Entities operating within the scope of the IBC benefit from one of the most advantageous tax regimes in the European Union:
Companies must begin their activity within a period of six months from the date of licensing, in the case of international services, and one year, in the case of industrial or shipping activities. They must also comply with the following eligibility requirements:
a) The company must have at least one paid employee or director (full-time or part-time) on its payroll;
b) if the company employs fewer than 6 employees (or directors), during the first two years of activity, it must make a minimum investment of €75,000 in the acquisition of tangible or intangible fixed assets.
Please contact us to learn more about the fulfilment of this employment requirement.
Tax benefits shall be limited to the following ceiling amounts, depending on the number of employees (or paid directors), in accordance with the aforementioned conditions:
The tax benefits are also subject to one of the following maximum annual thresholds:
If the tax base exceeds the limit, the excess shall be taxed at the 21% rate (Madeira general regime).
Profits and reserves distributed to Madeira companies by their subsidiaries or associated companies, along with capital gains or losses occurring due to the transfer of shares in these companies, regardless of the percentage of the shares transferred and its transfer form, shall not contribute to their taxable profit, under certain conditions. To learn more click here.
Distribution of Profits / Dividends
A tax exemption (withholding tax) applies to the distribution of profits/reserves by a Madeira company, providing that certain conditions are met. To learn more click here.
Capital gains earned by non-residents in Portugal from the sale of a shareholding in a Madeira company shall not be taxed if the company's main assets do not include real estate in Portugal. This exemption shall not apply to shareholders residing in tax havens.
Capital gains earned by a Madeira company on the sale of their subsidiaries or associated companies shall be exempt from taxation under the terms of the Participation Exemption.
Some sector activities have specific tax benefits:
Corporate income tax exemptions/reductions apply to income derived from this activity, except income derived from the transport of passengers or freight between Portuguese ports.
The crew of the ships registered in the International Ship Registry are exempt from paying personal income tax.
Crew members and their respective employers are exempt from social security contributions in Portugal, provided they are covered by another social security system or voluntary insurance policy that covers illness, occupational illness and parenthood. If the crew members are Portuguese or resident in Portugal, they shall be subject to obligatory registration under the Portuguese general social security system with a contribution rate of 2,7%, 0,7% being paid by the crew member and 2% by the employer. It should be stressed that, according to Portuguese law, crew members onboard ships at the service of entities resident in Portugal, are deemed to be resident in Portugal for tax purposes.
Industrial Free Trade Zone
Exemptions/reductions of corporate income tax apply to all industrial income generated in the Industrial Free Trade Zone, including income obtained in Portugal. The withholding tax exemption on dividends and interest paid to shareholders also applies to individual or corporate shareholders resident in Portugal.
Companies performing industrial activities also benefit from a 50% corporate income tax deduction provided they meet at least two of the following conditions:
a) They contribute to modernizing the regional economy, namely through technological innovation of products and manufacturing processes or business models;
b) They contribute to the diversification of the regional economy, namely through new activities with high added value;
c) They promote the hiring of highly qualified human resources;
d) They contribute to improving environmental conditions;
e) They create at least 15 jobs that must be maintained for at least 5 years.
Companies licensed before the 31st December 2014
Companies licensed within the International Business Centre of Madeira before the 31st December 2014, which have not chosen to benefit from the new regime, described above, are subject to a tax regime that is very similar thereto, with the following exceptions that shall only apply until the end of 2020 (in which date they may choose to benefit from the new regime):