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INTERNATIONAL
BUSINESS CENTRE
OF MADEIRA (IBCM)
OTHER TAX
PRIVILEGED
REGIMES APPLIED
IN PORTUGAL
INTERNATIONAL BUSINESS CENTRE OF MADEIRA
I. Madeira
II. International Business Centre of Madeira
III. Tax Benefits for the International Services
IV. Double Taxation Treaties
V. International Shipping Registry (RIN-MAR)
VI. Investment in Angola and Mozambique through Madeira
VII. Characteristics of Madeira Companies
VIII. Certificates of Fiscal Residency
OTHER PRIVILEGED TAX REGIMES APPLICABLE IN PORTUGAL
IX. Golden Visa
X. Non-Habitual Resident Tax regime
XI. About us
XII. Contacts
www.mcs.pt
MADEIRAMadeira is a Portuguese archipelago in the Atlantic Ocean, situated 625 miles (1,000 km) from
Mainland Portugal and 545 miles (900 km) from North Africa. It consists of four islands:
Madeira, Porto Santo, Desertas and Selvagens. Madeira and Porto Santo are the only
inhabited islands, while the Desertas and Selvagens islands are uninhabited natural reserves
that have been declared World Heritage Sites by UNESCO.
Madeira Island is the biggest and most important island of the archipelago with an area of 741
km2. Due to its subtropical climate and landscapes, it is known worldwide as an all year round
tourist destination. Although it is an integral part of Portugal and subsequently of the European
Union, where all laws applicable on the mainland also apply, Madeira is an autonomous region
with its own government and parliament.
The population numbers approximately 245,000 inhabitants and its capital is the city of
Funchal. Madeira’s International Airport serves several daily flights to Lisbon and other major
cities. The official currency is the EURO and it is a civil law jurisdiction. A considerable part of
the younger population is fluent in English.
Madeira’s economy is based on tourism, wine production and the International Business
Centre of Madeira (IBCM). Created at the beginning of the eighties, the IBCM has proved to
be a success and currently represents around 21% of the Regional Gross Domestic Product.
The highly advantageous tax regime, in addition to competitive operating costs, makes
Madeira an attractive centre for international investment.
INTERNATIONAL
BUSINESS CENTRE
OF MADEIRA
3 – 33 | www.mcs.pt
INTERNATIONAL BUSINESS
CENTRE OF MADEIRAMadeira, for being an outermost region of the European Union and benefiting from the state
aid regime foreseen in the EU treaties, was entitled to implement a development program to
attract foreign investment and economic activity. This program commonly known as the
Madeira Free Trade Zone or International Business Centre of Madeira (IBCM), initially created
in 1980, was duly approved by the European Commission and subsequently over time
reapproved on several occasions.
In March 2015, Portugal negotiated with the EU Commission the main guidelines of the so-
called “IV Regime”, for companies licensed between 2015 and 2020, and with tax benefits
going up to 2027. The new regime now integrated in the General Block Exemptions Regulation
(GBER) for State Aid, required some tough negotiations to enable specific derogations for
Madeira.
The new law (Law n.º 64/2015) was published on the 1st of July 2015, but with effects as from
1st of January 2015.
SECTORS OF ACTIVITY
Interested investors may take advantage of the several benefits of the following main sectors
of activity of the IBCM:
The Industrial Free Trade Zone
All industrial activities such as manufacturing, production, assembling and warehousing should
take place in an industrial park located in Caniçal, which is located 8 Km away from the
island’s international airport and next to the main commercial port. These activities enjoy
attractive tax and customs duties regimes.
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International Services
This is the main sector of the IBCM, allowing all type of international service activities such as
international trading, management and consulting services, e-business, telecommunications,
ownership of intellectual property, real estate investments or holding of participations.
International Shipping Registry of Madeira ( RIN-MAR)
An International Shipping Registry - MAR - Portugal’s second register, was also created within
the IBCM. MAR accepts the registration of all types of commercial vessels, including oil rig
platforms, as well as commercial and pleasure yachts. (Please refer to section V of this
memo).
New Upcoming International Aircraft Registration
The new IV Regime also foresees the creation of an International Aircraft Registration (still
subject to approval of internal legislation).
TAX BENEFITS FOR THE INTERNATIONAL
SERVICESAs referred, following successful negotiations with the EU Commission, Portugal approved the
so-called IV Tax Regime for the IBCM, for companies licensed between 2015 and 2020, and
with tax benefits up to 2027.
All existing companies licensed up to 31st December 2014, under the III Tax Regime for the
IBCM, will maintain their tax incentives up to 31st December 2020, notwithstanding the
possibility of transferring at any time into the IV Tax Regime to maintain benefits up to 2027.
5 – 33 | www.mcs.pt
The III & IV Tax Regimes are in general terms quite similar, with some small differences
resulting from the latest negotiations with the EU Commission.
MADEIRA IBC TAX REGIMEGeneral Guidelines
All Madeira Companies duly licensed to operate within the IBCM, are entitled to benefit from a
reduced Corporate Income Tax (“CIT”) rate of 5% provided that the conditions for admission to
the mentioned Madeira IBC regime are complied with.
This is the lowest corporate tax rate in force in the EU and one of the lowest in the
World.
Conditions (Substance Requirements) for admittance to the new regime
In order to benefit from this special regime, companies shall comply with the following
substance requirements:
a) Creation of one to five jobs in the first six months of business and making a minimum
investment of 75.000 Euros in the purchase of fixed assets, tangible or intangible, within
the first two years of business;
b) Creation of six or more jobs within the first six months of business.
The reduced corporate tax rate that companies are entitled to benefit from is subject to a
maximum limit of taxable income which depends on the number of jobs created in accordance
with the following scale:
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The reduced corporate tax rate that companies are entitled to benefit from is subject to a
maximum limit of taxable income which depends on the number of jobs created in accordance
with the following scale:
The remaining tax result, which surpasses the threshold, shall be subject to the IRC tax rate
applicable in the Madeira Autonomous Region, currently 21%.
As regards specifically the creation of jobs, the Regional Government of Madeira issued an
Order stating that any job relationship foreseen in the Portuguese labor code will qualify as a
job creation. Therefore a part-time job will qualify as well as a director receiving a salary. What
effectively matters is that the employee’s salary is processed through the Madeira Company
and is in compliance with the legal rules regarding withholding personal income tax and social
security contributions.
If the entities licensed to operate in the IBCM fail to comply with the requirements of the
regime with reduced taxes, the same shall be subject to CIT at the standard rate of 21%.
NUMBER OF JOBS TAXABLE INCOME
1 – 2 Jobs EUR 2,73 million
3 – 5 Jobs EUR 3,55 million
6 – 30 Jobs EUR 21,87 million
31- 50 Jobs EUR 35,54 million
51 – 100 Jobs EUR 54,68 million
More than 100 Jobs EUR 205,50 million
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Further to the reduced corporate tax rate, the following additional tax benefits are applicable to
companies licensed to operate in the Madeira IBC until 2020:
i. Participation Exemption regime (described under 3.3 below);
ii. No withholding tax on payment of dividends under IV Tax Regime to non-resident
entities (under certain conditions as described below);
iii. No withholding tax on payment of services to non-resident entities;
iv. No withholding tax on payment of interest to non-resident entities (under certain
conditions);
v. No withholding tax on payment of royalties to non-resident entities;
vi. No stamp duty or capital tax;
vii. No capital gains on the sale of the company itself (under certain conditions);
viii. Patent Box Regime (described below).
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It is important to enhance that the income obtained by entities licensed to operate in the
Madeira IBC shall only benefit from the tax exemptions/reductions foreseen whenever: (i) the
income is attributable to duly licensed entities, (ii) from operations included within the scope of
the licensed social activity (iii) carried out with non-Portuguese residents, excluding those
resulting from activities with other entities licensed to operate within the IBC. Contrarily, the
income derived from activities with residents in Portugal is taxed in accordance with the
standard CIT standard rate. This limitation of the fiscal benefits to external sourced income
implies that the respective beneficiaries must give proof of their non-residence status in
Portugal.
Consequently, in certain situations established in the law, it is necessary to obtain and keep a
document as proof of non-residence of the transaction’s counterpart. This document is a
certificate of fiscal residence or an equivalent document issued by the authorities of the
country where the counterpart is resident for tax purposes.
A last note to mention that the regime of the Madeira IBC continues to be significantly
competitive, granting the lowest corporate tax rate of the European Union (“EU”) and one of
the lowest corporate tax rates worldwide. In fact, companies operating herein are not
characterized as “offshore” and are totally entitled to benefit from almost all Double Taxation
Treaties (“DTT”) entered by Portugal, as well as from the EU Directives applicable to tax
matters. Furthermore, companies operating in the Madeira IBC are normally excluded from the
so-called “black list” of jurisdictions with low taxation that most States choose to disclose.
9 – 33 | www.mcs.pt
PARTICULARITIES OF THE IV TAX REGIME
As previously mentioned, the so-called IV Tax Regime for new companies licensed from 2015
onwards is very similar to the III Tax regime described above.
The main differences are:
New Exemption on withholding tax on the payment of dividends
The IV Tax Regime re-introduces a tax exemption on the payment of dividends to
shareholders (individuals or corporate entities) except if such person or entity is resident in the
Portuguese black listed jurisdictions of tax havens.
This benefit is limited to the profits, which were subject to the reduced corporate tax rate of
5%, or for the part not subject to the referred reduced corporate tax rate, if such profits derive
from operations carried outside of Portuguese territory, with entities not resident in the referred
blacklisted jurisdiction.
New Tax limits to tax benefits
a) The new regime also introduces a general limitation to the tax benefits. Companies under
this regime will be subject to any one of the following three annual maximum limits to their
tax benefits:
i. 15,1 % of Annual Turnover
ii. 20,1% of Gross Added Value (GVA)
iii. 30,1% Annual with labor costs
We believe that these limits to the tax benefits should be sufficient to accommodate nearly all
types of business activities in Madeira, independently of the margins and profits being made.
10 – 33 | www.mcs.pt
b) The new law also clarifies that all other taxes which could apply to companies in Madeira
such as stamp tax, municipality taxes, property transfer tax, state surcharge tax, etc., are
80% exempt.
PARTICIPATION EXEMPTION REGIME Exemption on capital Gains and Inbound dividends
a) Capital gains or capital losses obtained by entities resident in Portugal, including those
licensed to operate in the Madeira IBC, as well as dividends or reserves received, are
exempt from CIT provided the following conditions are verified:
b) Minimum direct or indirect participation of 10% (through share capital or voting rights);
c) A one year holding period (although, in relation to dividends, this period may be satisfied
after the income is received);
d) The entity distributing the dividends (or which participation is sold) should not be tax
transparent;
e) The entity distributing the dividends (or which participation is sold) should be subject to
and not exempt from (i) Portuguese CIT or (ii) a similar tax referred to in the EU Parent-
Subsidiary Directive or (iii) similar tax, provided that the applicable legal rate is not lower
than 60% of the Portuguese standard CIT rate (i.e. 12.6%). However this requirement is
not mandatory when: (A) at least 75% of the profits derive from an agricultural, industrial
or commercial activity, or from the rendering of services, which are not predominantly
targeted to the Portuguese market; (B) the activity of the non-resident entity does consist
of passive income (ex: banking, insurance, finance etc...);
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e) The entity distributing the dividends (or which participation is sold) should not be located
in a Portuguese blacklisted jurisdiction.
Exemption from withholding tax on distribution of dividends (outbound dividends
Dividends distributed by entities licensed to operate in the Madeira IBC may benefit from
exemption of withholding tax under the Parent Subsidiary Directive (2011/96/EU). Additionally,
such exemption also applies to dividends distributed to parent companies resident in countries
that entered into a Double Taxation Treaty (“DTT”) with Portugal with a clause of exchange of
information. Hence, the conditions that must be met for the exemption to apply are the
following:
a) The beneficiary of the dividends must be resident (i) in another EU Member State; (ii) or in
a State within the European Economic Area (EEA) which is bound to a cooperation
respecting exchange of information and assistance in the collection of taxes similar to that
in force in the EU; (iii) or in a country that entered into an agreement on avoidance of
double taxation with Portugal with a clause of cooperation respecting exchange of
information and assistance in the collection of taxes similar to that in force in the EU).
b) The beneficiary of the dividends should be subject to and not exempt from a tax as
referred in article 2ºnd of the Parent-Subsidiary Directive or a similar tax, provided that in
the cases of item (a) (iii) above the legal rate applicable to the entity is not lower than 60%
of the Portuguese standard CIT rate.
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c) The beneficiary of the dividends has a minimum direct or indirect participation holding in
the company distributing the dividends of 10% (through share capital or voting rights) for a
12 months holding period prior to the distribution.
Evidence that the above requirements are verified must be provided prior to the distribution,
namely those mentioned in items a) and b), through a declaration confirmed and certified by
the tax authorities of the country of residence of the entity receiving the dividends.
In the absence of such exemption, dividends distributed are subject to a withholding tax of
25% (or 35%, if paid to an entity resident in a blacklisted jurisdiction). Dividends distributed to
individuals are subject to a withholding tax of 28%. Such dividends can also benefit from the
reduced rates foreseen in the DTTs entered into by Portugal.
PATENT BOX REGIME
Following other EU jurisdictions, Portugal has also introduced a Patent Box regime. All
proceedings arising from the assignment or licensing of patents, industrial designs and
models, subject to registration, enjoy a 50% exemption from corporate income tax, as long as
they result from R&D activities developed or contracted by the Company.
PARTICULAR CASESPayment of Commissions
Commissions related to the intervention in any contracts paid by companies licensed to
operate in the Madeira IBC may be subject to withholding tax at a rate of 15%. The amounts
withheld should be
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delivered to the tax authorities until the twentieth day of the following month in which they have
been paid. However, if the non-resident counterpart is resident in a country with which
Portugal has entered into a double taxation treaty, it will be possible to avoid the withholding
tax.
Autonomous Taxation
Payments (other than under the concept of dividends) made by companies licensed to operate
in the Madeira IBC to entities resident in blacklisted jurisdictions, exempt and not subject to a
tax identical or similar to the CIT or when the legal CIT rate applicable to the entity is lower
than 60% of the Portuguese standard CIT rate may be subject to an autonomous taxation of
55% in case the company is not able to prove that the operations were substantial and real
and the amounts involved are not considered to be extraordinarily high or of abnormal
character.
DOUBLE TAXATION TREATIESMadeira, being part of Portugal, benefits from full membership of the EU, namely from all the
EU Directives in tax matters. Likewise Madeira benefits from Portugal’s double taxation treaty
network, which currently exceeds 70 treaties.
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DOUBLE TAXATION
TREATIESDIVIDENDS INTERESTS ROYALTIES
Algeria 10% / 15% 15% 10%
Austria 15% 10% 5% /10%
Barbados (not yet in
force)5% / 15% 10% 5%
Belgium 15% 15% 10%
Brazil 10% / 15% 15% 15%
Bulgaria 10% / 15% 10% 10%
Canada 10% / 15% 10% 10%
Cape Verde 10% 10% 10%
Chile 10% / 15% 5% / 10% / 15% 5% / 10%
China 10% 10% 10%
Colombia 10% 10% 10%
Croatia (not yet in force) 5%/10% 10% 10%
Cuba 5% / 10% 10% 5%
Cyprus 10% 10% 10%
Czech Republic 10% / 15% 10% 10%
Denmark 10% 10% 10%
East Timor (not yet in
force) 5% / 10% 10% 10%
Estonia 10% 10% 10%
Ethiopia (not yet in force) 5%/10% 10% 5%
Finland 10% / 15% 15% 10%
France 15% 10% / 12% 5%
Georgia (not yet in force) 5%/10% 10% 5%
Germany 15% 10% / 15% 10%
Greece 15% 15% 10%
Guinea Bissau 10% 10% 10%
Hong Kong 10% / 5% 10% 5%
Hungary 10% / 15% 10% 10%
Iceland 10% / 15% 10% 10%
India 10% / 15% 10% 10%
Indonesia 10% 10% 10%
Ireland 15% 15% 10%
Israel5% / 10% /
15%10% 10%
Italy 15% 15% 12%
Japan 10% / 5% 10% / 5% 5%
Korea (R.O.K.) 10% / 15% 15% 10%
Kuwait 5% / 10% 10% 10%
15 – 33 | www.mcs.pt
DOUBLE TAXATION
TREATIESDIVIDENDS INTERESTS ROYALTIES
Latvia 10% 10% 10%
Lithuania 10% 10% 10%
Luxembourg 15% 10% / 15% 10%
Macau 10% 10% 10%
Malta 10% / 15% 10% 10%
Mexico 10% 10% 10%
Moldova 5% / 10% 10% 8%
Morocco 10% / 15% 12% 10%
Mozambique 10% 10% 10%
Netherlands 10% 10% 10%
Norway 10% / 15% 15% 10%
Pakistan 10% / 15% 10% 10%
Panama 10% / 15% 10% 10%
Peru 10% / 15% 10% / 15% 10% / 15%
Poland 10% / 15% 10% 10%
Qatar 5% / 10% 10% 10%
Romania 10% / 15% 10% 10%
Russia 10% / 15% 10% 10%
San Marino (not yet in
force) 10%/15% 10% 10%
Senegal (not yet in
force) 5%/10% 10% 10%
Singapore 10% 10% 10%
Slovakia 10% / 15% 10% 10%
Slovenia 5% / 15% 10% 5%
South Africa 10% / 15% 10% 10%
Spain 10% / 15% 15% 5%
Sweden 10% 10% 10%
Switzerland 10% / 15% 10% 5%
Tunisia 15% 15% 10%
Turkey 5% / 15% 10% / 15% 10%
Ukraine 10% / 15% 10% 10%
16 – 33 | www.mcs.pt
DOUBLE TAXATION
TREATIESDIVIDENDS INTERESTS ROYALTIES
United Arab Emirates 5% / 15% 10% 5%
United Kingdom 10% / 15% 10% 5%
United States 5% / 15% 10% 10%
Uruguay 5% / 10% 10% 10%
Venezuela 10% 10% 10% / 12%
Note that some restrictions may apply in certain treaties, for example the use of the US or
Brazilian treaty with Madeira companies.
INTERNATIONAL SHIPPING REGISTRY (RIN-MAR)GENERAL INFORMATION
RIN-MAR was created in the decade of 1980 as a part of the International Business Center of
Madeira as many other European countries did, to prevent the flagging out of vessels from the
Portuguese Conventional Registry to other less burdensome and more cost effective open
shipping registries.
RIN-MAR was considered, in September 2014, the fourth largest international shipping
register of the European Union, reaching the largest number of vessels since its creation and
the third in terms of tonnage.
The main statistical data provided by RIN- MAR’s Technical Commission at the end of 2015, is
the following:
*79 Ownership registration + 13 Flagged out (bareboat) + 180 Flagged-in (bareboat)
NUMBER OF SHIPS AVERAGE AGE GROSS TONNAGE CREW
272* 11,38 6 895 500,00 5166
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RIN-MAR allows for the registration of all type of commercial vessels (except fishing boats),
commercial and pleasure yachts and oil rig platforms.
Companies, forms of partnerships, branches, agencies and legal representatives may apply to
register a vessel in RIN-MAR.
All reputable Classification Societies acknowledged by Portugal are entitled to undertake
surveys and other services in respect of vessel registration, namely:
Lloyds Registry of Shipping (LRS)
Bureau Veritas (BV)
Det Norske Veritas (DNV)
Registro Italiano Navale (RINA)
American Bureau of Shipping (ABS)
Germanischer Lloyd (GL)
Rinave Portuguesa (RINAVE)
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RIN-MAR GENERAL MAIN ADVANTAGES
i. Vessels registered in RIN-MAR may be owned and operated by a foreign company and
no restrictions in respect to the nationality or residence of the owners or directors of the
company apply. In case the vessel is owned by a foreign entity that entity must appoint a
Portuguese representative to deal with compliance matters and be specially empowered
to receive notifications and services of process in respect to the vessel(s);
ii. The credits secured by a shipping mortgage are considered secured credits with the right
to be paid with the product of the sale of the vessel with preference to other creditors of
the same debtor. As privileged credits they rank on third place just immediately after (i)
the costs and legal expenses made in the common interest of the creditors and (ii) the
wages due to assistance and salvation; incurred in the ship’s last voyage or because of
it;
iii. A very flexible and competitive mortgage system applies, allowing the mortgagor and the
mortgagee to choose, by written agreement in the mortgage document, the legal system
of a particular jurisdiction to govern the mortgage. In the lack of such an agreement, the
Portuguese mortgage law shall be applicable;
iv. Guarantee to the mortgagee of full payment of all credits secured by the mortgage in the
event of sale to third parties of the mortgaged vessel. The third party is not able to
sustain the value of the mortgaged property for an amount less than those credits;
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v. Exemption or reduced stamp duty applies to contracts, acts and documents ( namely
mortgages) whenever related to entities licensed to operate in the International scope of
the IBCM, including vessels registered in RIN-MAR, depending on whether those
entities (shipping companies) operate under the III or the IV Tax Regime of Incentives,
as summarized below;
vi. Exemption of registration fees and other registration taxes in acts related to the
registration of the property, mortgages and other acts pertaining to vessels registered in
RIN-MAR;
vii. Competitive initial registration and annual maintenance fees for the vessels registered in
RIN-MAR. Please refer to Annex I containing the official fees payable for the registration
of vessels in RIN-MAR and other acts and diligences related thereto;
viii. Possibility of temporary registration in RIN-MAR of vessels under a bareboat charter,
with the written authorization of the underlying register, the mortgagees and the ship
owner;
ix. Relative flexibility of the crew nationality requirements: only 30% of the crew must have
Portuguese, European or Portuguese speaking countries nationalities ( Brazil, Angola,
Mozambique, Cape Verde, S. Tomé). There are no restrictions in the remaining 70% ;
x. Application to MAR of all International Maritime Conventions ratified by Portugal.
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SOCIAL SECURITY AND TAX BENEFITS
As far as social security and tax incentives applicable to shipping companies, vessels and
crewmembers of vessel in RIN-MAR is concerned, we would highlight the following:
i. Exemption to contribute to the Portuguese social security regime for shipping companies
with vessels registered in RIN-MAR and their respective non-Portuguese crew members.
These crew members shall nonetheless enjoy any type of social protection regime
covering illness, professional illness and parenthood.
ii. The wages of crews onboard of commercial vessels registered in RIN-MAR are exempt
of individual income tax in Portugal.
iii. Madeira Shipping companies enjoy important tax benefits at the level of the Corporate
Income Tax and stamp duty on financing agreements. (Please refer to section III of this
Memo that applies to shipping and yachting companies incorporated in the IBCM).
All reputable Classification Societies acknowledged by Portugal are entitled to undertake
surveys and other services in respect of vessel registration, namely:
Lloyds Registry of Shipping (LRS)
Bureau Veritas (BV)
Det Norske Veritas (DNV)
Registro Italiano Navale (RINA)
American Bureau of Shipping (ABS)
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Germanischer Lloyd (GL)
Rinave Portuguesa (RINAVE)
YACHT REGISTRATION
Yachts, either pleasure or commercial, are allowed to register in RIN-MAR. The formalities for
registration differ one from the other but in all cases start with the lodging of an application
form.
Alike in Commercial Vessels the Technical Commission of RIN-MAR has the power to accept
or deny the registration of a yacht based on technical and legal grounds.
Yachts are subject to inspections carried out by MAR’s inspectors or by Classification
Societies by delegation. Inspections are made at the time of the registration of the yacht and
as a condition thereof and subsequently every three years, for pleasure yachts and every year
for commercial yachts. Dry dock inspections of commercial yachts are required every two
years.
The registration and maintenance of the yachts with MAR give rise to the payment of the
respective fees to the authorities. Please refer to the fees applicable under Annex II to this
Memo.
The crew on board commercial yachts registered in MAR will be exempt from personal income
taxes and will benefit from a flexible social security regime. In fact, non-Portuguese crew
members are not obliged to contribute to the Portuguese social security regime, provided that
an alternative pension scheme is guaranteed.
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However, the crew may choose the Portuguese voluntary social security regime or any other
type of protection scheme, public or private. On the other hand, Portuguese nationals or
residents in Portuguese territory shall be mandatorily covered by the general Portuguese
social security regime. A total contribution rate of 2,7% will be applicable, of which 2,0% shall
be borne by the employing entity and 0,7% by the employee.
There are no citizenship requirements for the crew on board the commercial yachts registered
in MAR.
VAT on acquisition of Non EU Yachts
Normally, as the importation rarely occurs in Portugal, although it may be made by a
Portuguese company, it would not be liable to Portuguese VAT as the yacht will not enter into
Portuguese waters and shall not, assumedly, be subject to custom clearance in
Portuguese/Madeira Territory. In so being VAT shall not be an issue in Portugal. The
Portuguese tax authorities can, nevertheless, request an evidence of the VAT payment
overseas in case of inspection.
VAT on the acquisition of EU yachts
Should the acquisition of the Yacht be made via a Madeira /Portuguese company and the
vessel be accounted as part of its fixed movable assets, the Regime of Intra-Community
Supply of Goods should apply. In this case the Madeira Company should use the VAT reverse
charge mechanism (it makes the declaration of both its purchase (input VAT) and the
supplier’s sale (output VAT) in its VAT return. In this way, the two entries cancel each other
from a cash payment perspective in the same return).
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Chartering of Yachts
The Portuguese flag, being a EU community flag, is permitted by the European laws and
regulations to be used within EU in chartering services. Although these services should be
allowed to all EU established owners irrespectively of the flag flown by their yachts, some EU
member states tend to render difficult the chartering activities by non EU flagged vessels.
The localization rules of the chartering contracts in Portugal are the same as those applicable
in the majority of the European members States and VAT is a harmonized tax at the level of
the Union.
In so being short time yacht charters (those for a period not exceeding 90 days) are taxed at
the country where the yacht is actually put at the disposal of the customer. As the charter
normally does not start in Portugal no Portuguese VAT will be due.
INVESTMENT IN ANGOLA AND MOZAMBIQUE
THROUGH MADEIRAToday, Portugal enjoys an excellent relationship with all Portuguese-speaking countries such
as Angola, Mozambique, Cape Verde, S. Tome & Principe, Guinea Bissau, East Timor and
Brazil.
Angola and Mozambique are today some of the fastest growing economies in Africa.
There are several advantages of using Portugal as a gateway to invest in Angola and
Mozambique. The countries share the same common language and history, similar legal and
fiscal regimes.
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There are thousands of Portuguese companies operating in Angola and Mozambique and this
has created an intense trading activity between the countries, and has promoted excellent
shipping connections.
Under the Portuguese Participation Exemption regime, dividends received from Angola and
Mozambique are not taxed as long as they represent a minimum of 5% holding held for a two
year period, and result from active income.
Performing the investment through a company established within the Madeira IBC, has the
additional advantage of benefiting from the 5% corporate tax, which in many cases can be
effectively reduced by application of the Portuguese unilateral international tax credit for taxes
withheld abroad. Therefore, for example, a Madeira company performing procurement
activities and other services in Angola, will suffer a 5,25% Angolan withholding tax, which will
trigger the tax credit relief in Madeira resulting in no taxation in Madeira.
Angola does not yet have any Double Taxation Treaty. A treaty has been negotiated with
Portugal but has not yet come into force.
Portugal does have a DTA with Mozambique, Cape Verde, Guinea Bissau, and East Timor.
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CHARACTERISTICS OF MADEIRA COMPANIESTYPE OF COMPANIES
There are two main types of Portuguese (Madeira) companies of particular interest for foreign
investors:
A private limited liability company (“Limitada” or “Lda”); and
A stock company (“Sociedade Anónima” or “S.A.”).
LDA COMPANY SA COMPANY
Minimum Share Capital EUR 1,00 EUR 50.000,00
Share Capital represented
by
Quotas
Shares (bearer
or nominative)
Minimum n.º of
Shareholders
1 1 or 5
Minimum n.º of Directors 1 1 or 3
Audit Body
Only mandatory in certain
circumstances
Yes
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INCORPORATION PROCEDURES
a) Application for name approval is made through a National Company Registry (RNPC);
b) Application for license to operate within the IBCM, obtained through “Sociedade de
Desenvolvimento da Madeira” (“SDM” - the Madeira Development Company), from the
Madeira Regional Government;
c) Incorporation act by means of a private or notarial deed. Minimum share capital should be
deposited with a local bank;
d) Registration of the incorporation deed at the Commercial Registry Office of the Madeira
Free Trade Zone;
e) Publication of the incorporation registration in the local government gazette and in official
online publication website;
f) Declaration of initiation of activity with Portuguese tax authorities;
g) Declaration of initiation of activity with Madeira Social Security.
The incorporation of a company can take from 2-3 weeks. However, it is possible to
incorporate a normal Portuguese company in 1 day through a Business Formalities Centre
(CFE) respecting certain conditions. Such Company would be registered in the main
Commercial Registry, following which, in order to operate within the IBCM the obtainment of a
license would be required as mentioned in b) above, followed by registration in the
Commercial Registry Office of the Madeira Free Trade Zone.
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CERTIFICATES OF FISCAL RESIDENCEMost of the corporate tax exemptions granted to Madeira companies under the terms
summarized above are subject to the condition that the operations entered by the Madeira
companies, from which their income derives, are done with non-resident entities. Moreover,
the exemption of withholding tax on income paid out by a Madeira company shall only apply if
the creditor of such income is not a resident of the Portuguese territory.
The law establishes that the non-resident status of entities which are counterparts in the
operations with Madeira companies must be proved by means of a certificate of fiscal
residence, or an equivalent document, issued by the tax authorities or any other official entity
of their country of residence, or even a document issued by the Portuguese Consulate. Such
certificate must have been issued no more than three years before, or three months after, the
date of the operation or of the receipt of the income. Should the expiry date of that document
be less than the timing indicated above, such expiry date shall be considered. These
documents must be kept in record for a period of 5 years.
It is our understanding that, whenever a tax residence certificate proves difficult to obtain, a
certificate of the Commercial Registry or a notarial certification duly legalized with The Hague
Convention Apostille is appropriate for the purposes of the law.
Should the company not obtain the above mentioned proof, nor keep it for the period as
indicated above, the Portuguese Tax Authorities will assume that the operation has been
carried out with Portuguese resident entities and, consequently, the income generated will
thereby be subject to Portuguese taxation.
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INTERNATIONAL
BUSINESS CENTRE OF
MADEIRAGOLDEN VISAWith the objective of attracting foreign investment to Portugal, the Government has recently
introduced a fast track visa permit for Non-EU Citizens called the Golden Visa, thus granting
the holder free movement within the Schengen area.
To apply for the Golden Visa, the non-EU nationals must perform an investment activity in
Portugal which may consist on one of the following
a) Capital transfers of at least one million euros;
b) Creation of at least ten jobs;
c) Acquisition of any type of real estate for an amount of at least EUR 500.000,00;
d) Acquisition of real estate located in a rehabilitation urban area or at least 30 years old,
including rehabilitation works in the overall amount of at least EUR 350.000,00;
e) Capital transfer of at least EUR 350.000,00 to be applied in scientific or technological
research activities by public or private institutions;
f) Capital transfer of at least EUR 250.000,00 to be invested in artistic production, recovery
or maintenance of national cultural heritage;
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g) Capital transfer of at least EUR 500.000,00 for the purchase of Portuguese mutual funds
or venture capital geared to the capitalization of small and medium size companies.
The investment activity may be personally performed by the foreign citizen or through a
company with head office in Portugal or in another EU Member State having a permanent
establishment in Portugal.
The Visa is valid for a period of one year counting from the date of issuance, and may be
renewed for successive periods of two years, provided that the investment activity is
maintained and the applicant makes evidence of having stayed in the Portuguese territory at
least for 7 consecutive or unsequential days in the first year and 14 days, consecutive or
unsequential, in the subsequent periods of two years.
NON-HABITUAL RESIDENT TAX REGIMEPortugal has recently introduced a new tax regime for non-habitual residents with the aim to
attract qualified expatriates to perform high-value-added activities, as well as to attract high-
net-worth individuals who may invest in the country.
The main idea behind this tax regime is that income generated in Portugal by a non-habitual
resident, within certain conditions, will be subject to a flat 20% Portuguese Individual Income
Tax (“PIT”) and all foreign sourced income, shall in principle, be exempt from taxation in
Portugal, if certain circumstances are fulfilled.
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To access the regime the non-habitual resident must become resident in Portugal, should not
be considered resident in Portugal for taxation purposes in the five previous years, and require
the registration as non-habitual resident when registering as tax resident in Portuguese
territory or, if later, until the 31st of March, inclusive, of the year subsequent to that when tax
residency was acquired.
This regime is granted for a period of 10 consecutive years, renewable, provided the taxpayer
is qualified in each year as a Portuguese resident taxpayer. If the individual does not qualify as
a Portuguese resident taxpayer in one or more years during the 10-year period, he will not
lose the possibility to be subject to taxation as a non-habitual resident if, in the following years
until the 10-year period terminates, he may qualify again as a Portuguese resident taxpayer.
ABOUT USMadeira Corporate Services, S.A. (MCS) (www.mcs.pt) is part of the On.Corporate Group,
with offices in Lisbon, Funchal, Luanda and Maputo. MCS is the branch of the group
specialized in the International Business Centre of Madeira (IBCM). MCS, established back in
1995, is today one of the leading management firms in Madeira. As a result of its position in
the market, the quality of the services it has been providing for twenty years and full
compliance with business ethics, MCS was awarded the Merit Certificate by the
Concessionaire of the International Business Centre of Madeira, SDM - Sociedade de
Desenvolvimento da Madeira, SA.
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Part of a multidisciplinary group of companies, MCS provides all type of services to clients
operating within the IBCM, available on a stand-alone or an integrated basis, mainly corporate,
management, human resources, accounting, auditing, administrative, shipping, tax and
advisory, thus allowing its clients to focus completely on their core business. Therefore, MCS
provides solutions of excellence, suited to each client’s specific needs in an integrated and
proactive way.
We have always understood the absolute need for a continuous legal assistance to our clients
for operations carried out in the IBCM, and we have therefore entrusted all these legal matters
to our associated law firm Teixeira de Freitas, Rodrigues e Associados (“TFRA”) (www.tfra.pt)
based in Lisbon, which also has offices in Madeira and is highly focused on IBCM related
matters. This legal assistance is important and essential in a sophisticated jurisdiction like
Madeira, used by reputable international clients. TFRA has partnerships in Brazil,
Mozambique and S. Tome and Principe. In Angola (Luanda) TFRA has instead created a legal
firm with local partners after a five years partnership with a local law firm.
Due to the demand of our clients, the On.Corporate Group (www.oncorporate.com),
specialized in accounting, auditing, human resources and management services, has
branched out and is now present in Luanda (Angola) and Maputo (Mozambique).
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CONTACTS
MCS
Av. Arriaga N.º 77, Edifício Marina Fórum
6th Floor, Suite 605, 9000-060, Funchal, Madeira – Portugal
Tel.: + 351 291 202 400
Fax: + 351 291 237 188
E-mail: [email protected]
ON.CORPORATE
PORTUGAL – LISBON
Avenida da República, 32 – 5.º Esq.
1050-193 Lisbon – Portugal
Tel.: + 351 217 613 220
Fax: + 351 217 613 229
E-mail: [email protected]
ANGOLA – LUANDA
Masuika Office Plaza
Rua Centro de Convenções S8, Bloco B, 4.º Andar A
Talatona – Luanda
Mobile +244 926 904 937
MOZAMBIQUE – MAPUTO
Edifício Millennium Park
Av. Vladimir Lenine 174 – 13.º Piso
Maputo – Moçambique
Tel.: +258 847 223 836
www.oncorporate.com
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