Are high taxes holding your business back from reaching its full potential?
Many business owners and entrepreneurs struggle to stay competitive in an increasingly globalized world where a single penny matters. If you are looking for a solution to reduce your tax burden and simplify compliance, Madeira could be the tax heaven for you.
With its attractive low taxation rates, business-friendly policies, and significant tax benefits, it is a prime destination for businesses seeking growth and efficiency.
Madeira’s International Business Center (IBC) can help your business save on taxes. With low tax rates and easy compliance, the IBC offers a smart solution for growth. If you want to benefit from Madeira’s tax-friendly policies, the experts at TaxMove will help you reduce the tax burden.
Why Choose Madeira for Your Tax Strategy?
Madeira is an autonomous region of Portugal and offers a remarkably attractive tax regime through its International Business Center (IBC).
Designed with the goal of promoting economic growth, Madeira’s IBC provides low tax rates, incentives for foreign investment, and compliance with European Union regulations, making it a legitimate and transparent option for companies worldwide.
From an ultra-low corporate tax rate of 5% to benefits on personal income tax, Madeira stands out as a top choice for entrepreneurs looking for efficient tax solutions.
Key Benefits of Madeira Taxation
The following are the key benefits of Madeira’s taxation:
Low Corporate Income Tax Rate
Companies operating within the IBC of Madeira enjoy a competitive corporate tax rate of 5% on profits derived from eligible activities. This rate is significantly lower than Portugal’s standard corporate income tax rate of 21% and is available until at least December 31, 2028. The 5% rate is subject to compliance with economic substance requirements.
Personal Income Tax Benefits
Non-Habitual Residency (NHR) Regime
Madeira residents can access the NHR 2.0 program, a key feature of Portugal’s tax framework:
- A flat 20% tax rate for high-value professionals in certain industries.
- Exemptions on income sourced from foreign interests, dividends and capital gains.
- Eligibility for the regime requires living in Madeira for at least 183 days per year.
Other benefits:
- No Wealth Tax: Neither Portugal nor Madeira charges a Wealth Tax.
- No Inheritance Tax: Neither Portugal nor Madeira charges an Inheritance Tax.
Reduced Income Tax Rates for Residents
Madeira offers lower tax rates compared to mainland Portugal, especially for higher-income earners.
While both regions share similar tax brackets for lower and mid-level income earners, the highest income bracket in Madeira is taxed at 48%, whereas mainland Portugal applies a 51% tax rate for income over €250,000, creating a 3% difference in favor of Madeira. Furthermore, the standard personal income tax rate on dividends and interest income has been lowered to 19.6%
These reduced tax rates in Madeira make it an increasingly attractive destination for those seeking to minimize their tax liabilities while enjoying a high standard of living in a beautiful and peaceful setting.
Alignment with EU Standards
Operating within EU guidelines, Madeira’s taxation framework complies with both European and OECD (Organization for Economic Co-operation and Development) regulations, ensuring its reputation as a trustworthy and transparent tax jurisdiction.
Furthermore, Madeira adheres to OECD’s Common Reporting Standard (CRS) to ensure tax transparency at an international level.
Withholding Tax Rates
Unlike Portugal’s mainland companies, Madeira’s tax regime offers a reduced 5% withholding tax on dividends, interest, and royalties. This means businesses can retain more earnings and lower their tax obligations. It is an effective way to improve cash flow and boost profitability.
Corporate Income Tax for Madeira IBC
Companies that are interested in benefiting from the 5% corporate income tax rate must meet certain criteria to operate within the International Business Center of Madeira. This includes ensuring economic substance and complying with EU-approved regulations.
Eligibility Requirements
To qualify for the reduced 5% tax rate, businesses must satisfy the following conditions:
- Economic Substance: Employ a minimum number of local workers (usually 1 to 6 employees, depending on the business activity) and make a specified amount of local investment (typically €75,000, though this may vary).
- Eligible Activities: Only certain business activities qualify, such as shipping, trading, intellectual property management, and consulting services, among others.
- Profit Cap: There is a maximum profit cap for each company to benefit from the 5% rate, which is determined based on the number of jobs created by the company. Profits beyond this cap are taxed at Madeira’s standard corporate tax rate, currently 14.7%.
Combining personal tax benefits with corporate tax advantages makes Madeira an excellent choice for business owners, top executives, and professionals
Setting Up a Company in Madeira
If you want to set up a company in Madeira, the following is the estimated cost of company setup:
Cost of Company Formation
When establishing a business in Madeira, company formation fees can vary based on the complexity of the company structure and the services required. Here’s an overview:
Company Registration Services including legal assistance, notary fees, administrative costs, and the application fee, typically range from €3,500 to €5,000.
Accounting, audit, and reporting costs range from €5,000 to €7,000 annually.
Required Steps For Setting Up a Company
- Choose a Business Structure: Limited liability company or branch office.
- Register with the IBC: Secure approval to benefit from the 5% corporate tax rate.
- Hire Local Employees: Ensure compliance with substance requirements.
- Submit Financial Reports: Annual filings with the Portuguese tax authorities.
Comparison of Madeira’s Taxation with Other Jurisdictions
| Feature | Madeira | Mainland Portugal | Other EU countries |
|---|---|---|---|
|
Corporate Tax Rate |
5% (IBC) |
21% |
5%–35% |
|
Personal Income Tax Rate |
14.5%–48% |
14.5%–51% |
10%-55%+ |
|
VAT Rate |
14.7% |
23% |
18%–25% |
|
Double Tax Treaties |
75+ |
75+ |
75+ |
Anti-Avoidance Measures
Controlled Foreign Corporation (CFC) Rules
To prevent tax avoidance, Madeira adheres to Portugal’s CFC regulations, targeting entities established in low-tax jurisdictions.
Exit Tax
Exit tax applies to companies or individuals relocating assets or tax residency out of Portugal. The tax is calculated based on the market value of the transferred assets.
Double Tax Treaties
Madeira benefits from Portugal’s extensive DTT network, enabling businesses and individuals to avoid double taxation. In this regard, Portugal has signed over 80 Double Taxation Treaties with a wide range of countries, including major global economies like the United States, Germany, France, and the United Kingdom. This is especially beneficial for:
- Reducing withholding taxes on cross-border payments.
- Avoiding dual taxation on income, profits, or dividends.
- Gaining access to favorable tax treatments under international agreements.
How Can TaxMove Help You?
Along with Cyprus, Malta, Bulgaria and Hungary, Madeira offers one of the lowest Corporate Income Tax rates in the EU.
You can get individual and business setup benefits from Madeira’s low corporate and income tax rates with the help of TaxMove. Our experts guide you through every step, ensuring accurate compliance and reducing your tax burden in Madeira.
TaxMove is here to simplify the process, offering services such as:
- Assisting with IBC registration and compliance.
- Assisting on NHR applications for personal tax benefits.
- Ensuring adherence to CFC rules and exit tax regulations.
- Providing end-to-end support for company formation in Madeira.
Submit the form to get tailored advice from our experts
What are the tax rates in Madeira?
Madeira offers a highly attractive tax regime, with a reduced corporate tax rate of 5% for companies operating within the International Business Center (IBC), provided they meet specific criteria.
For individuals, the personal income tax brackets in Madeira are competitive compared to mainland Portugal, with rates ranging from 14.5% to 48%.
Madeira also benefits from a 19.6% tax rate on dividends and interest income, significantly lower than the mainland.
What is Madeira's International Business Centre?
Madeira’s International Business Centre offers businesses a 5% corporate tax rate, personal income tax benefits, and a business-friendly environment with EU compliance. It’s ideal for companies seeking tax efficiency.
What are the corporate tax rates in Madeira?
- Low Corporate Income Tax rate: 5% to IBC companies.
- Reduced WHT rates: 5% for dividend, interest and royalty distributions.
What are the requirements to benefit from the reduced 5% rate in Madeira?
- Minimum number of local employees required (typically 1 to 6, depending on business activity).
- Minimum local investment requirement (usually €75,000).
- Only specific business activities qualify, such as shipping, trading, intellectual property management, and consulting services.
What are the personal income tax rates?
- Personal income tax rates range from 14.5% to 48%.
- Flat 20% tax on employment income for individuals benefiting from the NHR 2.0.
- 0% tax on overseas dividends, interests and capital gains for individuals benefiting from the NHR 2.0.
What is the process and cost of incorporating an entity in Madeira?
Cost of Company Formation:
- Company registration services, including legal assistance, notary fees, administrative costs, and the application fee: €3,500 to €5,000.
- Annual accounting, audit, and reporting costs: €5,000 to €7,000.
Required Steps for Setting Up a Company:
- Choose a Business Structure: Decide whether to establish a limited liability company or a branch office.
- Register with the IBC: Obtain approval to benefit from the 5% corporate tax rate under the International Business Center (IBC).
- Hire Local Employees: Ensure compliance with economic substance requirements by employing local workers.
