Tax Advantages in Madeira
Companies licensed to operate in the International Business Centre (IBC) of Madeira, between January 1, 2015 and December 31, 2020, enjoy a number of tax benefits which are guaranteed until December 31, 2027.
• Corporate tax rate of 5%;
• Madeira is an integral part of Portugal and therefore a full member of the European Union;
• Access to the majority of the Double Taxation Treaties that are currently in place between Portugal and other countries (approximately 70 treaties);
• Access to the Agreements on the Mutual Promotion and Protection of Investments signed by Portugal (approximately 60 Agreements);
• Madeira offers an International Register for Ships and Yachts;
• Automatic VAT registration when incorporating a company.
Tax Exemptions and Low Corporate Tax Rate
The special 5% corporate tax rate is subject to the following annual ceilings:
– 20.1% of gross value added obtained annually; or
– 30.1% of the annual costs of labor, or
– 15.1% of the annual turnover.
This tax benefits are applicable to different ceiling values of annual taxable income, depending on the number of jobs created, as described below:
|Jobs Created||Minimum Investment||Annual Taxable Income Ceiling|
|1-2||€ 75,000||€ 2.73 Million|
|3-5||€ 75,000||€ 3.55 Million|
|6-30||—||€ 21.87 Million|
|31-50||—||€ 35.54 Million|
|51-100||—||€ 54.68 Million|
|> 100||—||€ 205.50 Million|
If the annual taxable income exceeds the ceiling values described, the excess will be taxed at the rate of 21% (applicable corporate tax rate in Portugal in 2016).
The VAT Advantage
The companies registered in the IBC of Madeira are, on incorporation, provided automatically with a VAT registration number.
Trading within the EU is therefore made simpler and more effective, from a cash flow point of view, by the provision of a registration number for VAT purposes.
Corporate Tax Rate
The corporate tax for the year is calculated after the submission of the company´s Annual Tax Return (Model 22). The deadline to submit this annual tax return is the 31 May of each year.
The effective annual corporate tax payable is calculated on the basis of the net profit of the company less any tax loss brought forward from the previous year. The Provisional Tax Payments on Account (PC) and Special Tax payments (PEC) are taken into consideration when calculating the Annual Corporate Tax due/refundable.
Upon submission of the Annual accounts to the Tax authorities and after the assessment is issued, in some cases, the company may be entitled to a refund. Should this be the case, the Tax authorities will refund the surplus tax to the company´s local bank account.
Please note that any refund will only be paid into a local Portuguese bank account.