6 Common Myths about the International Business Centre of Madeira

With the vast amount of information available on the Madeira International Business Centre across a wide range of channels, it is essential to ensure access to reliable, up-to-date and accurate information. Only in this way is it possible to ensure informed decision-making, anticipate risks and strengthen investor confidence.

Throughout our 35 years of experience supporting investors in Madeira, we have identified various myths and inaccuracies relating to the Madeira International Business Centre (CINM). Relying on incorrect or out-of-date information can lead to significant misunderstandings and compromise strategic decisions.

Over the years, the CINM regime has undergone changes, deadline extensions and different regulatory frameworks, making it more difficult to keep content permanently up to date and consistent.

This article therefore has the ambitious aim of debunking six current and common myths about the tax regime of the Madeira International Business Centre (also known as the “Madeira Free Zone”).

Myth 1 – The Madeira IBC tax regime has been cancelled or is closed for new entries.

This statement is completely false. The Madeira International Business Centre regime has not been repealed (it has been in force since the 1980s, in various forms), and therefore remains open to new investors and the registration of new companies.

So, in 2026, this is the key information to remember:

• The IBC allows the registration of new companies at least until 31 December 2026, meaning you are free to set up a new company or transfer an existing company to the IBC; and
• The tax benefits of the scheme are guaranteed until 31 December 2033.

Further extensions are possible and even likely, as they have already been authorised by the European Union (“EU”).

MYTH 2 - Madeira is an offshore jurisdiction.

Madeira is NOT an offshore jurisdiction, is NOT a tax haven, is NOT a non-cooperative jurisdiction – if you find any other synonyms, the answer will be the same.

To fact-check, note, for example, that Madeira is not (and never has been) on the EU’s list of non-cooperative jurisdictions (available here) or on any other list compiled by the OECD or relevant public or private international institutions.

The tax regime of the Madeira International Business Centre does indeed offer a considerably lower level of taxation, but it is firmly committed to all international best tax practices, such as international cooperation, transparency and the exchange of information.

The reason is simple: failure to comply with these terms would result in the IBC scheme being immediately challenged by other EU Member States.

Furthermore, the IMBC tax regime was originally approved under EU state aid rules, meaning that each of the tax incentives granted was negotiated with the European Commission to ensure compliance with EU legislation promoting fair competition and preventing harmful tax practices.

More recently, it should be noted, the IBC scheme was included in the General Block Exemption Regulation, which means that its application no longer depends on the European Commission’s approval, as it is no longer considered state aid.

There is also a key commitment at national level: a company registered with the Madeira International Business Centre has the same rights and obligations as any other Portuguese company.

Thus, full compliance with national legislation (and, consequently, with EU legislation) is mandatory.

Myth 3 – Madeira companies do not need substance

This myth could probably be subsumed under the previous one, but we have nevertheless chosen to highlight it, in order to demonstrate the scheme’s commitment to transparency and international best tax practices.

We could write a thesis or outline some well-known tax concepts that you have read many times before, but the conclusion will always be the same: if you are looking for a jurisdiction to set up a purely artificial structure, without any economic rationale, without creating value or having a connection to the region (for ex ly by hiring an employee who is a tax resident of Madeira, regardless of whether or not they are a Portuguese citizen), you should look for a jurisdiction other than the Madeira International Business Centre.

Believe me: for a small economy like ours, it is difficult to turn away a certain type of investor who also adds value, but this is a commitment that Madeira has made to the EU and it is non-negotiable.

The good news is that, provided you are willing to meet the substance requirements, the IBC regime offers the lowest corporate income tax rate in the EU.

On the other hand, we would point out that, due to the specific characteristics of the local economy, implementing appropriate substance requirements is not as costly as in other EU jurisdictions (without this factor in any way compromising the quality of resources, growth potential or operations).

Myth 4 – Madeira companies cannot benefit from Tax Treaties or EU Conventions

Madeira is an integral part of the Double Taxation Conventions that Portugal has in force with other countries, both EU and non-EU, and of the network of EU Directives.

That said, there are two distinct situations:

• Companies incorporated under the general regime in Madeira, outside the International Business Centre, which can benefit from the entire network of tax treaties and EU Directives concluded by Portugal;
• Companies within the IBC, which benefit from the entire network of tax treaties and EU Directives, with only two exceptions: the Double Taxation Conventions concluded with Brazil and the United States of America, which expressly exclude IBC companies. However, we would point out that this effect can be fully offset by the withholding tax exemption provided for under the IBC regime on the distribution of various types of income.

In fact, not all companies based in Madeira are part of the International Business Centre: this regime is more specific (and beneficial) for companies with international activities – hence the need to rely on experienced partners, such as NEWCO, to advise on all cross-border issues that will arise.

Broadly speaking, companies in Madeira that are outside the International Business Centre pay corporation tax at a rate of 14.7%, whilst companies within the IBC benefit from a corporation tax rate of 5%.

Myth 5 – Madeira IBC companies are outside the VAT system

Madeira, being an autonomous region of Portugal, is part of the Portuguese Value Added Tax (“VAT”) system and follows the EU VAT rules, including rates, exemptions, and reporting requirements. In fact, a Madeira IBC company has the same reporting requirements (VAT or non-VAT related) as any other Portuguese company.

Immediately upon incorporation, a Madeira IBC company has a valid VAT number that can be used in every transaction. There is no need for a separate application.

MYTH 6 – Madeira IBC companies cannot have any activity in Portugal or Portuguese shareholders

The main benefits of the Madeira International Business Centre are for companies with international operations. This is a fact, and the reason is simple: the 5% corporation tax rate applies only to profits derived

• from transactions carried out with non-Portuguese entities or
• from transactions carried out with other companies registered with the IBC (the latter case is, however, somewhat unusual).

However, this does not mean that companies registered with the IBC are not permitted to carry out their activities in mainland Portugal: they may, of course, have Portuguese clients.

The only difference is that the portion of profits arising from transactions with Portuguese entities will be taxed at the standard corporate tax rate in Madeira, i.e. 13.3% (considerably lower than the 19% applicable in mainland Portugal), with the remaining portion of eligible income taxed at the special rate of 5%.

Finally, we would like to point out that IBC companies may have partners or shareholders of Portuguese nationality, whether they are individuals or companies.

In fact, the Madeira International Business Centre regime does not impose any restrictions based on nationality, although the benefits are restricted t s who are tax residents in jurisdictions considered tax havens under Portuguese law (you can consult the current list  here).

Our final thoughts on the International Business Centre of Madeira

Debunking myths is always more complicated than creating and/or spreading them, but we gave our best shot and hope to have made clear that Madeira remains on the table for companies with an international outlook.

The Madeira IBC regime has its future guaranteed (at least) until the end of 2033. It will continue to play a fundamental role in the diversification and development of the local economy.

Are there any reasons to choose Madeira? Yes!

• We have modern infrastructure and 5G coverage across the whole island;
• We have a welcoming community that enjoys hosting expats, digital nomads and investors;
• We have a pool of dedicated and dynamic local talent;
• We have a combination of a mild climate and diverse landscapes that allows for water sports, hiking and other outdoor activities all year round;
• We have low crime rates, high safety standards and efficient public services;
• We share the same time zone and have over 12 daily flights connecting Madeira to Lisbon/Porto (1h30m flight time) – direct flights are also available to other major EU capitals, such as London, Madrid, Paris, Amsterdam and Berlin, amongst other global cities.