When considering where to incorporate a business in Europe, Portugal stands out for its strategic location, business-friendly climate, and strong ties within the EU. But suppose you’re seeking to incorporate a company in Portugal with even more significant tax efficiency and operational advantages. In that case, one region offers exceptional opportunities: Madeira, home to the Madeira International Business Centre (MIBC).
What is the Madeira International Business Centre?
The MIBC is a Portuguese government-backed initiative to attract international investment through a highly competitive fiscal regime and modern infrastructure. Located on the picturesque island of Madeira, just southwest of mainland Portugal in the Atlantic Ocean, this EU-recognized free trade zone offers a secure, compliant, and appealing route for international businesses looking to establish themselves in Europe.
Unmatched Tax Benefits: Why the MIBC Stands Out
Businesses registered under the MIBC regime enjoy one of the lowest corporate tax rates in the EU—just 5%, guaranteed until at least 2028. This tax rate is fully approved by the European Commission as compliant with both EU competition rules and OECD standards on fair taxation.
But that’s just the beginning. Here are more reasons entrepreneurs are turning to Madeira:
- No withholding tax on dividends to non-resident shareholders (as long as they’re not in a blacklisted jurisdiction).
- Exemption from taxes on interest, royalties, and service payments abroad.
- Access to Portugal’s extensive Double Tax Treaties network creates better tax conditions for cross-border operations.
- Full EU integration means Madeira companies benefit from the same legal protections and treaties as mainland Portugal businesses.
Who Can Benefit from Incorporating in Madeira?
The MIBC is ideal for a wide range of business activities. Whether you’re running a service-based enterprise or a trading operation, the scope is broad:
- E-business and digital services
- International consultancy and technical services
- Wholesale import/export and trading
- Intellectual property management and commercialization
- Industrial manufacturing, assembling, and warehousing
- Shipping and yachting via the Madeira International Shipping Register (MAR), which ranks as one of Europe’s largest
Substance Requirements: Real Presence for Real Benefits
To ensure that tax benefits go to legitimate businesses, the MIBC has precise substance requirements:
- Initial Compliance:
- Within the first six months, hire one employee and invest €75,000 in fixed assets (within two years); OR
- Hire six employees within six months (exempting you from the €75,000 investment requirement).
- Ongoing Requirement:
- Maintain at least one full-time employee registered with Portuguese tax and social security authorities. This can be a director or board member.
These requirements ensure alignment with global standards while remaining accessible for small to medium enterprises and startups.
Capped Benefits, Scaled Opportunities
While the 5% tax rate is a significant draw, it’s important to know that there are limits based on job creation, ensuring that larger companies don’t gain disproportionate advantages. For example:
| Jobs Created | Maximum Taxable Income at 5% |
|---|---|
| 1–2 | €2.73 million |
| 3–5 | €3.55 million |
| 6–30 | €21.87 million |
| 31–50 | €35.54 million |
| 51–100 | €54.68 million |
| 100+ | €205.5 million |
Additionally, annual benefit caps apply based on the company’s turnover, earnings, or labour costs—ensuring a balanced, fair incentive structure.
More Than Just Tax Benefits
Madeira isn’t just a wise financial choice—it’s also a fantastic place to live and work. With a mild year-round climate, stunning natural beauty, and one of the lowest living costs in the EU, the island is perfect for entrepreneurs and employees.
Other lifestyle and business-friendly features include:
- Multilingual workforce (English widely spoken)
- Highly educated young population
- Modern infrastructure and tech readiness
- Frequent air links to Lisbon and major European cities
Final Thoughts: Is Madeira Right for Your Business?
If you’re considering incorporating a company in Portugal, Madeira offers a rare combination of EU-level regulatory assurance, world-class infrastructure, and highly competitive taxation. Whether you’re a tech entrepreneur, international trader, or holding company manager, the MIBC creates a legal and operational framework to help your business thrive.
Interested in learning how to incorporate a company in Portugal, namely, set up your company in Madeira? Contact our specialists today and discover your path to more innovative business in Portugal.
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
