Madeira’s Free Trade Zone Preferential Tax Regime

Corporate income tax rate (CIT) of 5% until 2027;
No withholding taxes on dividends paid out to Companies based in the EU and to most Companies headquartered in Switzerland;
No withholding tax on the payment of royalties;
No withholding tax on the payment of interests paid out to Companies headquartered in the EU and Switzerland;
No withholding tax on the payment of interests paid out to non EU residents, provided that the purpose of the loan is the realization of investments and the normal functioning of the company in the IBC framework;
No stamp duty;
Application of all EU directives;
Access to the network of Double Tax Treaties signed by Portugal (more than 50);

Flexible substance requirements

Creating one post of employment during the first six months of activity and the achievement of a minimum investment of 75,000.00€ in the first two years of operation;
Or create six or more posts of employment during the first six months of activity (in such cases it is not necessary to make any investment).

Companies that can operate under the framework of IBC

International Services (Services, Trading, Intellectual Property)

Corporate income tax rate (CIT) of 5% until 2027;
Access to the network of Double Tax Treaties signed by Portugal
No withholding tax on the payment of interests paid out to non EU residents, provided that the purpose of the loan is the realization of investments and the normal functioning of the company in the IBC framework;

Holdings

Application of the Parent-Subsidiary Directive – EU sourced dividends exempt from withholding tax;
Reduced taxation on dividends, interest and services worldwide other than the EU;
Exemption on Capital Gains/ Losses taxes obtained from Share sales, if it have been held for more than one year.

International Shipping Register – MAR (Registration of ships, yachts and oil rig platforms)

Shipping Companies:
Reduced corporate tax rates (0-5%) until 2027;
Possibility to incorporate a shipping company owning vessels registered in Madeira or under any other flag;
Possibility of requesting reimbursement of VAT concerning the expenses of vessels operations;
It is mandatory to meet the substance requirements previously mentioned.

Industrial Free Trade Zone of Madeira (Storage, Trade, Production)

Reduced tax rates of 5% on profits until 2027;
Companies established in the Industrial Free Trade Zone of Madeira will benefit of a 50% deduction on taxable if working with local companies, provided they meet two of the following criteria:

(a) Contribution to the modernisation of the economy through technical innovation, new products and procedures;

(b) Diversification of the regional economy by introducing new activities of added value;

(c) Fixation of qualified human resources;

(d) Contribution to the improvement of the environment;

(e) Creation of 15 jobs for a period of 5 years.
Production and assembling activities carried out by companies in the Industrial Free Trade Zone of Madeira, on the other hand, will benefit from the tax reductions also in operations with the companies residing in the Portuguese territory.

This regime does not apply to activities of storage if it does not involve some processing or assembling of the product in IFTZ.

Companies established in the Industrial Free Trade Zone of Madeira benefit from the Suspension Regime for goods originating from outside the European Community. In these cases, VAT is paid only when the final products leave the IFTZ of Madeira.

For more information you may consult the Tax Benefits Statute.