Dixcart has a number of companies which were licensed during 2000, which are entitled to a zero tax exemption until 31st December 2011.

MANAGEMENT AND CONTROL

Directors of these companies incorporated in Portugal and granted taxation advantages under the legislation may be based anywhere in the world. Management and control of the companies need not be exercised in Madeira itself to be able to benefit from the tax advantages. All that is required is that the company has local legal representation, which our office in Madeira can provide.

OTHER ADVANTAGES

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.

Portuguese companies registered under the Legislation of the IBC are able to take advantage of most of the network of double taxation agreements entered into between Portugal and countries elsewhere and may also enjoy the benefits of nearly all international conventions signed by Portugal.

HOLDING COMPANIES

A particular form of holding company incorporated in Portugal, known as an SGPS, is also able to receive dividends without withholding tax from other companies established in countries of the EU, having regard to the EU parent subsidiary directive.

Dividend income received by the SGPS (licensed prior to 31st December 2000) from other subsidiary companies in EU countries is exempt from taxation. However, all other income, interest, capital gains etc. are subject to Portuguese tax at the standard corporate tax rate, which is currently 22,5% for Madeira based companies (the standard rate in the rest of Portugal is 25%). In order to take advantage of the EU parent subsidiary directive, the holding company must have held the holding for at least two years.

There is no withholding tax on onward payments of dividends from the Portuguese company provided it is licensed to operate in the IBC.

The opportunity to benefit from the exemption from withholding tax on dividends paid to an SGPS can provide for substantial savings.

ACCOUNTING OBLIGATIONS

The accounting records and supporting information must be maintained and filed in Madeira on a regular basis. Companies are automatically given a 31st December year end and annual accounts must be submitted to the tax authorities by 31st March the following year.

VAT returns must be filed with the tax authorities within 45 days after each quarter end.

IN SUMMARY

Portuguese companies registered under the IBC Legislation of Madeira provide for a variety of opportunities in international tax planning.

They are tax advantageous and can be operated in a similar manner to companies incorporated in the better known jurisdictions such as the Cayman Islands, the Channel Islands, the Isle of Man or the British Virgin Islands. However, they provide other benefits not available elsewhere:

Х The ability to take advantage of the double tax agreements and the non inclusion of Portugal in the list of tax haven countries within many countries' tax regulations ensures that the political presence of the companies jurisdiction of incorporation is much more acceptable to other companies with whom trade is conducted or in whom investments are made.

Х The political presence of a company with an incorporation in Portugal is also useful in undertaking direct investments into countries where there may be some sensitivity to direct investments which might otherwise be made through financial services centres.

FORMATION OF PORTUGUESE COMPANIES IN MADEIRA

Detailed below is general information regarding the incorporation of companies under the legislation governing the IBC of Madeira. Companies so incorporated are either exempt from Portuguese taxation if licensed prior to 31st December 2000 or suffer low levels of corporation tax if licensed after that date.

SHARE CAPITAL AND SHAREHOLDERS

a) Private Limited Liability Company ("LimitadaФ or УLda")

The minimum share capital requirement for an Lda is А 5,000. This amount must be divided into quotas, the minimum value for each quota being А100. Each Lda must have at least one quotaholder. However should the company be a single quotaholder company, then the expression "Sociedade Unipessoal" must be reflected with the name of the company.

b) Stock Corporation ("Sociedade AnonimaФ or УSA")

The minimum share capital is А 50,000 divided into shares with a minimum value of А 0.01 each. A minimum of 30% of the share capital must be paid up immediately with the balance of 70% payable within 5 years. Each SA must have at least five shareholders. Share certificates can only be issued if the share capital of the company is fully paid up.

An SA in generally used by clients who wish to use a company that has a more substantial formal structure than an Lda. An SA is able to easily transfer shares and is subject to audit.

c) Sociedade Gestora de Participaчїes Sociais ("SGPS")

This type of company may only carry out the activities of a holding company.

It can have either a Lda or a SA share capital structure. The minimum share capital requirement would therefore be as per an LDA or SA, dependent upon which capital structure is chosen.

DIRECTORS

The Directors do not need to be Portuguese residents. However, if all directors are resident overseas, the company must appoint a local legal representative who can be provided by Dixcart. Dixcart can provide Portuguese resident directors to manage a company. However, in that situation, we seek to provide 100% of the management to ensure that the full nature and activity of the company is understood.

a) Limitada (Lda)

A Limitada may be managed by one or more directors who may be resident anywhere in the world.

b) Sociedade Anonima (S.A.)

An SA is legally required to have both a Board of Directors and an Audit Board. The Board of Directors should comprise of an odd number of members and the Audit Board should comprise of 3-5 members. The directors may be resident anywhere in the world. However, if the share capital of the SA is below А 200,000, a sole director and a qualified statutory auditor (ROC) may be appointed.

c) SGPS

The requirements for directors of an SGPS are as either an Lda or SA as above.

COMPANY NAME

Dixcart maintains a number of available Lda and SA companies, in addition to lists of approved names. Should a specific name be required, three alternatives should be provided to enable an application for the name approval to be made. The corporate name must describe the principal activity of the company. Foreign names are permitted but the principal activity must be described in Portuguese.

COMPANY ACTIVITY

A clear description of the proposed activity of the company is required to draft the incorporation documentation and to submit the request for the approval of the corporate name.

SGPS are strictly Holding Companies and therefore have precise Objects Clauses relating to the holding of shares and participations.

REGISTERED OFFICE

A registered office is required in Madeira.

ACCOUNTING SERVICES

The accounting and statutory records of the company are governed by the Portuguese Official Accounting Plan and must be maintained in Portuguese. Therefore, books of account must be kept in Madeira. Accounting information and supporting documentation must be forwarded to our offices on a monthly basis as this will enable the accounting affairs of the company to be kept up to date. Annual accounts must be submitted to the Tax Authorities, even if there is no liability for taxation. The annual accounts must be signed by all the directors and the Official Registered Accountant (TOC).

All companies must appoint a TOC, who is responsible for ensuring that all accounting and fiscal requirements are met by the company. The TOC may only sign the annual accounts if he or she has all the information necessary in order to form an opinion on the affairs of the company and the information available is complete and accurate.

Dixcart provides a TOC for all client companies. If incomplete information is supplied, the TOC may have to resign and annual accounts could remain uncompleted. This will result in fines and tax liabilities.

INCORPORATION

The incorporation process generally takes from 4 to 6 weeks to complete. Should a specific newly incorporated company be required, as opposed to the acquisition of one of our available companies, the shareholders must provide a Power of Attorney to effect the incorporation of the company on their behalf.

VALUE ADDED TAX (VAT)

All Portuguese companies and, therefore, all companies registered under the Free Trade Zone Legislation of Madeira, are automatically provided with a VAT number on incorporation.

The current VAT applicable in Madeira is 14%.

Companies registered under the provisions of the IBC Legislation are able to recover all VAT charged to them in Portugal and as a result of the provision of a VAT number are able to confirm a number for trading purposes within the EU and enjoy the advantages this brings.

Companies registered under the IBC Legislation will be charged VAT on purchases made within Portugal in the normal way. They are, however, able to reclaim all VAT that they incur and must, within 45 days after each quarter end, file a VAT return. Repayments of VAT can be claimed annually or quarterly when the amount repayable exceeds А 7,500.

VAT must be added to invoices rendered by the management companies in Madeira where these invoices are addressed to the Portuguese companies registered in Madeira under the IBC Legislation.

If the invoice is raised against a client outside of the EU, or an entity outside of Portugal but within the EU and with its own VAT registration number, no VAT is applicable.

LICENCE AND ANNUAL FEES

An application for a licence to operate within the IBC of Madeira must be made to the Sociedade de Desenvolvimento da Madeira ("SDM - Madeira Development Company) once the company name has been approved. The application fee А 750 (reduced to А 500 if paid by the required date through a local Management Company).

For Limitadas and Sociedades Anonimas the annual fee charged by SDM is А 1,500 per annum (reduced to А 1,000 if paid by the required date through a local Management Company) for a company with no physical presence in Madeira. For companies operating from their own office on the Island the annual licence fee is А 1,500.

For SGPS companies the annual licence fee in the first year is the same as for an Lda. For subsequent years the annual fee charged is А 1,500 plus 0.5% of the profits of the previous year exceeding А1,000,000 (limited to a maximum of А 30,000). Most of the companies licensed to operate in the IBC of Madeira operate on the basis of not having any physical presence in Madeira and, as such are charged an annual licence fee by SDM of А 1,500 (reduced to А 1,000 if paid by the required date through a local Management Company).

SDM have the power to withdraw the licence for a company whose annual licence fee is long overdue, with the result that liability to Portuguese taxation on all profits and capital gains would then arise at the current corporation tax rate of 22,5% for Madeira based companies. The withdrawal of the licence is made retrospective to the date when the invoice became due.

CERTIFICATES OF RESIDENCE

There is a requirement to prove, in certain cases, the non-residence of the entities with whom the company in Madeira is doing business.

This proof can be met by providing a Certificate of Residence or similar document issued by the Tax Authorities or other official state entity, e.g. Chamber of Commerce or Commercial Registry Office. This document should be legalised and apostilised before being sent to our office.

These certificates should be forwarded to our offices when any non trading activities take place with an entity or an individual who is non resident in Portugal. For example:

Х Payment of dividends and advances to shareholders
Х Payment of interest
Х Payment of royalties
Х Payment of rent for equipment or leasing of plant
Х Payment for the right of access to data networks
Х Payment of commission

Failure to have these certificates on hand will subject the company to the normal taxes applicable in Portugal to companies not benefiting from the exemptions available in MadeiraТs IBC.

Such a certificate must have been issued no more than 3 years before or 3 months later than the date of the receipt of income or payment of commission, interest, royalty or dividend.

SOCIAL SECURITY

All Portuguese companies must be registered for Portuguese Social Security.

All directors of Portuguese companies are automatically liable to pay Portuguese Social Security based on the remuneration received, regardless of whether they are resident in Portugal themselves.

If the directors receive no remuneration in Portugal the minimum Social Security contributions must still be made on the initial directorship held and contributions must be made on the basis of the national minimum wage requirement in Portugal. The minimum Social Security liability amounts to approximately А 1,800 per annum.

Directors of Portuguese companies may be resident anywhere in the world. Foreign-based directors may avoid the Social Security liability in Portugal by providing the Portuguese Authorities with proof that they are registered and paying Social Security in their country of residence.

Registration of the company for Social Security purposes, and confirmation that all obligations are being met, is necessary before any changes in the company shareholding structure can be made. This is required as the notaries must have a Social Security clearance certificate presented to them prior to executing the public deed for the transfer of quotas.

The liability of a director to make Social Security payments applies only to the first company directorship held. If an individual is a director of a number of companies in Portugal, Social Security contributions relating to only one of the companies needs to be presented to enable clearance to be obtained for all of the directorships held.

DUE DILIGENCE REQUIREMENTS

As with most countries in the world and particularly within the European Union, money laundering requirements have been introduced whereby financial organisations and professional representatives are required to be clear as to the nature and background of the clients on whose affairs they are acting.

On the acquisition of a company or on receipt of a request to form a new company, we will request that various due diligence forms be completed, signed and returned to our offices, before we can confirm the sale of the company or provide any services to our clients.

There is no requirement to disclose beneficial owner details to the local authorities.

COSTS

The costs of incorporating and maintaining a Madeira incorporated Lda company are as per the Summary of Fees Schedule (Lda Company).

If an SA type company is required, please request the Summary of Fees Schedule (SA Company) from your usual Dixcart contact or by emailing advice@dixcart.co.uk.

For an SGPS type company, the costs will be as per an Lda or an SA depending on the type of company formed.

2007-2009	3%
2010-2012	4%
2013-2020	5%

Job creation	Reduced tax rate applies to the following taxable income
1-2	Euros 2 million
3-5	Euros 2.6 million
6-30	Euros 16 million
31-50	Euros 26 million
51-100	Euros 40 million
over 100	Euros 150 million

JNC - Summary of the Formation and Maintenance Obligations of Portuguese Companies in Madeira