Frequently Asked Questions about the International Business Center of Madeira
We have compiled a list of questions frequently asked by our clients and potential investors, related to the International Business Centre of Madeira (IBCM).
1. Is there a deadline to register a company in the IBCM, to benefit from the current regime of tax reductions and exemptions?
The deadline to register a new company in the IBCM and benefit from the current tax regime has been extended until the 31st of December 2021. Registered companies will benefit from the current tax regime until the end of 2027, date from which they can apply for the (expected) next regime. More information on the tax exemptions and reductions of the current regime can be found here.
Note: There is likely to be a further extension of the regime soon, allowing new companies to be registered until 2023.
2. What are the eligibility requirements under the IBCM?
The activity of the company licensed in the IBCM must be carried out through adequate economic substance located in Madeira. The company must also comply with one of the following eligibility requirements:
- Creation of one to five jobs in the first six months of operation and a minimum investment of €75,000 in the acquisition of tangible or intangible fixed assets in the first two years of operation.
- Creation of six or more jobs, within the first six months of activity.
3. What is meant by an adequate economic structure?
There is no objective definition of this concept, however, the company licensed in the IBCM must have the adequate economic substance for the development of its activity, namely in terms of risks, assets, and functions appropriate to the development of its. Please see our white paper for further information.
4. What is meant by job creation?
The number of jobs is determined by reference to the number of people with a permanent employment contract with the registered company (full-time), provided that they reside, for tax purposes, in Madeira or, if they do not reside, carry out their activity in Madeira.
Employees working on an indefinite, part-time or intermittent basis are considered in proportion to the number of full-time employees in a comparable situation, measured in terms of annual work units (AWU). For this purpose, the following are not considered:
- Workers assigned by temporary employment agencies, as far as the respective user entities are concerned.
- Workers on a casual assignment regime, as far as the transferee entity is concerned.
- Workers with several employers, when the employer that represents the others in the employment relationship is not licensed in the IBCM.
5. What is meant by investment?
This concept of "investment" includes any assets, be they tangible, or intangible, that are identifiable, involve control over a resource and will generate future economic benefits for the company (excluding financial investments). By way of example, the purchase of land, buildings or equipment, intellectual property, patents, industrial property, among many other non-current assets, are considered an eligible investment.
6. Does the investment have to be made in Madeira?
The company must have, in Madeira, the adequate economic substance to carry out its business activity, namely in terms of risks, assets, and functions appropriate to the development of its activity. It is, consequently, recommended that the investment be made in Madeira. Please refer to our white paper for further information.
7. Are there any other limits to the benefits granted?
The benefits granted are limited to certain ceilings regarding taxable income, which depend on the number of jobs created in Madeira.
1 to 2 employees
€ 2,73 million
3 to 5 employees
€ 3,55 million
6 to 30 employees
€ 21,87 million
31 to 50 employees
€ 35,54 million
51 to 100 employees
€ 54,68 million
More than 100 employees
€ 205,5 million
Tax benefits are also subject to one of the following annual ceilings:
- 15.1% of turnover in Madeira.
- 20.1% of the gross value added generated in Madeira.
- 30.1% of labour costs incurred in Madeira.
The income and gains, as well as the expenses and losses, are deemed to be obtained, generated, or borne in Madeira if attributable to the activity carried out by the company through adequate economic substance in Madeira. If the taxable income is higher than the above limits, the excess will be taxed at a rate of 14.7% (general regime in Madeira).
8. What happens if my company does not comply with these requirements?
If your company does not comply with the above requirements, it will be subject to the general tax regime in Madeira, which is still one of the most competitive in Europe, namely in terms of corporate tax rate (14.7%). Find out more here.
9. What happens if my company does not create the jobs or does not make the investment within the regulated deadlines?
If this happens, the company will be subject to the general tax regime in Madeira, with retroactive effects from the date of licensing.
10. Can my company have business operations with Portuguese residents?
Yes, however these transactions should be registered separately, as they are taxed under the general regime in force in Madeira.
11. What is the best way to implement an adequate economic structure?
NEWCO is totally available to help its clients to implement their economic structure in Madeira, in order to comply with the substance requirements in force and according to the specific needs of each client. Besides the support in hiring your team, our NEWOFFICE, makes it possible for you to have an office with shared services, allowing you to have a dedicated space without the costs of renting a completely autonomous office. The shared office contains various functionalities: reception, telephone, Wi-Fi internet, electricity, weekly cleaning, and IT support, among others. Contact us to find out more.
NEWCO is your one-stop-shop for foreign investment services in Portugal and Malta, with 30 years of experience in providing all the necessary services for people and companies of any size to set up and develop their business in these countries, safely and efficiently.