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Corporate Income Tax (IRC) is regulated via the Corporate Income Tax Code, approved via DL 442-B/88 of 30 November and successive amendments, having come into force on 1 January 1989.

The characteristics, degree of application and calculation of IRC in Portugal apply to the entire national territory and the only difference between the Autonomous Region of Madeira and Mainland Portugal is in terms of the rates that are applied:

 

Mainland Portugal Rate (%)

Madeira Rate (%)

Resident entities and permanent establishments of non-resident entities

21

14.7

Resident entities characterized as a small or medium enterprises, on the first €25,000 of the taxation base

17

11.9

 

Companies licensed within the scope of the International Business Centre of Madeira benefit from a reduced rate of IRC (5%) applicable to qualified income and as long a the respective requirements have been met.

Please click here to find out more about the characteristics, degree of application and methods of calculating corporate income tax in Portugal.

 

Regional surcharge

The Regional Surcharge consists of a tax on the part of taxable profit that exceeds €1.500.000, subject to and not exempt from corporate income tax, as calculated by taxpayers who have a head office, permanent management, or stable establishment in the Autonomous Region of Madeira.

The companies that are established within the scope of the International Business Centre of Madeira shall benefit from lower Regional Surcharge rates for each taxation period with respect to income obtained within the scope of the IBCM and taxed at a rate of 5% (IRC).

As such, the following additional taxes shall apply:

Taxable profit (€)

Rate (%)

IBCM Rate (%)

From 1,500,000 to 7,500,000

2.1

0.42

From 7,500,000 to 35,000,000

3.5

0.70

Greater than 35,000,000

6.3

1.26

The part of taxable profit that exceeds €1,500,000:

  1. When greater than €7,500,000 and up to €35,000,000, it is divided into two parts: one equal to €6,000,000, to which a rate of 2.1% is applied; and another, equal to taxable profit that exceeds €7,500,000, to which a rate of 3.5% is applied;
  2. When greater than €35,000,000, it is divided into three parts: one equal to €6,000,000, to which a rate of 2.1% is applied; another, equal to €27,500,000, to which a rate of 3.5% is applied; and another, equal to taxable profit that exceeds €35,000,000, to which a rate of 6.3% is applied.

Payment of this tax shall be determined by calculating the difference between the Regional Surcharge owed and additional advance tax payments made during the same taxation period. If the amount of additional advance tax payments made during that taxation period is greater than the amount of Regional Surcharge owed, the difference shall be reimbursed.

Additional advance tax payments must be paid in July, September and on 15 December of the year that the taxable profit pertains to, or if an annual taxation period different from the calendar year has been adopted, in the 7th month, the 9th month and on the 15th day of the 12th month of the respective taxation period, and its final payment shall be made during the periodic income declaration (Form 22 of IRC).

The amount of these payments is equal to the amount that results from application of the rates stipulated in the following table, applicable to the part of taxable profit that exceeds €1,500,000 related to the previous taxation period.

Taxable profit in euros (€)

Madeira Rate (%)

IBCM Rate (%)

From 1,500,000 to 7,500,000

1.8

0.36

From 7,500,000 to 35,000,000

3.2

0.64

Greater than 35,000,000

6

1.20

 

Municipal Surcharge

The Municipal Surcharge applies to taxable profit before deduction of reportable tax losses. In the municipality of Funchal, where NEWCO has its head office, the Municipal Surcharge rate is 0.5%, and taxpayers whose turnover during the previous year did not exceed €150,000 are exempt.

Companies established within the scope of the International Business Centre of Madeira shall be subject to a reduction in the Municipal Surcharge for each taxation period, the effective rate being 0.1% in this case.

To find out more about the rates applicable in other municipalities and any applicable reductions and exemptions, please contact us.

How we help our clients

NEWCO is an inward investment services provider specialized in the implementation of foreign investment in Portugal and Malta. With 30 years of experience and know how, we help our clients maximize the opportunities and minimize the risks of operating in a new country, allowing them to stay focused on their business. Contact us to find out how we can help you invest or relocate into Portugal, including Madeira, or Malta.

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