Understanding taxes in Madeira has become essential for expats, entrepreneurs, and international families assessing Portugal after the end of the Non-Habitual Resident (NHR) regime. While Portugal has moved toward a more selective, activity-based tax model, the Autonomous Region of Madeira has consolidated its position as the country’s most competitive jurisdiction from a fiscal perspective.
This article explains how taxes in Madeira work in practice, covering personal income tax, capital gains tax, corporate taxation, and the implications for expatriates under the current post-NHR framework.
From NHR to a New Tax Model
For over a decade, the NHR regime offered broad, predictable benefits to internationally mobile individuals. That regime is now closed to new entrants and has been replaced by the Incentive for Scientific Research and Innovation (IFICI), often referred to as NHR 2.0.
The policy shift is structural. Portugal has moved away from passive-income-friendly incentives and toward a model that rewards:
- Active professional or entrepreneurial engagement
- Employment and economic contribution
- Real substance and effective management
Within this national transition, taxes in Madeira stand out because the Region combines this new philosophy with structurally lower tax rates.
Personal Income Taxes in Madeira
Personal income tax (IRS) in Madeira follows the same progressive structure as mainland Portugal, but with consistently lower rates across all brackets. This applies to employment income, self-employment income, and most other categories subject to aggregation.
Personal Income Tax Table – Madeira (2025)
| Taxable income (€) | Marginal Rate |
|---|---|
| Up to 8,342 | 8.75% |
| 8,342 – 12,587 | 10.99% |
| 12,587 – 17,838 | 14,.84% |
| 17,838 – 23,089 | 16.87% |
| 23,089 – 29,397 | 21,77% |
| 29,397 – 43,090 | 24.43% |
| 43,090 – 46,566 | 30.17%% |
| 46,566 – 86,634 | 31,22% |
| Above 86,634 | 33.6%% |
Solidarity surcharge (applies nationwide):
- 2.5% on income between €80,000 and €250,000
- 5% on income above €250,000
From 2026 onward, the effective top rate in Madeira is capped at 33.6%, applying only to income above €86,634, further reinforcing the Region’s advantage.
Capital Income: Dividends and Interest
One of the most relevant aspects of taxes in Madeira for expats and investors is the treatment of capital income.
- Dividends and interest are subject to an autonomous IRS rate of 19.6%
- If the taxpayer opts for aggregation, the effective tax rate on dividends can fall to 16.8%
- These rates are materially lower than those applicable in mainland Portugal
For residents with diversified investment portfolios, this difference alone can have a significant impact on net returns.
Corporate Taxes in Madeira
Corporate taxation in Madeira is particularly competitive for entrepreneurs and owner-managed businesses.
Standard Corporate Income Tax (IRC)
- General Madeira corporate tax rate: 13.3%
- SMEs benefit from a 10.5% rate on the first €50,000 of taxable profit
This compares favourably with mainland Portugal, where higher standard rates and surcharges are applied.
Madeira International Business Centre (MIBC)
In addition to the general regime, Madeira hosts the Madeira International Business Centre, an EU-approved regional state-aid framework:
- 5% corporate tax rate on qualifying income
- Regime extended until 2033
- Subject to substance, employment, and activity requirements
- Full compatibility with EU law and OECD standards
For internationally active companies, this regime fundamentally reshapes the tax landscape in Madeira compared to other European jurisdictions.
What Taxes in Madeira Mean for Expats
For expats, the key takeaway is that taxes in Madeira reward real engagement rather than passive relocation.
- Passive tax planning strategies are no longer sufficient
- Professional activity, employment, or entrepreneurial substance is essential
- The choice between mainland Portugal and Madeira is now structural, not cosmetic
Madeira does not replicate the old NHR regime. Instead, it offers a more sustainable, compliant, and economically grounded alternative for those willing to align tax efficiency with genuine activity.
Final Remarks
The end of the NHR regime marked the end of one chapter in Portuguese tax planning, but not the end of opportunity. In the current framework, taxes in Madeira combine:
- Lower personal and corporate tax rates
- EU-recognised regional fiscal autonomy
- Legal certainty and long-term predictability
For expats, investors, and entrepreneurs, Madeira has become the jurisdiction where competitive taxation and economic substance converge most effectively.
Frequently Asked Questions About Taxes in Madeira
How do personal income taxes in Madeira differ from those in mainland Portugal?
Personal income taxes in Madeira follow the same progressive structure as mainland Portugal but apply consistently lower rates across all brackets. In 2025, marginal rates range from 8.75% up to 33.6%, with the top rate applying only to income above €86,634. A solidarity surcharge of 2.5% applies to income between €80,000 and €250,000, and 5% above €250,000. This structure makes taxes in Madeira more competitive from a personal income perspective.
What are the corporate tax rates in Madeira?
The general corporate tax rate in Madeira is 13.3%, with SMEs benefiting from a reduced rate of 10.5% on the first €50,000 of taxable profit. Companies operating under the Madeira International Business Centre (MIBC) may benefit from a 5% corporate tax rate on qualifying income, subject to substance, employment, and activity requirements. These rates make taxes in Madeira particularly competitive for entrepreneurs and internationally active businesses.
This article is provided for general information purposes only and does not constitute legal, tax, or professional advice. Tax outcomes depend on individual circumstances and the legislation applicable at the time of implementation. Specific advice should always be obtained before making any decision.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
