Madeira - VAT Opportunities

When goods or services are supplied from one EU country to another, benefits can be achieved if the supply is from a country that charges a low rate of VAT.

Madeira currently has the lowest standard rate of VAT charged in Europe. This low rate compares favourably with other European countries and is very attractive in a competitive market. It is therefore no surprise that many multinationals are using Madeira as their gateway into Europe.

A business based either inside or outside the EU could form a Portuguese subsidiary based in Madeira. The company is automatically registered for VAT in Madeira and would only be liable to charge VAT at the standard rate on sales to private individuals in the EU.

If the Portuguese subsidiary is registered under the Madeira International Business Centre Legislation, then other tax exemptions and advantages are available to the company.

DixcartNet.pt

DixcartNet.pt provides internet service facilities for international companies operating from the island of Madeira.

We offer a totally dedicated ISP and ASP infrastructure, which means that DixcartNet.pt clients are fully assured of their IT service supply. Specific IT maintenance contracts can also remove the need for companies and clients to employ on-site IT specialists.

VAT on Internet Delivered Services within Europe

Location is an extremely important consideration, as sales of electronically delivered services are taxable.

Madeira is a highly relevant jurisdiction to consider for two types of vendor:

Non-EU Vendors
From July 2003, registration in one of the member states of the EU has been required to enable VAT to be added to the cost of supply by non-EU vendors. VAT will be charged based on the rules applicable in the customer's country. With a number of EU member states, different rates of VAT could technically be charged.

Enormous simplification can be achieved through the incorporation of a European subsidiary, and the registration of the subsidiary in one EU country. Financial benefits can be obtained from registering in a location where the VAT rate is at a relatively low level. Madeira provides the lowest rate location in the EU and therefore offers vendors a competitive advantage over suppliers registered elsewhere.

The complication of the requirement to clarify the location of the customer within the EU may also not arise for a company incorporated in Madeira, as local Portuguese VAT regulations would apply and the entity would be regarded as a normal EU enterprise.

EU Vendors

Location of a subsidiary in Madeira will ensure that a vendor can charge the lowest rate of VAT in Europe, as opposed to higher rates applicable in other EU countries.

With Madeira increasingly being considered as a jurisdiction for the location of internet based corporations, the provision of reliable IT resources and services is absolutely essential.