Madeira IBC: Get Licensed by 31 December 2026 for 5% Tax

Yes, you read well: companies licensed in the Madeira International Business Centre (Madeira IBC, also known as Madeira Free Trade Zone) by 31 December 2026 can benefit from a 5% corporate tax rate until the end of 2033. That means up to eight tax years of competitive taxation, all depending on a single date.

Can the deadline be extended? Absolutely. Portugal's 2027 State Budget will soon go before Parliament, and the regime has been extended before: the 2025 State Budget moved the licensing deadline to 31 December 2026, and the 2026 State Budget extended the benefits until 2033.

Even so, if Madeira is part of your business plans, there is little reason to wait. This is a good time to review your next steps, and a good place to start is with the fundamentals of the regime, which we set out below - yes, we never get tired of going through them!

Madeira IBC vs. Portuguese standard regime

In Portugal, the standard corporate income tax (CIT) rate in 2026 is 19%, reduced to 13.3% for companies based in Madeira. The IBC goes even further and reduces it to 5%, one of the lowest corporate tax rates in the European Union. The mainland rate is set to fall to 18% in 2027 and 17% in 2028, but the gap to 5% remains wide.

In short, the 5% rate applies to income from operations with non-residents or with other IBC-licensed companies. Any other income is taxed at the regular Madeira rate of 13.3% (10.5% on the first €50,000 of taxable profit for SMEs), which is still significantly lower than the 19% applicable to companies based in the mainland.

Madeira IBC benefits for shareholders

Being able to lower the CIT rate is only a glimpse of all the advantages that a licence from the IBC provides.

Non-resident shareholders of an IBC-licensed company are exempt from personal or corporate income tax until 31 December 2033 on the dividends, interest and other remuneration from shareholder loans and capital advances made to the company.

The dividend exemption does not apply to shareholders resident in blacklisted jurisdictions or in Portugal.

Madeira IBC requirements

To guarantee access, the law sets requirements that every Madeira IBC company must meet:

• Be licensed to operate in the Madeira IBC;
• Start operations within 6 months of the date of licensing, or within 1 year for industrial activities and maritime or air transport;
• Create 1 to 5 jobs in Madeira within the first 6 months of activity and make a minimum €75,000 investment in tangible or intangible fixed assets in the first 2 years of activity; or
• Create 6 or more jobs in Madeira within the first 6 months of operation with no minimum investment required.

If a founder or managing director moves to Madeira and is paid by the company, they count as one of these jobs, as long as they receive employment income from the company and become tax resident in Madeira. This applies both to the job requirements and to the profit caps below.

Please note that the benefits are capped. The maximum annual profit taxed at 5% depends on the number of jobs the company maintains in Madeira each year. By way of example:

• 1 to 2 jobs in Madeira equal up to €2.73 million annual profit taxed at 5%;
• 3 to 5 jobs in Madeira equal up to €3.55 million annual profit taxed at 5%;
• 6 to 30 jobs in Madeira equal up to €21.87 million annual profit taxed at 5%.

Is the Madeira IBC the right option for your project?

The Madeira IBC can be home to a wide range of companies focused on international operations, such as international services, industrial activities, warehousing, and shipping operations.

These tax incentives tend to work best for businesses selling mainly to clients outside Portugal, and for international groups that seek an EU operating base.

Whether it makes sense for you depends on several factors, such as where your clients are and which activities you plan to carry out.

NEWCO helps companies determine whether the Madeira IBC fits their business, set up the company and shareholder structure correctly from scratch, and obtain licenses before the deadline, helping you keep the company compliant through 2033.