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Council Directive 2011/96/EU of 30 November 2011 (previously Directive 90/435/EEC) regarding the common tax regime applicable to parent companies and affiliate companies of different Member States is fully applicable to Madeira companies.

Through this directive, distribution of profits by a Portuguese company to companies residing in the European Union (EU) shall benefit from withholding tax exemption, providing that the following conditions exist:

  • Both companies meet the criteria of one of the corporate forms stipulated in the Directive Annex;
  • Both are subject to and not exempt from the income tax referred to in the Directive;
  • The shareholder has directly or indirectly held a share in the subsidiary >= 10% for at least 2 years.

Madeira companies fulfil the first two requirements. If the third one is also met, it shall be possible to pay dividends to entities residing in another EU Member State without paying withholding tax.

Under article 15 of the Agreement between the EU and the Swiss Confederation, the aforementioned exemption is also applicable to the relationship between companies in Madeira and Swiss companies if the company benefitting from the profit has had at least a 25% direct stake in the capital of the company distributing the profits for at least two years, if both entities are subject to income tax without exemptions, and if they are both limited companies.

Similarly, if the requirements of this Directive have been complied with, the distribution of profits made by companies that reside in the European Union to a Madeira company shall be exempt from withholding tax.

Distribution of dividends

Participation Exemption


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