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Council Directive 2003/49/EC dated June 3, 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States, is applicable to companies in Madeira.
Payment of interest and royalties between companies in the EU are exempt from withholding tax, if:

  • Both companies embody one of the legal forms of constitution provided for in the Appendix to the Directive;
  • Both are subject to Income Tax;
  • There is an existing association of capital between them >= 25%, or if both are directly held in >= 25% by a third company, which complies with the two requisites stated above, so long as in either of the cases, the subsidiary is held for a minimum of two years.

Companies in Madeira comply with the first two requirements. If the 3rd is also fulfilled, it is possible for entities in other Member States to pay interest or royalties to the company in Madeira without automatic withholding at source.

Under the Agreement between the EU and Switzerland, tax exemption on the payment of interest and royalties shall also apply to the relationship between Madeira and Swiss companies, provided that both are limited companies and fulfil the above-mentioned requirements.

With the application of the tax regime available within the International Business Centre of Madeira, payment of interest to third parties is exempt from withholding tax.

Partners or shareholders of Madeira companies, as long as non-resident in Portugal or in tax-havens, are also exempt from tax on the payment of income deriving from interest or other form of remuneration of shareholder loans, allowances or advances of capital that they have made to the company.


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