International Business Centre of Madeira - Changes and Advantages
The International Business Centre of Madeira (IBCM), created in the 1980's, consists of a series of benefits, mainly of a tax nature, which are periodically reviewed and updated. Recently (April 2021), a new extension of the benefits of the IBCM has been approved, while also introducing some concepts aimed at promoting a better articulation between national and community legislation.
We emphasize the need to employ full-time employees who reside or carry out their activity in Madeira, as well as the need for the activity of the company licensed in the IBCM to be carried out through an adequate economic substance located in Madeira (see "Substance Requirements" below).
Which companies may be registered in the IBCM?
Madeira hosts a wide range of international companies, in the following areas:
- International services: trading, consultancy, technical and professional services, holding companies, telecommunications, e-commerce, and any other services of an international nature.
- Industrial Free Trade Zone: industrial activities and warehousing
- International Shipping Register (MAR): shipping activities, registration of ships, commercial and pleasure yachts
The tax regime of the IBCM is fully integrated with the Portuguese and Community (EU) legal systems. As part of the Euro Zone, operations carried out within the IBCM benefit from the consequent reduction in operating costs, freedom of movement of capital and elimination of foreign exchange risk.
What advantages does the IBCM offer to registered companies?
Companies operating within the IBCM benefit from one of the most advantageous tax regimes in the European Union:
- The corporate income tax rate is 5%.
- Exemption from withholding tax on the payment of royalties, services, and interest to third parties.
- Tax credit for international, economic, and legal double taxation.
- Exemption from withholding tax on the distribution of dividends to shareholders (provided they are not resident in Portugal or in tax havens).
- Full application of the Portuguese participation exemption regime.
- Exemption from withholding tax on the payment of interest and other forms of remuneration on shareholder loans, bonuses, or capital advances to shareholders.
- 80% reduction in stamp duty, municipal tax on real estate transactions (IMT), municipal real estate tax (IMI) and regional and municipal taxes, notary, and registration fees.
- Reduction of the Special Payment on Account and Autonomous Taxes in proportion to the applicable corporate income tax rate (in this case, a 66% reduction).
Substance requirements for IBC companies
Companies that wish to benefit from the reduced income tax rate (5%) until the end of 2027 must start their activities within six months, in the case of international services, and one year, in the case of industrial or shipping activities, from the date of licensing. They must also meet one of the following eligibility requirements:
a) Creation of one to five jobs, in the first six months of activity and a minimum investment of €75,000 in the acquisition of tangible or intangible fixed assets in the first two years of activity.
b) Creation of six or more jobs, in the first six months of activity.
The number of jobs is determined by reference to the number of persons with a permanent employment contract with the licensed company (full-time), provided that they reside, for tax purposes, in Madeira or, if they do not reside, carry out their professional activity there.
Employees working on an indefinite, part-time or intermittent basis are considered in proportion to the number of hours worked by 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 companies.
- Workers on an occasional transfer regime.
- The workers in a multi-employer regime, when the employer representing the others in the employment relationship is not licensed in the IBCM.
The benefits granted are limited to certain ceilings, which depend on the number of jobs created in Madeira.
Jobs Taxable amount
1 to 2 workers
€ 2,73 million
3 to 5 workers
€ 3,55 million
6 to 30 workers
€ 21,87 million
31 to 50 workers
€ 35,54 million
51 to 100 workers
€ 54,68 million
More than 100 workers
€ 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.
But it's not only for companies…
Living in Madeira is also an excellent option! The stunning landscapes and warm climate are the perfect complement to the advantageous Portuguese tax regime for Non-Habitual Residents (NHR). Some of the advantages are:
- Exemption on salaries received from foreign companies, if taxed at source.
- Exemption or flat rate of 20% on professional income derived from high added value activities (e.g., software developers, authors, journalists and linguists, creative artists, executive managers, commercial directors, IT specialists).
- Exemption on dividends received from foreign companies.
- The occasional sale of crypto currencies is not taxed.
NHRs who want to set up a company can also benefit from:
- Residence permit for entrepreneurship and/or innovation activities (Start-up Visa).
- Financing and investment programmes.
- Incubator (Start-up Madeira) integrated in the European network of business and innovation centres.
- One of the lowest corporate tax rates in the European Union (14.7% or 5%).
- Patent Box scheme which provides for a 50% exemption from corporate tax on income from the temporary assignment or use of software, patents, industrial designs, or models subject to registration.
In our brochure (available below) you can find detailed information about the International Business Centre of Madeira.
We are available for any clarifications you may require. Please contact us.
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.
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