to structure international holdings efficiently while maintaining full compliance with EU directives and OECD standards.
For non-resident shareholders, profit distributions from Madeira companies are exempt from Portuguese withholding tax, provided the shareholder is not resident in Portugal or a listed tax haven. This ensures that corporate profits can be repatriated with minimal tax leakage.
3. Explore the International Business Centre of Madeira (IBC)
The IBC of Madeira offers one of the lowest effective tax rates in the European Union, 5% corporate income tax on qualifying income. Companies licensed under this regime benefit from additional advantages, including:
- Exemption from withholding tax on dividends, interest, and royalties paid to non-residents;
- Participation exemption on worldwide dividends and capital gains;
- Tax credit for international double taxation (economic and legal);
- Up to 80% reductions in municipal property tax (IMI), property transfer tax (IMT), stamp duty, and autonomous taxes.
To qualify, companies must create a minimum of one to six jobs and invest at least €75,000 in fixed assets within the first two years of activity, or employ six or more people within six months. The IBC is particularly suitable for companies operating internationally in sectors such as holding, trading, consulting, and services.
For investors seeking to relocate or expand their business operations, Madeira offers a unique combination of EU regulatory security, fiscal competitiveness, and a high-quality professional ecosystem.
4. Consider Individual Tax Efficiency for Executives and Expats
For individuals relocating to Portugal, the country offers a stable framework of personal tax incentives. Although the Non-Habitual Resident (NHR) regime closed to new entrants at the end of 2023, current beneficiaries retain access to its ten-year benefits. For new residents, alternative frameworks, such as the Tax Incentive for Scientific Research and Innovation (IFICI) and the Return Programme, provide reduced rates on Portuguese income and partial exemptions on foreign-sourced income.
Portugal’s personal income tax (IRS) system is progressive, but expatriates who plan effectively can significantly optimise their global tax exposure through treaty relief, exemption mechanisms, and efficient asset structuring.
Notwithstanding the above, Madeira residents also enjoy reduced regional IRS rates compared with the mainland, enhancing its attractiveness for executives and remote professionals relocating under residence permits such as the D2 (entrepreneur), D7 (passive income), or D8 (remote worker) visas.
5. Align Tax Strategy with Long-Term Substance and Compliance
The most sustainable tax opportunities for investors are those grounded in genuine economic activity. Both Portuguese and EU frameworks prioritise substance over form, meaning that companies must demonstrate effective management, local operations, and appropriate staffing to benefit from reduced tax rates.
In Madeira, this requirement is clear yet achievable: businesses must operate with a real presence, employ local staff, and demonstrate an identifiable link between income generation and regional activity. Proper governance, accounting, and documentation are essential to maintaining compliance and preserving tax benefits.
On the above, partnering with experienced advisors ensures all local and cross-border obligations are met, from corporate formation and accounting to treaty analysis and annual filings.
Conclusion
Portugal’s stable legal environment, broad treaty network, and integration within the European Union continue to offer substantial tax opportunities for investors. Within this national framework, Madeira stands out as the jurisdiction of choice for those seeking a secure, EU-approved, and efficient tax environment.
Whether structuring a holding company, establishing international operations, or relocating management functions, investors benefit from Madeira’s combination of low effective taxation, economic stability, and professional expertise.
MCS Madeira Corporate Services assists international investors and expatriates in identifying and implementing the most efficient structures in Portugal and Madeira, ensuring full compliance with Portuguese and EU regulations.
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
