Madeira accounting and tax considerations in 2021

Since 2003, Healy Consultants Group PLC assists our Clients with timely compliance of their annual legal, accounting and tax obligations in Madeira.

  • Corporate Income Tax

    • Until 2027, Madeira LLC corporation tax is a low 5% of annual net profits if the following criteria are met:
      • The company has local economic substance including i) at least one local employee and ii) the company makes an investment of at least €75,000 in a Madeira property or other tangible/intangible assets such as softwares, patents, machinery, cars, boats etc
      • Each company director secures a Portuguese personal income tax number;
      • Directors’ and shareholders’ information is published on an open online register;
      • Annual audited financial statements are prepared in Portuguese and available for public viewing.
    • However, the European Commission is investigating Madeira for potential abuse of this low-tax scheme because it was alleged that multinational companies were able to skirt local economic substance requirements. As a result, there is a risk the 5% corporation tax will disappear before 2027.
    • Income received in Madeira from non-EU subsidiaries also suffers just 5% corporation tax.
    • Otherwise, the standard corporate income tax rate in Madeira is 14.7%. Small and medium-sized businesses may be eligible to pay a lower rate of 11.9% on the first €25,000 of taxable income (with the 14.7% rate applying on income above that).
    • A Madeira LLC may also be subject to a surtax of either i) 2.1% ii) 3.5% or iii) 6.3%, on taxable profit of i) €1.5 million to €7.5 million ii) €7.5 million to €35 million and iii) more than €35 million respectively. This surtax will apply if the company conducts commercial, agricultural or industrial business.
  • Withholding taxes/capital gains tax

    • The European Union’s (EU) parent subsidiary directive allows a Madeiran holding company to receive dividends exempt from withholding tax from subsidiaries domiciled in the EU.
    • There is no Portuguese withholding tax on dividend payments made from a Madeira LLC to non-resident shareholders, provided they are not resident in tax havens or jurisdictions blacklisted by the Portuguese Tax Authority;
    • Also payments made from a Madeira LLC related to i) intellectual property ii) technical services iii) management fees or iv) head office expenses are exempt from withholding tax. Otherwise, dividend payments made to residents and non-residents suffer a 25% withholding tax.
    • There is no capital gains tax on the sale of shares in international subsidiaries of a Madeira LLC.
    • Interest and royalty payments made to residents are taxed at 25%. Non-residents receive interest and royalty payments tax-free.
    • A Madeira LLC which holds a Certificate of Residence issued by the Portuguese Tax Authority can access Portugal’s double tax treaty network. This includes i) all European Economic Area (EEA) countries ii) Brazil iii) Mozambique iv) Korea and v) Venezuela. These tax treaties reduce the withholding tax payable on dividends, interest and royalties.
  • Property tax

    • Municipal property tax is levied at between 0.3% and 0.8% of the tax registration value (TRV) of the property in Madeira. A higher tax of 7.5% on the TRV is levied on property in Madeira owned by companies resident in a number of blacklisted jurisdictions, mostly tax havens. Exemptions or reductions in the property tax may apply.
    • A tax of between 5% and 10% is levied on property transfers.
  • Social security tax

    • Employers in Madeira contribute a monthly 23.75% social security payment on employees’ monthly gross salary. Social security contributions are deductible for corporate income tax purposes.
    • Non-resident directors of a Madeira FTZ company will be exempt of Portuguese social security contributions if they are already paying social security in their country of residence.
  • Value Added Tax (VAT)

    • Madeira is a Portuguese territory and Madeira companies have a Portuguese VAT number. As a result, a Madeira company can directly access the free circulation of goods and services within the European Union (EU). VAT in Madeira is levied at between 5% and 21%. Goods and services qualifying for the reduced rate include pharmaceuticals, agricultural products and transport services.
  • Tax reporting, accounting and auditing considerations

    • The Madeira tax year is usually the calendar year.
    • Corporate income tax returns must be submitted every year by 30 May in the year following the income year. Returns are submitted electronically to the Portuguese Tax Authority.
    • A Madeira company must also prepare annual accounts (in Portuguese) and financial statements. Every Madeira company is required to maintain accounts in Portuguese at its registered office, and books must be kept by a certified accountant.
    • Corporate income tax is payable in three instalments in July, September and December. A final instalment is payable with the annual return on 30 May of the year following income.
    • VAT returns are filed every month by the 10th day of the second month after the month relating to the return. Quarterly filing (by the 15th day of the second month) is required if the company’s annual turnover is less than €650,000.
    • A company may be subjected to a tax audit by the PTA.
  • Penalties for late / non-filing of tax returns

    • For late assessments, annual interest of 4% is levied.
    • For delays in payment of tax assessed, a penalty of 4.786% applies. The maximum penalty for late payments for a company is between €45,000 (for cases of negligence) to €165,000 (for intentional avoidance of payment).
  • Healy Consultants Group PLC fees for accounting and tax support

    Madeira accounting & tax task
    VAT registration950
    Annual tax and accounting fees (active trading company)2,300
    Annual tax and accounting fees (dormant company)950

    These accounting and tax fees are an estimate of Healy Consultants Group PLC fees to efficiently discharge your annual company accounting and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants Group PLC will more accurately advise accounting and tax fees.

  • Monthly bookkeeping service

    Healy Consultants Group PLC will be happy to provide a monthly book-keeping service for your Madeira company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger ii) trial balance iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll.

    For further details of our book-keeping service and our fees, visit this page.

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Conclusion

Clients should be aware of their personal and corporate tax obligations in their country of residence and domicile. They must fulfil these obligations annually. Let us know if you need Healy Consultants Group PLC’s help to clarify your annual reporting obligations.

Contact us

For additional information on our company registration services in Madeira, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi
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