Madeira - Benefits

Traditionally, Madeira's main sources of income have been tourism, wine and agriculture. To broaden the base of the economy of the island, the Free Trade Zone Legislation was enacted with the full support of both the Portuguese Government and European Union. This has led to Madeira becoming a successful international business centre.

The International Business Centre Legislation provides for the setting up and development of the following:

Manufacture and Warehousing of Goods

Industrial activity must be undertaken in the designated area of Canical in Madeira, and may include activities of an industrial or commercial nature. In particular this includes manufacturing, assembling, packaging or warehousing of goods, provided that these operations do not present any threat to national security, public health or the natural environment.

International Services

As in other financial centres, international services, predominantly of a non-financial nature, may operate in and from Madeira. These activities may include, amongst others, international trading, management services, consulting services, the provision of trustee services and holding and property companies. As these types of activity do not normally involve the physical movement of goods, they can be established anywhere on the island, including the town of Funchal.

Financial Activities

The legislation allows for the establishment in Madeira of branches of both international and Portuguese banks, as well as other financial institutions. Such bank branches can deal in foreign exchange operations, free from any Portuguese domestic exchange control regulations, and transactions can be carried out in any foreign currency.

International Shipping Registry

Under the International Business Centre Legislation, Madeira has created an international register for ships and yachts.

Vessels are registered as operating under the Portuguese flag, a traditional and respected maritime jurisdiction. No taxation (or a very low level) will arise on the activities of the vessel when operating outside Portuguese territory, as long as the vessel is owned by a company licensed to operate within the International Business Centre.

Advantages of the Madeira International Business Centre

Conditions have been created under the International Business Centre Legislation to give Madeira a competitive edge over many other international financial centres. These advantages are:

Income and Corporation Tax

Companies registered within the International Business Centre of Madeira enjoy low rates of corporation tax, which are guaranteed until 2020. Companies licensed prior to 31st December 2000 will continue to enjoy a total exemption from corporation tax until the end of 2011 and from year 2012 the new tax regime will also apply to these companies. Full details of these rates and conditions are available from any Dixcart office.

Please note: for financial institutions approved by the Bank of Portugal and licensed to operate within the International Business Centre, higher rates of corporation tax apply.

The shareholders of the licensed companies are also exempt from any withholding tax on profits received from those companies. Otherwise, within Madeira, the taxation system remains the same for local companies and individuals as that which exists in the rest of Portugal.

For information relating to SGPS companies licensed prior to 1st January 2001 please contact any Dixcart office.

As the companies incorporated in Madeira are Portuguese companies, they are also entitled to virtually all the benefits of the network of Double Taxation Agreements entered into by Portugal with countries elsewhere.

Customs Duties and VAT

There is an exemption from customs duties for many goods and raw materials imported into the International Business Centre.

On incorporation, all Portuguese companies are automatically provided with a tax reference number, which is also used for value added tax purposes. The companies themselves are registered for value added tax, and when trading within the European Union can take advantage of the exemptions from value added tax on movement of goods within the European Union.

VAT on the Supply of Telecom and Digitalised Services

The advantage in supplying telecom and digitalised services from Madeira lies in the fact that Madeira has the lowest rate of VAT on the supply of such services than any other EU country.

Exchange Controls

All companies licensed to operate in the International Business Centre of Madeira benefit from complete freedom from exchange controls. The companies can operate using any currency and they may transfer capital, profits and funds freely. There is specific legislation covering bank secrecy and there are both civil and criminal penalties for those convicted of breaches of confidentiality.

Fiscal and Financial Incentives

There is an exemption from customs duties for many goods and raw materials imported into the International Business Centre.

Work Force

The Madeira authorities prefer that the local workforce be employed. However, there are no legal limitations on the ability of companies to employ expatriate workers of any level of skill.

European Union Status

Madeira is an integral part of Portugal. Consequently the Madeira International Business Centre is within the European Union.

This status provides benefits for both companies within the EU and outside, in that movement of goods between member countries can be arranged without VAT or taxation complications.