DOING BUSINESS IN MADEIRA IN 2020
Madeira is an Atlantic island, and an autonomous region of Portugal. Many international entrepreneurs considering register a company in Madeira opt to set up an entity in the International Business Centre of Madeira (IBC). Madeira company provides a tax-efficient solution for international investment or a holding company.
|Compare different Madeira entities||Private LLC||Public LLC||E-business company||Shipping company||Branch office|
|Also known as||Sociedade por Quotas||SA||Lda||Lda||Filial|
|Best use of company?||All products/ svcs||To get pub. funding||International business svcs||Maritime transportation||Specific projects|
|How soon to invoice Clients?||2 weeks||2 weeks||6 weeks||6 weeks||2 weeks|
|How soon can you hire staff?||2 weeks||2 weeks||4 weeks||4 weeks||2 weeks|
|How soon can you sign a lease agreement?||1 week||1 week||1 week||1 week||1 week|
|How long to supply corporate bank a/c?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|How long to supply co. reg / tax numbers?||2 weeks||2 weeks||4 weeks||4 weeks||2 weeks|
|Corporate tax rate on annual net profits?||5%||5%||5%||5%||5%|
|Limited liability entity?||Yes||Yes||Yes||Yes||No|
|Government grants available?||Yes||Yes||Yes||Yes||Yes|
|Govt approval required for foreign owners?||No||No||No||No||No|
|Res. director/partner/ legal rep. required?||No||No||No||No||No|
|Minimum paid up share capital?||€1||€50,000||€1||€1||None|
|Can bid for Government contracts?||Yes||Yes||Yes||Yes||Yes|
|Corporate bank account location?||Santander||Millenium BCP||Deutsche Bank||Citibank||BNP Paribas|
|Can secure trade finance?||Yes||Yes||Yes||Yes||Yes|
|VAT payable on sales to local customers?||22%||22%||22%||22%||22%|
|Average total business set up costs?||€18,050||€16,700||€14,700||€14,700||€14,700|
|Average total engagement period?||3 months||3 months||3 months||3 months||3 months|
Madeira company registration summary
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Advantages of Madeira company registration
- A Madeira IBC registered LLC is an excellent EU/EEA holding company because:
- Madeira corporation tax is a mere 5% of net profits if certain conditions are met;
- Zero withholding tax on payments to non-residents re i) loan interest ii) dividends and iii) royalties;
- Zero stamp duty and capital gains tax;
- The above is approved by the EU Commission until 2020;
- SGPS (Sociedades Gestoras de Participações Sociais) holding companies comply with the requirements of the parent subsidiary directive, thereby allowing the SGPS to receive dividends from subsidiaries domiciled in the European Union exempted from withholding tax at source in the origin country.
- A Madeira LLC is an excellent holding company for Portuguese Speaking African Countries (PALOPs) because:
- Dividend income from subsidiaries suffers 5% Madeira corporation tax;
- There is no capital gains tax on sale of shares of subsidiaries;
- PALOP members include Angola, Cape Verde, Guinea-Bissau, Equatorial Guinea, Mozambique, São Tomé e Príncipe;
- As a region of Portugal, Madeira is a stable jurisdiction with a well established legal system (governed by European Union (EU) and Portuguese law) and economic infrastructure;
- Madeira business is not perceived as a tax avoidance vehicle. However with proper structuring, a Madeira business is a perfect entity to book international profits with minimal tax liability;
- International entrepreneurs undertaking Madeira company formation in the IBC are liable to pay a corporate tax of only 5% until 31 December 2020. This is the lowest corporate tax in the entire EU;
- Madeira company does not require an individual to have a physical office present on the island;
- To fulfill business setup regulations, a minimum of one director is required. The director need not be resident in Madeira and can be of any nationality. Madeira company registration regulations require a minimum of one shareholder;
- Investors choosing Madeira are not required to disclose beneficial ownership to Portuguese authorities;
- It is easy to open global corporate bank accounts to support Madeira company. Healy Consultants works with internationally recognised banks such as HSBC, Standard Chartered and Citibank to provide corporate bank account services;
- Portugal has the world’s 19th-highest quality-of-life, according to The Economist Intelligence Unit. It is the 13th-most peaceful and the 8th-most globalized country in the world;
- Madeira is part of the Portuguese territory and, therefore, within the EU. A Madeira IBC company, being a Portuguese company, can provide a Certificate of Residence issued by the Portuguese Tax Agency and benefits from all EU Council Directives;
- Madeira is geographically well-positioned in the Atlantic Sea in the southwest of Lisbon. Its capital city, Funchal is a renowned dock area for shipping industries which has further helped the economy to successfully create its commercial base in transportation, fishing and tourism industries. In total, Funchal contributes to 12% of the exports of the economy.
- Multi-national Clients can conduct business throughout the EU, while enjoying a corporation tax of 5%.
- Low-cost, part-time administration and accounting employees are available in Madeira to comply with local substance requirements.
- A Madeira IBC registered LLC is an excellent EU/EEA holding company because:
Disadvantages of Madeira company registration
- A Madeira business will suffer as a result of one of highest VAT rates in the EU (22%), which will be inconvenient for businesses where VAT is applicable. The VAT rate is 23% in the mainland and 18% in the Azores;
- Portugal is negatively ranked as the 30th least corrupt country in the 2018 Corruption Perceptions Index by Transparency International. Consequently, Madeira business registration is likely to result in our Clients facing bureaucratic hurdles;
- The minimum share capital for a LLC company (Limitada/Lda) amounts to only €1 per shareholder. This is the most common type of incorporated companies. A Corporation or a Public Limited Company (Sociedade Anónima/SA) requires minimum paid-up capital of €50,000;
- Effective 1 January 2015, all companies operating in Madeira International Business Centre (MIBC) are required to fulfil economic substance requirements by i) employing at least one local staff within the first six months ii) leasing a physical office space and iii) incurring a minimum expenditure of €75,000 on tangible or intangible fixed assets within the first two years;
- Corporate directors are not permitted under Madeira company law;
- Following Madeira business setup, an annual tax return is to be submitted;
- Following company registration, annual accounts are required to be submitted to the relevant authorities in Portuguese;
- Madeira business registration mandates all companies to include in their names the activity or specialisation of the company;
- The Madeira business registration mandates all entities to submit a quarterly or monthly VAT return, depending on the volume of business;
- The Portuguese justice system is well known for being slow in dealing with rights and duties of citizens and legal entities;
- Madeira is a cash-based export economy, with only a small percentage of inter-bank and electronical transactions;
- The Madeiran economy is heavily dependent on i) exports of agricultural commodities such as sugar, tropical fruits, wine and ii) tourism. As a result, the scope of investment and success is very limited for foreign entrepreneurs who are willing to advance in other sectors.
- Each foreign individual must obtain a personal Portuguese tax number before they can be appointed a shareholder, director and bank signatory to a Madeira company.
- To enjoy the reduced withholding tax rate on dividends, Madeira company shareholders cannot be registered in tax haven jurisdictions blacklisted by Portugal.
Healy Consultants’ video on Madeira business setup
Contact the presenter: Kunal Fabiani, CEO of Americas & Africa, Healy Consultants Group PLC
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Useful links for Madeira