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Trusts in Madeira are regulated through omission. Decree Law 352/88 & Decree Law 149/94 deal with the registration and management of offshore trusts whereas Decree Law 264/90 concerns authorization by government of trust corporations and branches.
Portuguese residents cannot use Madeiran offshore trusts. The law forbids a trust to hold immovable property situated in Portugal and to have either a settlor or a beneficiary who is a Portuguese resident.
All trust property must be based outside Portugal and all trust income must be derived from non-Portuguese sources if the favorable taxation regime governing entities licensed to operate under the Free Trade Zone Legislation of Madeira is to apply.
Where trust income arises in Portugal, it is taxable in the hands of the trustees as if the trustees were both legally and beneficially entitled to the income. The reasoning behind this principle is that Portuguese law does not recognize the concept of a trust and so does not recognize the distinction between legal and beneficial ownership for the purposes of taxation.
By way of exception income arising through investments made through companies licensed to operate under the Free Trade Zone Legislation of Madeira is not considered to have arisen within Portugal for tax purposes.
For a Madeira trust to be valid it must satisfy the following criteria:
Trusts that are created in or transferred to Madeira may emigrate without prior authorization by exchanging the law governing the trust with the law of the foreign jurisdiction to which the trust is going to migrate.
The settlor must expressly designate the law (other than Portuguese) that will regulate the Trust at the time of incorporation. Furthermore the trust deed can reserve the right to change the proper law governing the validity, interpretation & administration of the trust at any future point in time.
A Madeira offshore trust is brought into existence by the execution of a notarial trust deed in front of a public notary. Provisions protecting
Pursuant to European Directive 2015/849, all beneficial owners of the trust must be reported to the control-accessed Central Registry of Beneficial Owners. Under this EU Directive the trust’s beneficial owners are: the settlor(s), the trustee(s), the curator (if applicable), the beneficiaries of the trust and any other individual that controls (in)directly the trust.