Madeira is an autonomous region of Portugal located in the north of the Atlantic Ocean. It sounds tempting and already reeks of delicious seafood and ocean breeze. For many, Madeira is a top destination for vacation, beach, and tourism. But in fact, Madeira is a great place to start a business.
Why? It’s simple, Madeira is in a free economic zone. Companies registered in Madeira have the same rights and benefits as companies registered throughout the European Union.
The advantages of doing business in Madeira
- Preferential conditions for the development of small and medium-sized businesses
- Fast registration and no red tape
- The openness of the authorities to foreign investment
- Madeira’s tax system is flexible the possibility of high-quality local recruiting
- Low rents for the premises are one of the lowest in Western Europe.
- The territory of Madeira also has a visa-free regime, as throughout the Schengen area.
You don’t have to worry about someone stealing or robbing you. Madeira has a shallow crime rate so that you can rest easy
Registering a company in Madeira
We’ll briefly run through all the nuances of registering a business in Madeira and coming to the basics:
- To obtain a license to operate within the MFTZ (Madeira Free Economic Zone), an application (in Portuguese) must be submitted by the person to the Madeira Development Society (MDC). Only after this procedure, the company will be free to operate in the MFTZ with the possibility of qualifying for tax benefits
- In Madeira, the same legal forms as Portugal’s rest function. But for large foreign investors, we recommend to pay attention to:
- Public limited company (PLC/SA)
- A 100% foreign-owned company/company of a Special Industrial Zone (Madeira IBC/Santa Maria FTZ)
But, whichever legal form you choose, the proper company structure must comply with the following points:
- The presence of at least one shareholder. Shareholders (founders) can be legal and natural persons, residents, and non-residents of Madeira.
- There is a minimum of one director (residency does not matter). Each director is required to obtain a tax number.
- Share capital – from 11750 euros. The minimum paid-up share capital is 5000 euros. Availability of shares is not allowed.
- Account in a Portuguese bank
- Permission to conduct commercial activities.
- Submission of public information to the public registry. The beneficiaries must be provided to the Registration Agent and the auditor.
And, probably, these are the main bases for those wishing to register a company in Madeira. Now we may turn smoothly to the tax peculiarities.
Taxes on business in Madeira
Since Madeira is part of Portugal, the Portuguese taxation principles apply here, which we talked about in the article on doing business in Portugal. But if you register a company in the Madeira Free Economic Zone, there is a special tax regime – a reduced corporate tax rate of 5%. The rate applies to income from licensed activities, which must not be derived from Portuguese sources.
To qualify for this exemption, several criteria must be met:
- All profits obtained must not be related to real estate transactions in Portugal.
- The amount invested by the company must be at least 75000 euros in tangible and intangible assets. This investment can take place over two years.
- Create at least six jobs in Madeira. And only one employee is required to be local (this is good because you do not have to hire entire families ☺ )
- Zero tax rate on capital gains and dividend distributions.
- There are no exchange controls on Madeira.
- Madeira also has a double taxation treaty with 79 countries!
- The jurisdiction has a Tax Information Exchange Agreement (TEIA) with 16 countries.
For companies that have obtained a license to operate in the MFTZ between January 1, 2015, and December 31, 2020, the preferential tax treatment applies until December 31, 2027.
Tax period and VAT reporting in Madeira
There are no surprises about tax reporting in Madeira:
- The reporting period is one calendar year but can sometimes be shorter.
- Until March 31 of each year, the company is obliged to hold an annual meeting and present the accounts for the previous year and the director’s report.
- All accounts of public companies are subject to mandatory auditing (CJSC is not subject to this requirement unless its assets exceed 700 000 euros, or the company has more than 50 employees, or its net sales exceed 1 400 000 euros).
- Under the International Financial Reporting Standards (IFRS in force in Madeira), the accounts must be prepared by the 31st of March in the following year.
- And the last tax nuance, the company must file a tax return within five months after the end of the reporting period.
Our team is ready to provide consultation on these issues. Our business hours: Monday to Friday, 9:00 AM — 7:00 PM. Contact us via WhatsApp, Telegram, or Viber, or submit an inquiry through our online form.
